US-China Rivalry Reaches New Depths

Undersea communications cables off the coast of Portugal

CHINESE FIRMS ARE increasingly involved in owning, operating, laying and equipping undersea communications cables — creating another front in the technology and telecommunications contest between Washington and Beijing.

Undersea fibre-optic cable is the backbone of global data transmission and communications. More than 400 cables beneath the oceans carry upwards of 95% of international internet data — everything from streaming videos to billions of dollars of sensitive financial transactions and encrypted government communications.

Thus, China’s growing presence and designation of undersea cables as a ‘marine strategic emerging industry’ — part of a broader goal of capturing 60% of the global market for fibre-optic communication equipment by 2025 — is seen in Washington as both a commercial rivalry and a geo-strategic threat.

The three big state-owned telecos, China Mobile, China Unicom and China Telecom, are the principal Chinese owners and operators of commercial cables, often as consortium members. The leading Chinese turnkey supplier and installer of undersea cables and the systems running them is HMN Technologies, formerly Huawei Marine Networks. It is now rebranded and 81%-owned by Shanghai-listed Hengtong Optic-Electric, the country’s largest producer of advanced submarine-grade fibre, after a restructuring to get around US sanctions on the Huawei group. 

HMN Tech says it has completed or is working on 108 projects worldwide involving 64,000 km of submarine cable. It is now the number four in the global industry, behind US-based SubCom, Nokia-owned Alcatel Submarine Networks (ASN) and Japan’s NEC Corp. The private sector dominates the installation side of the industry, as opposed to the owner-operator side, which has traditionally been dominated by a mix of private and state-owned telcos.

HMN Tech is estimated to have a 10% share of a worldwide installation market worth $5 billion last year and forecast to grow at 10% a year for the next seven years as the bandwidth-devouring giant cloud and social media platforms drive an investment boom in new capacity, including their own cables, and route prioritisation.

Geopolitics

Earlier this month, the World Bank pulled the plug on a cable project it was funding on which HMN Tech had reportedly outbid ASN and NEC for the installation contract. The East Micronesia Cable System (EMCS) would have connected three Pacific island nations, Nauru, Kiribati and the Federated States of Micronesia. 

However, it would have an onward link to the cable connecting Guam with the United States. Guam is a US territory, 29% of whose land area is occupied by US military bases. Washington let it be known that it objected to Chinese involvement in the EMCS because of a possible threat to US national security from potential Chinese espionage or disruption. The World Bank diplomatically decided that all three bids were ‘non-compliant, leaving the project in limbo.

Huawei’s first involvement in the industry dates back to 2009, a joint venture with the UK’s Global Marine, to lay a Hong Kong to United States cable. However, the People’s Liberation Army and the Ministry of Information Industry have played a strong role in developing the country’s submarine cable technology and capabilities since the 1990s. The PLA Naval University of Engineering and Hengtong Optic-Electric, along with others, established a joint submarine cable R&D laboratory in 2016 and the PLA-N has at least eight cable-laying and repair ships. As that might suggest, undersea cable technologies have dual-use.

The so-called ‘underwater great wall’ — a network of subsurface sensors connected by cable networks — is central to the PLA-N’s monitoring of in-shore waters (and beyond) for submarine activity, similar to the US SOSUS system that monitored Soviet-era submarines. During the Trump administration, one of the concerns of US security planners was how this could erode American naval superiority in the South China Sea.

Trump

These concerns aligned with the Trump administration’s twin objectives of stymieing both China’s indigenous technology development and the modernisation of the PLA. This was a broad front. The administration barred the use of Huawei equipment in government procurement contracts in 2018; the following year, it put Huawei and 68 affiliates on its Entity List, which stopped the use of any of its gear in US networks. However, a couple of measures had specific relevance for China’s undersea cable capacity.

One was the formalisation of an ad hoc US interagency group known as Team Telecom that advised the US Federal Communications Commission on national security issues. The Commission routinely referred applications for licences for operating landing points for undersea cables to the ad hoc group. Referring them to the new committee did not provide a substantive change in that regard. However, like the updating of the Committee on Foreign Investment in the United States (CFIUS), the more formal structure and stringent deadlines for reviews will likely have a chilling effect on new applications from consortia with Chinese members. 

The Trump administration also called for closer scrutiny of submarine cables connecting the United States to ‘adversary countries’. Of the three cables directly connecting the US and China, two are partially owned by Chinese state-owned companies.

Hong Kong

A year ago, with its attention focused on Beijing’s imposition of a national security law on Hong Kong, the Trump administration blocked approval for the city to be a landing point for a fourth direct link, the Pacific Light Cable Network (PLCN). This connects Los Angeles and Hong Kong with branches to Taiwan and the Philippines and was backed by Google, Facebook and Dr Peng Telecom & Media Group. The latter is a former speciality steel smelter turned Beijing-based internet services provider listed on the Shanghai exchange. The Trump administration argued national security grounds, albeit with its customary lack of public evidence.

Google and Facebook subsequently were permitted to light the Los Angeles-Taiwan and Los Angeles-Philippines links only. As a result, the leg to Hong Kong has stayed dark.

