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Data security risks threaten approval of Chinese undersea cable plan between US and Hong Kong

Data security risks threaten approval of Chinese undersea cable plan between US and Hong Kong

US government's "Team Telecom" wants to partially deny a proposed undersea cable connection between the US and Hong Kong over surveillance, data theft concerns

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On June 17, the intergovernmental group known as Team Telecom filed on behalf of the Executive Branch a recommendation to the Federal Communications Commission (FCC) to partially deny an undersea cable system application by a Chinese company called Pacific Light Cable Network (PLCN).

Team Telecom (recently renamed as the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector) consists of the Department of Homeland Security (DOH) and the Department of Defense (DOD) led by the Department of Justice’s National Security Division, Foreign Investment Review Section.

In its filing Team Telecom specifically urged the commission to reject that part of the application that involves a direct connection between the US and Hong Kong.

The rationale for the recommended rejection echoes similar recent moves by the Trump Administration to push Chinese technology out of the US telecommunications system and power grid supply chains.

The White House, along with Team Telecom, has stepped up its arguments that China poses a digital and technology security threat, a contention that is occurring against a backdrop of soured trade negotiations and a politically deteriorating relationship between the US and China.

Fears of data theft, surveillance from China

In its filing at the FCC, Team Telecom said its recommendation “reflects an assessment that submarine cables are a fundamental element of global communications critical infrastructure, carrying most of the world’s internet, voice, and data traffic between continents.”

The group argues that it’s not in the national interest to approve the operation of cables that “land directly in Chinese territory, where the government of the People’s Republic of China (PRC) has demonstrated the intent to acquire the US person’s data to harm US national security.”

One surprising element of this position is that Team Telecom conflates Hong Kong with China, considering them one and the same despite the continued struggle of the special administrative region of the PRC to maintain its national independence and be treated as a separate jurisdiction.

In its FCC filing, Team Telecom argues that Hong Kong has little choice other than to support China in its intelligence efforts, citing a series of developments illustrating the likelihood that Hong Kong would support any surveillance orders emanating from Beijing.

Team Telecom also says that it’s undeniably clear that China is motivated to steal US citizens’ data, citing the February 2020 DOJ indictment of Chinese hackers for the massive Equifax breach and the intelligence community’s belief that China was behind the 2015 theft of nearly 22 million records from the US Office of Personnel Management, among other high-profile breaches tied to China.

In addition to China’s apparent intent to steal US data, Team Telecom is suspicious of PLCN's owners, Dr. Peng Group and Pacific Light Data. The group argues that Dr. Peng is obligated to support PRC intelligence and security services under Chinese law.

The team also raises questions about Dr. Peng’s past compliance with US laws when acquiring US telecommunications assets. Team Telecom further casts a wary eye on Pacific Light Data’s connections to PRC state-owned carrier China Unicom, which has come under separate US government suspicion.

Finally, Hong Kong’s strategic location as a gateway to the Asia-Pacific region troubles the executive branch because it is “a hub for international communications critical infrastructure, where a growing share of US communications traffic to the Asia- Pacific must first land on Chinese territory and traverse Chinese-owned or -controlled infrastructure before ultimately reaching final destinations in other parts of Asia.”

Google and Facebook have undersea cable stakes

Cable connection from the US to other Asian regions, specifically Taiwan and the Philippines, don’t bother Team Telecom quite as much, which is why the group’s recommendation to the FCC is only for a partial denial of the undersea cable application.

PLCN’s initial application was to seek a license to land and operate a fibre-optic submarine cable system. At 144 terabits per second (Tbps), the system should be the largest capacity of any cable system connecting the US and Asia. The original vision for the system was to extend the network from the United States to Hong Kong, Taiwan, and the Philippines.

US tech giant Google, through an affiliate, owns 100 per cent of the PLCN segment that branches off the main trunk to Taiwan. Facebook, likewise through an affiliate, owns 100 per cent of the two PLCN segments that branch off the main trunk to the Philippines.

Team Telecom recommends that the FCC approve both of these initiatives backed by the Silicon Valley giants “on the condition that the companies’ subsidiaries enter into [national security threat] mitigation agreements for those respective connections.”

Google appealed to the commission earlier this year to allow it to continue its operations on the PLCN network, saying that it would otherwise face prohibitive costs in carrying traffic to the region.

In April, the FCC granted Google’s request to commercially operate the segment of PLCN connecting the United States and Taiwan for six months, if it fulfilled the obligations of a Provisional National Security Agreement it signed.

Other cable plans at risk

In the meantime, as Team Telecom notes in its recommendation, other applicants want to build direct undersea cables between the US and Hong Kong, and given Team Telecom's recommendation, it's unclear how fruitful those pursuits will be. In particular, two applications are pending for the Hong Kong connections; one is called Hong Kong-Americas (HKA) and the other is Bay to Bay Express (BtoBE).

“I think Team Telecom is signalling that they're going to face an uphill battle to get a positive recommendation,” national security attorney and partner at Crowell and Moring LLP Caroline Brown tells CSO.

“The FCC last granted an application for a cable system between the US and China in 2017, so this recommendation may signal a departure from the way that Team Telecom and other executive branch agencies previously viewed these applications. What’s interesting to consider is what may happen to those authorisations already in existence.”

It’s unclear when the FCC will act on the recommendations of Team Telecom.

“There is no timeline on which the FCC must act on the recommendations by Team Telecom,” according to Brown. “Executive branch agencies recommended that the FCC deny China Mobile’s section 214 application in July 2018 and the FCC ultimately denied that application in May 2019.

"Executive branch agencies recommended that the FCC revoke China Telecom’s existing authorisations on April 9, 2020 and the FCC issued an order to show cause to China Telecom on April 24, 2020, so it does seem that the FCC is reacting more quickly once it receives these recommendations."

Other factors, however, could slow down FCC action. For example, the recommendation to grant those Google and Facebook portions of the application that connect the US to Taiwan and the Philippines is conditioned on the negotiation of the mitigation agreement before the FCC’s grant of that license.

“The ultimate decision may be contingent on a meeting of the minds regarding that mitigation agreement,” Brown says.

On top of that is the complexity of the licenses involved. “These cable landing licenses are very, very complicated, oftentimes more so than Section 214 international authorisations, which are authorisations to provide telecom services from the US to foreign points and usually only involve one or two companies.

As is the case with this application, there are often several companies included in the same application. That alone is going to complicate the review process,” according to Brown.


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