$1.5 Billion: the Cost of Cutting London-Tokyo Latency By 60ms

MrSeb writes "Starting this summer, and thanks to the continuing withdrawal of Arctic sea ice, a convoy of ice breakers and specially-adapted polar ice-rated cable laying ships will begin to lay the first ever trans-Arctic Ocean submarine fiber optic cables. Two of these cables, called Artic Fibre and Arctic Link, will cross the Northwest Passage, which runs through the Canadian Arctic Archipelago. A third cable, the Russian Optical Trans-Arctic Submarine Cable System (ROTACS), will skirt the north coast of Scandinavia and Russia. All three cables will connect the United Kingdom to Japan, with a smattering of branches that will provide high-speed internet access to a handful of Arctic Circle communities. The completed cables are estimated to cost between $600 million and $1.5 billion each. As it stands, it takes roughly 230 milliseconds for a packet to go from London to Tokyo; the new cables will reduce this by 30% to 170ms. The latency drop will mainly benefit algorithmic stock market traders, but other areas like education, telemedicine, and POTS will also enjoy the speed-up. Perhaps more importantly, almost every cable that lands in Asia goes through a choke point in the Middle East or the Luzon Strait between the Philippine and South China seas. If a ship were to drag an anchor across the wrong patch of seabed, billions of people could wake up to find themselves either completely disconnected from the internet or surfing with dial-up-like speeds. The three new cables will all come down from the north of Japan, through the relatively-empty Bering Sea. In addition, the Arctic Ocean, where each of the cables will run for more than 5,000 miles, is one of the least-trafficked parts of the world. That said, the cables will still have to be laid hundreds of meters below the surface to avoid the tails of roving icebergs."

Comments

Bering Sea?

[wolrahnaes]

Next, on Discovery's Deadliest Cabling Job...

Quake Servers

[Anonymous Coward]

Oh awesome, now I can play on japanese quake servers!

Millisecond trading

[Michael Woodhams]

Investing in shares for time spans of months is of general benefit to the economy, directing investment dollars to those best able to use them. Millisecond trading is of no benefit to anyone except millisecond traders, and any money they make is at the expense of people trying to do something productive. I propose that stock markets shift to a 'clock pulse' trading model: Trade bids for (e.g.) Apple are accumulated for (e.g.) 5 seconds and then all sales are resolved without regard for the order in which the bids arrived. This will cause no problems to real investors, but will rid us of the millisecond leaches.

However, I am not experienced with the share market, so constructive criticism is welcome.

Re:Millisecond trading

[Anonymous Coward]

Cross-exchange arbitrage strategies are typically performed by servers located as close the the midpoint of the cabling between them as possible. Perhaps it's time to speculate on Alaskan rack space.

Re:Millisecond trading

[0123456]

When you buy a share the only person who benefits is the person who sold it to you. It helps the company not at all.

While I generally agree that the stock market is mostly legalised gambling with trillions of dollars, the last company I worked for was only able to buy up a couple of its ailing competitors by a mix of cash and share swaps; had the price been significantly lower that would not have been possible because it would have required far too much cash.

Yay self-destruction

[billcopc]

"The latency drop will mainly benefit algorithmic stock market traders"

In other words, these cables will help machines ruin the global economy.

A part of me is kind-of glad they're speeding this up. We all know the system is destined to break, so the sooner that happens, the sooner people will wake the fuck up and demand change.

Re:Yay self-destruction

[isorox]

It's funny. But idiot's like the GP don't understand that speculators like me make money up and down in the market. I don't care one way or the other, I can make money in either direction.

For every cent you make, someone else loses it. You're like the sad people in vegas that spend their lives camped on the slots, the only difference is you gamble with other peoples money.

Re:Yay self-destruction

[bgarcia]

For every cent you make, someone else loses it.

Yes, because there is a fixed amount of wealth in the world in all of history, and nobody ever increases society's wealth, correct?

Re:Yay self-destruction

[Wildclaw]

Yes, because there is a fixed amount of wealth in the world in all of history, and nobody ever increases society's wealth, correct?

Except that we weren't talking about wealth, we were talking about currency. And excluding stabilizing inflation mechanics, yes the currency is basically fixed.

To actually increase wealth, you need to have people being able and wanting to spend money on actual wealth refinement, and people able and willing to provide said work.

