NMDG Exec Reveals Strategy for $5 Billion Global Network

By: Erik Kreifeldt

Having named its primary suppliers at the end of 1999, the New Millennium Development Group (West Palm Beach, FL) is laying out its strategy to build fiber networks and sell capacity in Europe, Asia, and Latin America. NMDG president and COO Philip Arcoria offers a look at how NMDG will procure undersea systems with at least 2.5 Tb/s of capacity per cable this year, offer both postalized and distance-sensitive capacity prices, and build at least half of its global network from scratch.

The overall prime contractor for NMDG's network project is Marconi plc (London). Marconi will supply synchronous digital hierarchy (SDH) equipment at undersea cable landing stations and telehouses in major cities, and provide overall operations and maintenance for the network, Arcoria reports.

Marconi will also procure ancillary equipment that it can't provide itself, Arcoria says, citing wireless DWDM as one attractive technology not already in the Marconi product portfolio. The technology, offered by Lucent Technologies (Murray Hill, NJ), could rapidly put NMDG on the forefront of offering global city-to-city capacity, he says.

Pirelli Cable Systems (Milan) is NMDG's co-prime contractor on the undersea portion of the network project. The Pirelli gear will connect the cable stations to the Marconi equipment. Underneath the Pirelli project umbrella, KDD SCS (Tokyo) will support projects in Asia and Latin America.

Network plan
NMDG plans to develop a network with eight fiber pairs, each with 32 wavelengths of STM-64 (10 Gb/s) SDH transmission. "We're trying to get to 2.5 terabits or even higher [per cable]," Arcoria says. "That's why KDD is in the picture." Pirelli currently offers half the maximum capacity, he says.

NMDG plans to begin implementing the European network in the second half of this year, and the Asian network in about the same time frame. "We hope to have the systems implemented simultaneously," Arcoria says. NMDG recently acquired the Magellan cable system project in Latin America, he notes, which introduces the potential to turn up all three networks simultaneously (see NMDG Acquires Magellan Network).

NMDG is now obtaining firm commitments from carriers to buy capacity on the networks, particularly in Europe and Asia, Arcoria reports. "We're talking to approximately 100 carriers around the world," he says. With the supply team in place, NMDG can gain the network operators' confidence that it has a network underway, and not just a plan on paper, Arcoria observes, noting that the accomplishment puts NMDG ahead of its development schedule.

Capacity pricing
"Everybody's moving toward commodity pricing," Arcoria observes, pointing out several web pages that host capacity auctions and rapid decreases in terrestrial city-to-city capacity prices. Europe is now host to the most aggressive pricing, he notes, calculating that city-to-city prices have dropped 70% between major cities—particularly London and Paris—compared with prices one year ago. On the other hand, he says secondary cities, such as St. Petersburg and Istanbul, may fetch high prices because of limited access.

"People have different theories for pricing structures," Arcoria offers. NMDG is strongly considering postalized pricing, where customers pay one price for port-to-port, city-to-city capacity worldwide. On the other hand, NMDG is also considering distance-sensitive pricing.

"We're being asked by some of the carriers this, strange as it may seem," he reports. "We want to try to be flexible in meeting the needs of the marketplace." Distance-sensitive pricing is associated with legacy networks, while postalized pricing is associated with next-generation data networks.

Going global
"We like to consider ourselves a medium-to-long haul carrier," Arcoria says. "We'll be able to back up most of the terrestrial networks out there now [with capacity from the NMDG network]." NMDG is approaching carriers on a regional and local level, with the promise that NMDG will interconnect regional networks in Europe, Asia, and Latin America to provide global connectivity that extends to secondary and tertiary cities.

NMDG is beginning its effort in Europe, where $1.2 billion will cover equipment for cable landings, backhaul, and city-to-city capacity. "Where it makes sense, we'll lease facilities, mainly dark fiber," Arcoria explains. About 40% of the necessary infrastructure already exists in Europe, he calculates, leaving 60% of the network that needs to be built from scratch. The Asia network will require more construction than Europe, and Latin America more yet, he says.

Equipment supply
With so many global network projects in the works, NMDG faces short supplies of equipment and installation capability. "Pirelli is telling us that they either have enough capacity or that it can procure what it can't supply itself," Arcoria says.

KDD announced a major supply contract with Global Crossing (Hamilton, Bermuda) shortly before NMDG announced its partnership with Marconi, Pirelli, and KDD, Arcoria notes, adding that KDD's resources are probably tapped. Other resources may manifest themselves as additional partnerships on the undersea supply side of NMDG's plans, he reveals.

Financing and forecasts
Arcoria keeps a close guard on NMDG's financing strategy. "We've been staying away from venture capital," he offers. NMDG has secured enough private equity to support the company, he reports. "We don't think the financial side [of executing the business plan] will be a problem."

NMDG has managed to overcome the obstacles of securing suppliers and financing that industry experts warned about, Arcoria says. One of NMDG's biggest challenges is assembling a staff to carry out the business plan. "We're short-staffed," he says. "That seems to be what everybody's going through."

"What I find surprising is the amount of potential business that is out there on the carrier level with the explosive growth of bandwidth," Arcoria says, noting the legendary hockey-stick graphs of bandwidth demand forecasts. "It's warmly surprising that it appears that the hockey stick curve is a real trend," he continues.

"I can tall you from firsthand experience that it's real. I've looked at these guys in the eyes," he concludes, after meeting with carriers around the world. He draws what he calls a refreshing conclusion that global bandwidth demand is more than a technological modeling and analysis, and that fears of a bandwidth glut are unfounded.