PLCN’s fate has had a chilling knock-on. Three consortia of other planned trans-Pacific cables to Hong Kong withdrew landing license applications, including Amazon, Facebook and China Mobile’s proposed Bay to Bay Express linking San Francisco to Hong Kong cable, the China Telecom, China Unicom, Facebook, Tata Communications and Telstra Hong Kong-America cable between Hong Kong and Hermosa Beach in California; and Google’s Hong-Guam cable. In addition, two other proposed trans-Pacific cables, Facebook’s Bifrost and Facebook and Google’s Echo, announced earlier this year that they would avoid Hong Kong landing points.

This suggests that Hong Kong will not be a growing gateway for trans-Pacific cables as long as US-China tensions persist. However, that will not necessarily stop it from remaining an intra-Asian regional cable landing hub.

Biden

The East Micronesia cable example suggests that the Biden administration is carrying through with the thrust of its predecessor’s policy. That includes extending its discouragement of other countries from using Huawei and other Chinese telecoms equipment manufacturers’ kit in their 5G networks and other critical infrastructure to undersea cable systems. 

The Biden administration is starting to rally its allies around the idea of creating a more cohesive and updated legal framework to protect undersea cables. These are covered by Articles 113-115 of the UN Convention on the Law of the Sea (UNCLOS) and the International Convention on the Protection of Undersea Cables. The latter dates to the 1880s and has 36 signatory nations. China is not among the three dozen.

As most cables are privately owned and operated, the US wants to establish stricter global standards and norms for private companies to make their cables and network management systems secure from cyberattacks and physical disruption. 

This would go beyond the code of conduct of The International Cable Protection Committee (ICPC), a forum for submarine communications and power cables companies. It would also include greater sharing of intelligence between governments and companies on cyber threats to the cables. This Bystander understands that the United States raised both these notions at the recent G7 and NATO summits.

Vulnerabilities

Submarine cables are surprisingly vulnerable for such critical infrastructure. There are an estimated 150-200 accidental fractures a year. Undersea earthquakes can break them, but ships’ anchors and fishing nets snagging them are the most frequent cause. In the Soviet era, there was a suspicion that Soviet trawlers deliberately fished for cables.

US security planners fear that Chinese trawlers could employ the same tactic, particularly against Taiwan in the event of conflict or the threat of it, or even just as a muscles-flexing exercise. Taiwan is a telecoms hub for the region, so the damage to regional economies and financial markets could be severe.

A different set of concerns surrounds espionage risks and an adversary’s ability to divert or monitor data traffic. This is an additional concern for governments. They use the global network of commercial undersea cables for their communications, albeit encrypted. Government-owned classified or military cables are surprisingly uncommon.

There are three ways to hack into undersea cables’ data: 

  • remotely via backdoors in the kit inserted during manufacturing or in the network management software systems; 
  • infiltrating facilities at the landing points or where the cables connect to domestic networks; and 
  • tapping the cable directly on the seafloor. 

The last is technically the most challenging and beyond most countries’ capabilities. Unverified reports say that the United States, the United Kingdom and Russia have managed it by using specialist submersible craft to place physical listening devices on cables. Earlier this month, a Foreign Ministry spokesman accused the United States of ‘unacceptable’ espionage of undersea cables.

Believing that Chinese espionage efforts concentrate on targeting landing points, the Biden administration is addressing the first two attack points by pushing ahead with Trump’s strategy of banning approvals for equipment in US telecommunications networks from foreign companies deemed national security threats, i.e., Huawei and ZTE, and getting their kit removed from US networks. 

The US Congress passed the Secure and Trusted Communications Networks Act in 2019, authorising the FCC to do that through its rule-making. Earlier this month, the FCC said it was moving onto the next stage of that process — public comments on the proposed rule that would revoke the certification of any equipment listed by the 2019 Act, signalling it had had a green light from the Biden administration.

Digital Silk Road

China sees undersea cable networks as a component of its Digital Silk Road under the One Belt, One Road initiative. For example, HMN Tech has laid or is laying cable under the Java, Andaman and South China Seas, the Gulf of Thailand and the Indian Ocean.

It is also laying a 15,000km submarine cable connecting Pakistan to East Africa and Central Europe (PEACE) via the Red Sea, another project on which the United States has been expressing disquiet. The Peace cable will have a landing point at Gwadar in Pakistan, whose port is owned by state-owned China Overseas Port Holdings and where China will likely have a military base. The Peace cable would connect to China from there by an overland route through Pakistan.

HMN Tech has also laid a barely shorter cable of 14,530km connecting South Africa and the United Kingdom, with a dozen landing points along the west coast of Africa.

Authorities regard the company as a national champion, although the company, like its forebear parent, asserts its independence at every turn.

To this Bystander, this is shaping up to mirror the contest over 5G networks, with HMN Tech and the Chinese telcos squeezed out of undersea communications cables with landing points in the advanced economies where the United States and its allies hold sway, but growing their market share in the Global South where their lower prices and political and financing support from Beijing will prove attractive.

If there is a difference, it is that Washington and its allies can offer a realistic alternative to China in both the installation and operation of cables in a way it cannot with 5G networks.

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