And if you want to know why so much of economic theory is bullshit, you just have to look at how much of it ignores if people actually are able/willing/wanting to spend/work.

Re:Yay self-destruction

[petermgreen]

also automatic traders will have serves in japan if they're trading in japan so this(new cabling) isn't really going to matter at all to them

The traders it matters to are those engaging in arbitrage.

Many things (stocks, commodities, derivitives whatever) are traded on more than one market. Each market develops a price for the thing. Prices in the different markets are held reasonablly close by people engaging in arbitrage (buying in one market and selling in another). The lower you latency you have to BOTH markets the lower the risk that prices will shift to an unfavorable position while you are in the middle of executing your arbitrage.

Hundreds of meters below the surface?

[Compaqt]

Surface of the water or of the seabed?

I'd say you wouldn't need more than a few meters below the seabed.

On the other hand, since the depth of the ocean may vary considerably, what sense does it even make to say they're burying it hundreds of meters below the surface of the water?

That's like specifying underground land line depth in feet below the mesosphere.

Re:Hundreds of meters below the surface?

[currently_awake]

Given that north american cellphone rates are based on the stratosphere that's not a bad idea.

Re:Hundreds of meters below the surface?

[SuricouRaven]

Because the surface is where the hazards float: Shipping and iceburgs. The most dangerous thing you'll find on the bottom are sharks, that are rather fond of cables. It's the magnetic field from the repeater power current - screws with the shark's field sense, makes them confused.

Re:Hundreds of meters below the surface?

[SuricouRaven]

A few seconds of googling confirms that sharks do indeed bite cables. http://findarticles.com/p/articles/mi_m0DUJ/is_9_105/ai_n27568414/

Expanding bandwidth, ignoring latencies.

[unixisc]

Why not just leave the latencies alone? It's not like one gets cumulative latencies - the 230ms is constant in time.

I guess the Bering Sea will be the crosspoint b/w the Siberia-Alaska railline that the Russkies want to build, and this cable that runs from the Arctic to the South. Probably run it along the Kamchatka peninsula coastline, then across to Sakhalin, Japan, then on to Taiwan, Philippines and along the S China Sea to Singapore on one end, and on the other, from Philippines, run it along to Papua New Guinea and then Australia and New Zealand. From Singapore, they could run a line to India, and get enhanced bandwith in that country.

Re:Expanding bandwidth, ignoring latencies.

[currently_awake]

You get the added benefit of not routing your economy through the NSA.

Re:Expanding bandwidth, ignoring latencies.

[EdIII]

As if the UK is going to be any better? If it is a race to fascist totalitarianism than the UK is currently leading with the US and Australia trailing behind....

Re:Also good for gamers

[mercnet]

I played on a 56k modem that averaged to about 500ms. You quickly learn how to lead railgun shots.

Neutrinos

[mbone]

If you want to cut latency, communicate through the Earth with neutrinos. If we could just get the bit rate up some (from the current 0.1 bps), you could communicate to anywhere on Earth with a one way time of 40 milliseconds.

Re:Neutrinos

[Michael Woodhams]

That would be from anywhere on Earth with a high intensity particle accelerator to anywhere on Earth with a huge particle detector buried hundreds of metres underground.

Re:Neutrinos

[erice]

That's true as long as it doesn't take any time to detect and decode a signal sent with neutrinos. Neutrinos are not electrons and trying to extract a signal from them is challenging enough that, in the near term, the computational latency would likely dwarf the transit time.

Re:Neutrinos

[timeOday]

Wow, I wonder if anybody is exploring this for communicating with or detecting submarines.

$600 million or $1.5 billion? Depends

[hoggoth]

The higher estimate of $1.5 billion is contingent on using Monster Cables.

Re:$600 million or $1.5 billion? Depends

[0123456]

The higher estimate of $1.5 billion is contingent on using Monster Cables.

Wall Street can afford to buy the best.

Re:Posting doesn't match up with the speed of ligh

[ModernGeek]

Yeah, but the packets have to be routed, and that takes time, too.

Parasitic trading

[Anonymous Coward]

Parasitic trading is tolerated not desired. It diverts profit from investors into traders, reducing the number of investors in a market by reducing the profits they can make and thus reducing the capital available to companies. Fewer companies go to the stock market to obtain capital as a result.

