The Last Chance to Defeat China and Win Back the Cyber Domain?

Two months ago, when Zooming In did a story on Huawei and global 5G deployment, Huawei was poised to take control of much of the world’s cyber domain. We talked about the national security implications of that prospect. And we observed the U.S. efforts to raise awareness of that risk. Two months later, when we did another story on this topic, we realized the world knows Huawei a lot better through these efforts, but Huawei’s momentum has not stopped. In fact, Huawei and China are playing a grander game. They have a brilliant strategy that is working well with the very nature of a crony capitalism. Can this battle still be won by the free world? And what does it take to win? Let’s find out in this edition of Zooming In.
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National-Security Concerns Threaten Undersea Data Link Backed by Google, Facebook

U.S. firms and Chinese partner have sunk hundreds of millions of dollars into Los Angeles-Hong Kong cable project

U.S. officials are seeking to block an undersea cable backed by Google, Facebook Inc. and a Chinese partner, in a national-security review that could rewrite the rules of internet connectivity between the U.S. and China, according to people involved in the discussions.

The Justice Department, which leads a multiagency panel that reviews telecommunications matters, has signaled staunch opposition to the project because of concerns over its Chinese investor, Beijing-based Dr. Peng Telecom & Media Group Co., and the direct link to Hong Kong the cable would provide, the people said.

Ships have already draped most of the 8,000-mile Pacific Light Cable Network across the seafloor between the Chinese territory and Los Angeles, promising faster connections for its investors on both sides of the Pacific. The work so far has been conducted under a temporary permit expiring in September. But people familiar with the review say it is in danger of failing to win the necessary license to conduct business because of the objections coming from the panel, known as Team Telecom.

Team Telecom has consistently approved past cable projects, including ones directly linking the U.S. to mainland China or involving state-owned Chinese telecom operators, once they were satisfied the company responsible for its U.S. beachhead had taken steps to prevent foreign governments from blocking or tapping traffic.

If the U.S. rejects Pacific Light’s application, it would be the first time it has ever denied an undersea cable license based on national-security grounds, and it could signal regulators are adopting a new, tougher stance on China projects.

The threat of a failed approval process reflects growing distrust of Chinese ambitions and comes amid escalating tensions between China and the U.S., part of a broad rivalry between the world’s two largest economic powers. A prolonged trade conflict has each side affixing tariffs on hundreds of billions of dollars in goods flowing between the two countries, while Washington has sought to blunt Beijing’s ambitions to expand military and economic influence in Southeast Asia, the Pacific, Africa and elsewhere.

A number of U.S. officials—as well as some from allied countries—also have been waging a high-profile campaign to exclude China’s Huawei Technologies Co. from next-generation mobile networks, and to limit its role in the undersea cable networks that ferry nearly all of the world’s internet data.

The Pacific Light project cost at least $300 million to build based on its route, according to consultants who advise companies on subsea cable construction. Companies like Google and Facebook have spent the past decade funding similar cables to handle ever-growing network traffic between the U.S. and Asia. The new link to Hong Kong would give them greater bandwidth to a major regional internet hub with links to growing markets in the Philippines, Malaysia and Indonesia as well as mainland China.

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Latest U.S. Concern Over Huawei Lies Deep Under The Sea

Latest U.S. Concern Over Huawei Lies Deep Under The Sea
While U.S. security officials have openly targeted Huawei’s operations in the airwaves, they have been less vocal about another potential security threat: its undersea cables. Experts say in theory these cables could enable China to spy. Photo: George Downs/The Wall Street Journal

Team Telecom’s concerns over Pacific Light include Dr. Peng’s Chinese-government ties and the declining autonomy of Hong Kong, where pro-democracy protesters have been holding massive demonstrations for months against Beijing’s efforts to integrate the territory more closely. Dr. Peng is China’s fourth-biggest telecom operator. Listed in Shanghai, the private firm serves millions of domestic broadband customers. In the past, a cable link to Hong Kong would have been viewed as more secure than one to mainland China, but the distinction is becoming less relevant, these people say.

Proponents of the project say its approval would give the U.S. better oversight over the data that flows through the cable because Team Telecom could advise the FCC to force the companies to agree to certain conditions to protect security. Even if the U.S. thwarts this particular cable, the need for greater data capacity will still exist, and that data will just find its way through other cables that aren’t necessarily within the U.S.’s jurisdiction, they say.

Roughly 380 active submarine cables carry almost all the world’s intercontinental internet traffic via about 1,000 landing stations.

Armoured

cable

Network

management

system

Terminal

equipment

Cable with

bundle of

fiber-optic

lines

Cable landing

station

Sources: U.K. Cable Protection Committee; Alcatel Submarine Networks

Team Telecom last year reversed its long-held stance on Chinese applications to provide telecom services through U.S. networks, and recommended for the first time the denial of an application based on national-security and law-enforcement concerns. In May, the Federal Communications Commission adopted the recommendation that came after years of deliberation, voting unanimously to deny an application from China Mobile Ltd. ’s U.S. arm even though it had previously approved applications from fellow state-owned operators China Telecom and China Unicom .

