In the battle for data, China and US fight to control undersea cables

The United States has, for now, gained an upper hand over China for the control of international subsea internet cables, which has become yet another frontier of intense rivalry between the world’s biggest and second largest economy.

The grand geopolitical tussle was visible in plain sight when i SubCom LLC, an American subsea cable company, won a contract to build the Southeast Asia-Middle East-Western Europe 6, or SeaMeWe-6, internet cable.

The 19,200-kilometer undersea SeaMeWe-6 cable will link Singapore to Marseille, France, passing through Malaysia, Bangladesh, Sri Lanka, Maldives, India, Pakistan, Djibouti, Saudi Arabia, Egypt, Greece and Italy along the way. According to its schedule, the laying of the fibre-optic cable should be completed in the first quarter of 2025.

The contract was never about economics and free competition. Instead, it reflected a titanic power struggle between China and the United States for global ascendancy. In this exercise to keep China down, Washington was determined not to allow the cable link to hook up with Hong Kong, which is under China’s de facto control, thereby denying Beijing any leeway to intervene with data transfers. Also, the Americans want to undermine the status of Hong Kong as one of the leading data-driven financial centres in the globe—a position it can retain only if fed by the most modern and high-speed undersea cable network.

According to a Reuters report more than 400 cables run along the seafloor, carrying over 95% of all international internet traffic. These data channels, which transmit everything from emails and banking transactions to military secrets, are vulnerable to sabotage attacks and espionage, the report said citing a U.S. government official and two security analysts.

Besides, spy agencies can readily tap into internet cables landing on their territory. The report said that undersea cables were “a surveillance gold mine” for the world’s intelligence agencies.

The report explains how the Chinese were systematically ousted from the project despite their much lower bid.

In 2020, before the dye was cast in favour of SubCom, HMN Technologies Co Ltd, formerly known as Huawei Marine Networks Co Ltd, had been picked to manufacture and lay the SeaMeWe-6 internet cable. Its bid of $500 million, was a third lower than SubCom’s offer.

However, the US government’s intervention forced HMN Technologies to quit the race, the report said. In fact, the US Trade and Development Agency (USTDA) granted US$3.8 million of training funding to five telecom companies in countries on the cable route.

“Telecom Egypt and Network i2i Limited, a company owned by India’s Bharti Airtel Limited, got $1 million apiece, USTDA said. Djibouti Telecom, Sri Lanka Telecom and Dhivehi Raajjeyge Gulhun of the Maldives each received $600,000,” said the report.

Hoping to compete in the price war, SubCom lowered its bid to about $600 million, but HMN was ahead, slashing its offer further to $475 million.

But investors were spooked out of supporting the Chinese when they were warned that the Chinese companies were likely to be sanctioned by the US—a move that would be disastrous for their overall businesses.

“American diplomats cautioned participating foreign telecom carriers that Washington planned to impose crippling sanctions on HMN Tech, a development that could put their investment in the cable project at risk,” said the report.

Analysts say that the submarine cable war had heightened with the advent of the 5G networks, which consume copious amounts of data transmitted through cables in order to work efficiently.

Finally, China Telecom and China Mobile, which owned a 20% stake in the project, pulled out–their stakes taken up by Telekom Malaysia Berhad and PT Telekomunikasi Indonesia International.

Despite the huge setback, the Chinese can be expected to put up a fight in future projects. Afterall the upstart Huawei Marine Networks Co Ltd, had with great difficulty broken into the big league of companies laying undersea fibre optic cables comprising America’s SubCom, Japan’s NEC Corporation and France’s Alcatel Submarine Networks, Inc.

From 2008 onwards, the Tianjin-based Huawei Technologies, had entered the fray, first building small cable systems in Papua New Guinea and the Caribbean.

But by 2022, HMN Tech, had become the fastest-growing manufacturer and layer of subsea cables, according to data provided by TeleGeography. Yet, the biggest challenges may lie ahead as geopolitical rivalry between China and the US is peaking.

Also Read: Indo-Pacific QUAD set to take on China in subsea cable war