So yeh, you basically understood it correctly, however it has little to do with 'share' trading, rather derivatives.

The derivatives market far outweighs the shares market these days. These are pure bets stuff like: "derivative X pays out k(Z-W) for each cent asset Z rises above (K+U+Y)/3.... ladies and gentlemen place your bets I will spin the wheel". It's a bookies pure bet.

Unlike a proper bookies, Wallstreet pays out more money that it receives, so banks around the world place bets on these derivatives in order to make money. The banks and Wallstreet can afford to buy cables, it's pocket change since the underlying asset may only be a shopping mall worth $50 million, but the derivatives derived from that can be worth billions since it's a virtual asset with no real value beyond the fact it pays out a profit.

In a good year (when they take more money than they pay out) Wallstreet awards themselves big fat bonus's, in a bad year, the Fed extends them more credit against smaller assets. So overall, because they pay out more than they take in, their borrowing leverage increases. Today it's something like 30:1 or more.

The Fed says 'the loans were good we got all the money back', but that's a lie. They print money against 'Linden dollars', Wallstreet buys assets that pay out enough to cover the interest with that cash, Wallstreet borrows against those new assets, and pays back the money borrowed against the 'Linden dollars'. The Fed says 'hey look we got all our 'Linden loans' back', Wallstreet gets to own a real asset, everyone holding dollars has been silently robbed by inflation.

But hey - faster internet! /rant

Re:Parasitic trading

[tlhIngan]

Parasitic trading is tolerated not desired. It diverts profit from investors into traders, reducing the number of investors in a market by reducing the profits they can make and thus reducing the capital available to companies. Fewer companies go to the stock market to obtain capital as a result.

Once a company IPOs, that's pretty much all the capital they get. And the bank handling the IPO pays the company to do so at a fixed price. Now, a company may choose to only sell say, 10% of itself, holding onto 90% of itself for times it may need extra money.

At which point, it becomes tricky because to sell a share, you need a buyer - if the bid-ask spread is too high, the shares are thinly traded and being able to sell a share for what you want gets a LOT harder.

E.g., XYZ company owns 1,000 shares in itself. Its last trade price was $5. But the bid-ask is huge, say, bid $4, ask $6. If XYX needed $1000 now, it would have to sell 250 shares at $4 and lose a quarter of its holdings in itself. They could offer 200 shares at $5/share (lowering bid-ask since it's bid $4, ask $5), but there's no guarantees they would sell (i.e., low liquidity - it's hard to convert shares into cash and vice-versa). Heck, the person bidding $4/share may not even want 250 shares. They may want say, 10. At which point 10 shares are sold, and XYX still needs to raise $960 and hope the next guy in line is bidding close to $4.

HFT does lower the margin - purely because they're trying to put in bids higher than the current bid, and asks lower than current ask because they're trying to make money on the fractions. But it also means that the next bidders in line are more likely closer to the last trade price (so XYZ may have to sell shares at say, $4.95, $4.90, $4.85, ... until it reaches $1000).

Sure the person who asks $6/share gets screwed because they're forced to sell at say, $5.05 rather than $6. Except they're also more likely to move stock at $5.05 - they could very well be asking $6 and fail to sell a single share while everyone else is buying and selling XYZ simply because of the lower ask.

Thinly traded stocks are especially annoying to hold because of this - there's not enough liquidity in the market to be able to liquidate those stocks except at substantially discounted rates.

Re:Parasitic trading

[jpmorgan]

Sigh, you have a very incorrect understanding of derivatives. First off,

These are pure bets stuff like: "derivative X pays out k(Z-W) for each cent asset Z rises above (K+U+Y)/3

No derivative works that way. Derivatives are, for the most part, options that allow you to make a trade in the future at a predetermined price today. For example, I can buy a put option which gives me the option of selling some shares 6 months from now at a preset price. Of course, it's not just shares. Futures are most heavily traded on commodities (wheat, oil) and currency (the US dollar, the euro, the yen).

You're right that they can be used for gambling. A speculator can buy and sell options, for example, and take the risk of market movements. But the reason why derivatives are profitable for traders is because they're buying risk for a premium. That means somebody else is selling risk.