Though the FCC makes the final decision on whether to grant a license for the Pacific Light project, it has historically deferred to recommendations from Team Telecom after its members coalesce around a unified view. The ad hoc group has no resolution mechanism in the event of a dispute. It isn’t known how strongly other members of the team, including the Defense and Homeland Security Departments, feel about the issue.

Should the Justice Department hold firm in its opposition and win support from other Team Telecom members, the group’s negative view would likely kill the project. If other team members decide to fight the Justice Department on the issue—and it refuses to back down—any approval could be delayed indefinitely, leaving the project in limbo. It is possible regulators might extend the temporary permit in the interim. Team Telecom, meanwhile, could still recommend the FCC approve the project if the Justice Department changes its position.

Pacific Light Data Communication Co., the Hong Kong company managing the cable project, said it has already installed more than 6,800 miles of the cable system, which will be ready for service by December or January. Senior Vice President Winston Qiu said he hadn’t heard of any U.S. regulatory problems. “We didn’t hear any opposition,” he said.

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Dr. Peng didn’t respond to emailed and faxed requests for comment. Repeated calls to its offices and those of its subsidiaries and biggest shareholder went unanswered.

A Google spokeswoman said the company has “been working through established channels for many years in order to obtain U.S. cable landing licenses for various undersea cables. We are currently engaged in active and productive conversations with U.S. government agencies about satisfying their requirements specifically for the PLCN cable.” A Facebook spokeswoman declined to comment.

A Justice Department spokesman declined to comment on the project and said its reviews and recommendations are “tailored to address the national-security and law-enforcement risks that are unique to each applicant or license holder.” The Pentagon referred questions to the Justice Department as the team’s lead agency. Spokesmen for the Department of Homeland Security and the FCC declined to comment.

The Pacific Light project has taken an atypical path. Google ownerAlphabet Inc. teamed up with Facebook in 2016 to provide its U.S. financing, adding to the tech companies’ growing inventory of internet infrastructure. Google took responsibility for its U.S. landing site. The Hong Kong end fell to a company controlled by a mainland Chinese real-estate magnate that had only recently entered the telecom sector.

The Chinese partner later sold its majority stake in the project to Dr. Peng, a company with interests in telecom, media and surveillance technology. In 2014, Dr. Peng signed a strategic cooperation agreement with Huawei to jointly research cloud computing, artificial intelligence and 5G mobile technology, according to an exchange filing. Dr. Peng’s website lists Huawei as a partner.

Dr. Peng’s chairman, Yang Xueping, is a former Shenzhen government official, according to the company’s website, and its subsidiaries have worked on several projects with government entities, including building a fiber-optic surveillance network for Beijing police, its website and filings show. Last year, Dr. Peng said in an exchange filing that two wholly owned subsidiaries had been fined 2 million yuan ($279,000) after some of their executives were convicted of bribing Chinese officials in connection with Beijing police projects.

Net Neutrality Was Never Enough

In addition to being a public good that ought to be regulated, the internet is also an amplifier of panic, malice, and intemperance. Like it or not, those vices helped get the nation into the political moil it currently faces, from internet policy to immigration to taxation to health care—as well as to the validity of elections themselves.
 .. Under the new rules, dubbed “Restoring Internet Freedom” by the FCC, ISPs would have to disclose any steps they take to limit or sell special access.
.. The FCC voted in favor of repeal despite widespread support of net neutrality among the American public
.. Even the FCC hearing itself was disrupted by the internet’s feral anxiety about itself.
.. progressive advocacy for net neutrality can’t credibly claim to be acting on behalf of consumers and small businesses when venture-backed technology start-ups are the main beneficiary.
.. but it’s not clear that the online-video market hasn’t been taken over by incumbents anyway, like search and social networking have.
.. Pai insists, telco investment in broadband infrastructure has declined
.. better solutions to broadband competition exist. One is local-loop unbundling, a policy that requires telcos to share last-mile connections with competitors. It’s one of the reasons that broadband is so much cheaper in Europe than it is in the United States.

Sorry…What Is Net Neutrality Again? A Handy Q&A

Websites that produce a lot of video, like Netflix and YouTube, make up a huge percentage of internet traffic, and they make a lot of money off advertising and subscriptions. Internet providers have been frustrated by that—they have to invest billions of dollars to make fatter pipes to carry all that data but have a more difficult time monetizing the increasing web traffic.

.. New FCC chairman, Ajit Pai, a Republican appointed by Donald Trump, believes net neutrality and the utility classification stifle innovation and investment. He has decided to throw out the rules altogether. His proposal will be voted on by FCC commissioners on Dec. 14, and it will likely pass along party lines.

.. Broadband companies in theory could start to charge for different packages of websites, much as they do for cable tv packages. But none have announced any such plans. For the most part, they have been pushing faster broadband connections (and higher prices) as internet usage, particularly video streaming, surges. Chairman Pai said he believes prices could fall because internet companies could get money from websites rather than consumers.

