Israeli techs fuel Med's cable boom - Company Business and Marketing

CommunicationsWeek International, April 16, 2001 by Neal Sandler

A new wave of subsea cable investment in the eastern Mediterranean could help establish the region as a major new center for the broadband industry. International cable operators Tyco International and Telecom Italia are investing a total of $1 billion in new infrastructure, initially to open access to the high technology industry in Israel.

Analysts say that the growth of the Israeli high tech industry, as well as a huge increase in international voice and data traffic--particularly for Internet use--all around the region, are opening the broadband market.

"Demand in the region is expanding rapidly, especially in the corporate sector," said Gideon Lopez, telecommunications analyst at International Data Corp. in Tel Aviv. In Israel, demand has been the fastest growing in the region in recent years.

An IDC report predicted that the data communications market in Israel would continue to grow at a rate of 35% annually through 2005. Israel's communications ministry claims that international data use in the country is currently greater than in all of the other countries of the Middle East combined. But Lopez expects even faster growth in markets like Turkey and Greece, where penetration rates of Internet and corporate data networks are still relatively low.

At present, much of the Israeli-bound traffic is being carried by the Med-1 cable, which links Israel to Cyprus and Italy. The cable, operated by Mediterranean-Nautilus Ltd., of Dublin, began operating in March 1999 and has a capacity of 20 gigabits per second.

But industry officials say that Med-1 is nearing its capacity, and the need has arisen for much larger cables. Experts estimate that the two new cables to the region will meet demand at least through 2007, if not longer.

The latest operator to enter the field is Israel's Bezeq International, a subsidiary of Bezeq Telecom, Israel's largest telecommunications company. The company has plans for a joint venture with TyCom, subsidiary of Tyco Inc., of Exeter, New Hampshire, to build a 1.28 terabit-per-second cable linking Italy, Greece, Turkey, Cyprus and Israel. Bezeq International plans to take a 20% stake in the project. The project, dubbed EMAD, will compete with the even larger Nautilus cable now being built the Med-Nautilus.

"We expect to be up and operating in the second half of 2002," said Ori Yogev, former president of Bezeq International, who signed the agreement shortly before departing the company. Bezeq International officials said that they hope to finalize the agreement with Tyco soon.

The other major international player in the eastern Mediterranean, Telecom Italia, owns a 51% stake in Med-Nautilus. Other investors include three Israeli companies: Globescom Ltd., Clalcom Ltd. and Aurec Ltd.

"We're going to be ready for service by the final quarter of this year," said Amos Lasker, president of Med-Nautilus. The Nautilus cable has a planned capacity of 3.87 Tbps and will link all the major markets in the eastern Mediterranean, including Israel, Egypt, Turkey and Greece.

The eastern Mediterranean has become a major focus for Telecom Italia in recent years. The Italian company also owns a stake in Golden Lines Ltd., an Israeli international service provider.

"The larger capacity cables will lead to a further drop in international data rates in coming years," said Daniel Rosenne, director general of Israel's ministry of communications.

Both the Nautilus and EMAD cables will be linked to larger international cables. Nautilus will be hooked up to Telecom Italia's existing network from Italy, and EMAD will start in Israel and connect to Portugal, via Turkey, Greece, Italy and Spain. From Portugal, it will be linked to TyCom's Trans Global Network (TGN), which is due to connect thirty major cities around the world.