Let's say I live in the US, and I want to sell my product in Europe. The revenue I gain in Europe will be in Euros, but it's not fiscally sensible to repatriate those funds constantly: it's cheaper to keep my european revenue in Euros, and repatriate it once a year, or once a quarter. But if the Euro suddenly tanks, I could stand to lose an enormous amount of money. If I'm a small business and my European business is big enough, that could be a big enough disruption to my cashflow to bankrupt my company. So I buy Euro put options... they'll allow me to reconvert my Euros into Dollars at today's exchange rate, regardless of what happens on the currency markets. I'll let a bank, with billions in assets, take the risk. That's a service, no different from insurance.

Hell, even if I'm not a small company, it's still worthwhile. Even if my Euro exposure is small, accounting for the long-term risk is complicated and requires an in-depth understanding of the European and international economy. If I'm just welling widgets, I probably don't have that expertise in house, but large currency speculators do. The currency speculator that I'll buy the options from will certainly be making a decent profit margin on the trade, but they can hedge their cashflow more efficiently than me, since they have a better understanding of the risk.

It's not just currency either. The futures market has long been exploited by agriculture to insulate farmers from price variations. It takes months to grow wheat. If the wheat price collapses between now and harvest time, I could be out a lot of money. The futures market lets me push that risk onto speculators, and let me - the farmer - worry about what I'm good at: farming.

Or let's say I'm interested in Apple's new dividend, but I'm not so confident in their stock price. A stock price captures both current revenues, and expectations of growth... if I think Apple's not likely to continue their revenue growth, I can buy their stock to get the current income stream, and use call and put options to insulate my investment from the fluctuations in the stock price. I won't make any money if Apple's stock continues to go up, but I also wont lose any money if the stock goes down.

Derivatives aren't gambling. They're insurance. Saying we should ban derivatives because they're gambling is as stupid as religious types who say insurance is a sin.

Why focus on Trading when we talk about latency?

[grelmar]

There are so many internet applications where low latency is a win. VOIP, remote systems management, two-way graphical applications that for various reasons are location sensitive (there's more of these types of apps then you realize - think proprietary software that would be either illegal or economically dangerous to physically locate outside of NA or the Eurozone, including geophysical analysis software for mining/oil exploration, among other things)...

There are lots of scientific applications where latency is critical.

But oh, that would be difficult to discuss. Much easier to relate everything to a vilify-able application.

Come on, for once, talk about the benefits of a mega infrastructure project.

Oh, right... Slashdot. My bad. That's just not what we do here.

Re:Posting doesn't match up with the speed of ligh

[doshell]

You also have to account for the queueing delay at the routers, which are store-and-forward devices. That said, I really have no clue whether 230ms is a realistic number.

Re:Posting doesn't match up with the speed of ligh

[Sneeka2]

I really have no clue whether 230ms is a realistic number.

I currently get a 431ms Japan <> UK ping on a pretty mediocre Japanese ADSL line in the country side.
So, yes, that's realistic.

In case you ever wondered how a sea cable is fixed

[bedouin]

See this.

Re:Why focus on Trading when we talk about latency

[ThatsMyNick]

The only ones willing to pay a premium for the low latency are the HFT folks. I dont think, the masses who use VOIP, choose their ISP based on the ping time to UK (most go for the obvious bandwidth). I agree, it is a win for a lot of people, but it is paid for (atleast the initial costs) by High Frequency Traders.

Re:Also good for gamers

[SuricouRaven]

I think chess games via postal service may win the latency contest.

As someone working in Australia...

[dackroyd]

with a head office in the UK, I think this is awesome.

Currently the packets between Oz and the UK either go through central Asia, where there is massive packet loss, or they go the long way round - across the Pacific, across the USA and then across the Atlantic.

The new route will probably shave 40ms off the ping time from Oz to the UK as well as be pretty reliable - and also not subject to US data monitoring.

Re:Why focus on Trading when we talk about latency

[MMC Monster]

Tele-medicine.

Or, more to the point: Tele-surgery.

Need more cables!

[phik]

I was in South Africa in 2010 when one of their main cables got cut by a ship. It sucked. Internet got SLOOOOOWWWW

Re:Also good for gamers

[readin]

You were lucky to have a glacier.

We had to wait for continental drift.