Undersea cables serve as critical infrastructure assets that possess immense strategic value. They are the lifelines of global information flow, facilitating approximately 95% of intercontinental internet traffic through a vast network of over 400 active undersea cables, spanning an impressive total length of 1.4 million kilometers. These cables enable the transmission of various forms of data, including video calls, instant messages, emails, and more. Controlling the undersea cables grants dominion over the primary transoceanic channels for global information transmission.
In an era marked by escalating international geopolitical tensions, undersea cables have emerged as a crucial focal point of competition among major powers. Activities previously perceived as purely commercial, such as investing in undersea cable businesses during the booming era of globalization, have now gained increased political significance.
In June 2019, Huawei Technologies, which was already in the midst of being cracked down in the U.S., decided to sell its undersea cable business. According to ANBOUND macro team's information tracking at that time, Huawei Technologies intended to sell 51% of its stake in Huawei Marine Systems, the subsidiary engaged in the undersea cable business, to Hengtong Optic-Electric of Jiangsu Province. In March 2019, The Wall Street Journal cited U.S. security officials stating that undersea cables built by Huawei could be subject to espionage activities by the Chinese government. Against this backdrop, Huawei's sale of its undersea cable business was evidently aimed at reducing potential risks and avoiding future issues that could impact its core business. In hindsight, Huawei's proactive divestment from the undersea cable business did not shield it from the U.S. crackdown.
In 2017, Google and Facebook proposed a plan to build a transpacific fiber optic cable network, outlining three connection points on the Pacific West Coast. It was revealed that on June 17, 2020, the U.S. Department of Homeland Security and the Department of Justice requested the Federal Communications Commission (FCC) to reject the option of connecting to Hong Kong, which they perceive to be able to allow China to access the personal information of U.S. citizens. They also pointed out that the cable plan's partner in Hong Kong, Pacific Light Cable Network (PLCN) is a subsidiary of Dr. Peng Telecom & Media Group, which has ties to Chinese intelligence and national security agencies. Subsequently, on July 27, 2020, Google and Facebook submitted a new version of the undersea cable plan, changing it to only connect Taiwan and the Philippines, while abandoning Hong Kong.
In February 2023, as part of the Southeast Asia-Middle East East-West Europe 6 (SEA-ME-WE 6) cable plan under consortiums that include Microsoft, Orange, and Telekom Egypt, a 19,200-kilometer cable connecting Southeast Asia and Western Europe was estimated to cost around USD 500 million. Due to intervention from the U.S., the American company SubCom was chosen to construct this line, instead of opting for China's largest undersea cable supplier, Hengtong. Subsequently, China Telecom and China Mobile withdrew their combined investment of approximately 20% in the undersea cable project. The exit of the two Chinese telecommunications groups from the SEA-ME-WE 6 pipeline highlights the increasingly intense competition between the U.S. and China over the ownership issue of global internet infrastructure.
Under such developments, some telco experts are concerned that this could lead to a decoupling of internet infrastructure. American companies are increasingly constructing pipelines connecting allied nations, while China is investing in pipelines connecting most of Asia and Africa.
Researchers at ANBOUND believe that as the world becomes increasingly geopoliticized, undersea cables have evolved into a form of "geopolitical asset" due to their unique nature. Consequently, Chinese companies are being excluded from participating in the construction and operation of undersea cables based on political considerations. This exclusion may impact various aspects, including investment, construction, route selection, important node placement, cable operation, and maintenance, potentially posing significant challenges for China.
ANBOUND has previously noted that "globalization without China" is a possible trajectory that China needs to be aware of, and the same could possibly develop in the global undersea cable network that excludes the country. With accelerated global digital economy development and further deepening of informatization, undersea cables will remain the mainstream for global information communication for a long time, while satellite-based communication networks will serve as a supplementary option.
In the context of deglobalization and geopolitical frictions, China maintains its position against complete disengagement from the world. Similarly, for the U.S. and the West, achieving a comprehensive and systematic decoupling from China presents challenges. That being said, establishing a level of separation between China and the West aligns with the American strategic goal to manage a long-term competitor. If this perspective becomes prevalent in the decision-making process within the U.S., there may be sustained efforts to encourage decoupling from China in specific critical areas. Undersea cables, identified as such an area, are particularly susceptible to ongoing exclusion.
China may currently lack effective countermeasures in the face of such challenges. It is unlikely that it will be able to independently establish its own undersea cable network, as even if it did, Western countries may refuse to grant landing rights. Therefore, for China, the solution lies in promoting a situation of multinational cooperation, so as not to be excluded from the network of interconnected undersea cables. This means that maintaining the participation and utilization patterns established during the era of globalization is currently the most viable strategy.
Final analysis conclusion:
The challenge on undersea cable is merely one of the many issues China faces in the context of deglobalization and geopolitical tensions. Ultimately, resolving such problems relies on the larger environmental changes that it is confronting. Globalization and deglobalization represent two extremes on the pendulum of world development. Currently, the situation still lies on the extreme end, yet in the long run, the pendulum will swing back towards a more balanced position in the middle. When it comes to the undersea cables, China’s best option is to adhere to openness and cooperation, as well as aim for the long term.
