12.09.1997Corporate

World's longest undersea fiber cable commences Europe-Middle East-Asia operations

FLAG fills crucial gap in international wholesale market

LONDON and HONG KONG -- FLAG Limited and Bell Atlantic today announced the launch into commercial service of the world's longest undersea fiber-optic cable system -- the first of a new generation of high-capacity undersea cables.
 
Known as FLAG (Fiberoptic Link Around the Globe), the system is organized, designed and priced to compete in the rapidly growing wholesale market for international telecommunications traffic.
 
FLAG is the longest man-made structure ever built, stretching 28,000 kilometers (17,000 miles) from the United Kingdom to Japan and linking Europe and Asia by way of the Middle East.
 
"FLAG is the way for nearly three-quarters of the world to participate in the digital revolution," said Frederic V. Salerno, Bell Atlantic senior executive vice president for strategy and corporate development and chief financial officer.
 
"As international calling and the World Wide Web become permanent features of business and everyday life, FLAG offers carriers in growing markets the ability to provide their customers -- often for the first time -- an all-digital connection to the future."
 
With landing points in Japan, Korea, China (at Shanghai and Hong Kong), Malaysia, Thailand, India, the United Arab Emirates, Egypt, Italy, Spain and the United Kingdom, FLAG offers approximately 75 percent of the world's population access to a broadband superhighway intended to meet the soaring demand for international communications services.
 
"Our customers' communications needs are stretching boundaries to the point that there is little distinction between local and global markets anymore," Salerno said. "Bell Atlantic is committed to meeting those needs, and to participating in this new, worldwide communications industry through projects such as FLAG."
 
Although trans-Atlantic and trans-Pacific cables have been built in the past ten years, no capacity has been added along the critical Europe-Middle East-Asia route until now. FLAG offers eight times the capacity of the only other submarine cable directly connecting Europe and Asia, as well as secure, reliable transmission to regions previously dependent on satellites.
 
FLAG can transmit more than 10 gigabits of digital information per second -- the equivalent of 600,000 simultaneous conversations -- over two fiber pairs. Further technical advances, including Wavelength Division Multiplexing, give FLAG the potential to double the capacity of most segments.
 
FLAG is the first major submarine cable system to be financed by private investors rather than international carriers. As such, FLAG is distinguished from traditional cable systems because its services can be flexibly and responsively packaged and priced for a competitive market.
 
Bell Atlantic is FLAG's largest single shareowner, holding approximately 38 percent, and is managing sponsor. Other investors in FLAG are:
 
- The Dallah Al-Baraka Group of Jeddah, Saudi Arabia, a diversified multinational company which manages a $6 billion portfolio of operations in more than 40 countries.
 
- Telecom Holding Co., Ltd., a wholly owned subsidiary of TelecomAsia, the largest market-capitalized company on the stock exchange of Thailand.
 
- Marubeni Corp., one of Japan's leading general trading companies.
 
- The Asian Infrastructure Fund, a Hong Kong-based $1 billion fund that invests in entities engaged in developing and operating infrastructure projects in Asia.
 
- GE Capital Services, a diversified financial services company wholly owned by General Electric Co. of the United States.
 
- Gulf Associates Inc., a New York-based investment firm with extensive trade and project development ventures in the Middle East.
 
The wholesale market for international traffic is expected to reach nearly $3 billion a year over the next 10 years. Driving its growth is a 14 percent average annual jump in international switched traffic -- and even higher growth rates for private line traffic, which includes Internet volumes that have been doubling each year for the past ten years. The Internet is already accessed daily by an estimated 50 million people and is adding 10,000 new users each day.
 
"FLAG offers carriers a distinctive value proposition," said Daniel C. Petri, acting chairman of FLAG Limited.
 
"The market for wholesale capacity is being reshaped by changes in regulation and the emergence of competition in many countries," Petri said. "More than half of FLAG's landing party countries have liberalized their communications markets, or are expected to do so in the near future, and this is stimulating the establishment of new carriers as well as growth in communications traffic.
 
"In this new environment, FLAG has several competitive advantages," he said.
 
Most important, FLAG offers carriers the benefits of digital fiber capacity while allowing them to avoid up-front construction costs previously associated with submarine cables.Under the traditional system, carriers who need international capacity jointly fund the cost of cable construction and commit to capacity well in advance of actual use, making the funding requirements substantial and long-term.
 
In contrast, FLAG's construction was financed by private investors, freeing carriers to purchase only the capacity they need, and only when they need it. "FLAG's flexibility makes it attractive to carriers that want to meet changing customer requirements quickly," said Petri.
 
FLAG goes into service with 66 international carriers as customers. Petri said that while FLAG's initial customers are large carriers and newly competitive carriers, other potential customers include resellers of communications products and services and Internet providers. Corporations and industries seeking to build global, enterprise-wide networks also may use FLAG through appropriate arrangements with licensed carriers.
 
Petri also noted that the successful engineering and construction of FLAG will translate into superb reliability and customer care. Bell Atlantic's Global Systems unit has received worldwide recognition for its project management of FLAG in the form of ISO 9001 certification, one of the international business world's most prestigious quality awards. FLAG construction was built on time (in 27 months) and within budget, at a capitalized cost of approximately $1.5 billion. And, unlike traditional cable systems, the entire FLAG system is monitored continuously from a single network operations center, which is located in the United Arab Emirates.
 
Future plans for FLAG, Petri said, include full global connectivity through appropriate agreements with other cable systems, as well as additional landing points on the present route.
 
FLAG Limited, a Bermuda-based corporation, owns and operates FLAG, the world's longest undersea fiber optic cable system. Linking Europe, Asia and the Middle East with high-capacity digital services through 13 landing points in 11 countries, FLAG provides international communications services to carriers in nations with some 75 percent of the world's population.
 
The new Bell Atlantic -- formed through the merger of NYNEX and Bell Atlantic -- and its companies are among the world's largest investors in high-growth global communications markets, with operations and investments in 21 countries. With more than 40 million telephone access lines and 5.8 million wireless customers worldwide, Bell Atlantic companies are premier providers of advanced wireline voice and data services, market leaders in wireless services and the world's largest publishers of directory information.
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