.. The FCC will require internet providers to disclose any websites they throttle, block or have paid prioritization deals with. The FCC said the Federal Trade Commission will watch out for unfair business practices or anticompetitive behavior.

Trump vs. the First Amendment

the hallmark elements of the president’s political style:

  • ignorance,
  • stupidity,
  • pettiness, and
  • malice.

.. the FCC does not license networks or cable channels. NBC, CBS, ABC, Fox News, etc., do not have FCC licenses to review or revoke. The FCC licenses individual stations.

.. Bill Mitchell, the Trump sycophant whose comprehensive lack of self-respect makes Paul Begala look like Cincinnatus, went on to argue that print publications such as Vanity Fair and the Washington Post should have their licenses revoked, too

There is no such thing as a newspaper license in the United States. There is the First Amendment.

.. Gutting the First Amendment is one of the top priorities of the Democratic party, which seeks to revoke its protection of political speech — i.e., the thing it’s really there to protect — so that they can put restrictions on political activism, which restrictions they call “campaign-finance reform.”

.. They abominate the Supreme Court’s solid First Amendment decision in Citizens United, a case that involved not “money in politics” but the basic free-speech question of whether political activists should be allowed to show a film critical of Hillary Rodham Clinton in the days before an election. (Making a film and distributing it costs money, you see, hence “money in politics.”) They lost that one, but every Democrat in Harry Reid’s Senate — every one of them — voted to repeal the First Amendment.

.. Right-wing populists, too, are an illiberal bunch

.. They are repeating the progressives’ mistake: imagining what their guy could do with vast new antidemocratic powers while never bothering to consider that the other side’s guy is probably going to get in there one of these days and enjoy the same powers.

.. Free speech is extraordinarily unpopular on college campuses, and California has just enacted a flatly unconstitutional law that would empower the government to put people in jail for failing to use the preferred pronoun of a transgender person.

Donald Trump’s Multi-Pronged Attack on the Internet

It’s about to get worse: President Trump’s F.C.C., under the leadership of its fiercely deregulatory chairman, Ajit Pai, wants to let these companies become even more powerful by letting them do whatever they want and allowing them to merge with one another.

.. pushed Congress to erase rules that would have constrained these companies from using and selling our sensitive online information.

And he is getting ready to wipe out the classification of high-speed data services as a utility — even though, without this legal label, the F.C.C.’s authority to require these five companies to treat their customers fairly will be fatally undermined.

Mr. Pai is responsible for a sector that accounts for a sixth of the American economy. But even that is an understatement: Everything we do, from manufacturing to governance, requires reliable, inexpensive, world-class data transmission.

.. Perhaps the most immediate concern is the commission’s so-called net neutrality rule .. Mr. Pai has put dismantling this structure at the top of his agenda.

.. It’s not just that the existing giants want free rein over their customers. They also want even greater scale and even greater involvement in content as well as distribution

  • .. Comcast bought NBCU
  • .. AT&T, which already swallowed up DirecTV, wants to buy HBO’s and CNN’s programming through an $85 billion merger with Time Warner.
  • .. Verizon already bought AOL, is about to absorb Yahoo

.. Other countries — South Korea, Sweden, even China — have made the widespread adoption of universal, inexpensive, high-speed data transmission a priority.

.. understand that markets, if left to their own devices, won’t deliver this benefit to all citizens.

With Washington’s Blessing, Telecom Giants Can Mine Your Web History

Congress’s repeal of FCC privacy rules could be data boon for Verizon, Comcast, AT&T

What if your telecom company tracked the websites you visit, the apps you use, the TV shows you watch, the stores you shop at and the restaurants you eat at, and then sold that information to advertisers?

In theory, it’s possible, given the stance Washington is taking on online privacy.

.. Undoing the rules, which had been adopted last fall by the Federal Communications Commission but hadn’t gone into effect, is a boon to Verizon Communications Inc.,VZ -0.09% Comcast Corp. CMCSA +0.32% and AT&T Inc., T +0.45% which are all in the process of building data-driven digital ad businesses to complement the broadband, wireless and TV services they offer.

.. The telecom providers had argued the rules put them at a competitive disadvantage to online ad giants Google and Facebook, which generally aren’t regulated by the FCC.

.. But online advertising executives say telecom providers potentially have access to more powerful data than the two tech powerhouses. Their networks — both wired and wireless — could give them a window into nearly everything a user is doing on the web.

.. “ISPs like Verizon can now start building and selling profiles about consumers that include their friends, the news articles they read, where they shop, where they bank, along with their physical location,”

.. If a consumer uses the same telecom provider for wireless, broadband and TV service, the provider could, in theory, track the majority of that consumer’s online behavior and media consumption.

.. &T’s defunct Internet Preferences program collected web-browsing data from some home broadband customers and charged subscribers who wished to opt out of collection an additional $29 a month.