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What’s Indigo and How Does It Fit into the Alphabet Story?

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Apr. 18 2017, Updated 2:00 a.m. ET

Project to lay 5,600 miles of undersea cable

Alphabet (GOOGL) recently announced that it is backing a seventh submarine data cable project, Indigo. The Indigo network will span 5,600 miles to connect Singapore, Jakarta, and the Australian cities of Perth and Sydney. The project is expected to be online by mid-2019.

Alphabet is partnering with Telstra, Singtel, and SubPartners, among others, on the Indigo project. Alcatel Submarine Networks, a subsidiary of Nokia (NOK), will build the undersea network. It is expected to provide a capacity of 18 Tbps (terabytes per second), allowing for faster data transfers between the regions.

 

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What Indigo means to Alphabet

Where does the Indigo project fit into the Alphabet story? Indigo seems to be part of Alphabet’s cloud computing efforts. Google has disclosed plans to open cloud regions in Sydney and Singapore. If that remains its dream, then it is safe to conclude that Indigo will serve Google’s cloud data centers in those regions. Google is racing to catch up with cloud leaders Amazon (AMZN) and Microsoft (MSFT), which already have cloud regions in Singapore and Australia. The above chart shows Synergy Research Group’s ranking of major cloud providers by market share.

Does Indigo go against the grain?

Alphabet CFO (chief financial officer) Ruth Porat, who moved to the company in 2015 from investment bank Morgan Stanley (MS), has introduced significant cost controls. Her tenure has seen the company close and crimp several ventures, with Internet projects being among the casualties. However, Indigo seems to go against the grain—management may shed more light on this in Alphabet’s 1Q17 report.

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