Tech Giants Seek Hong Kong Alternative After U.S. Blocks Data Cable
February 07 2020 - 5:54PM
Dow Jones News
By Drew FitzGerald and Kate O'Keeffe
American tech giants such as Alphabet Inc.'s Google are
considering alternatives to Hong Kong as a global data hub after
U.S. national security officials upended plans for a Trans-Pacific
internet link to the territory, according to people familiar with
the matter.
Google and Facebook Inc. last week asked U.S. authorities'
permission to start using the internet conduit's branches to Taiwan
and the Philippines while leaving its Chinese portion offline. The
two firms helped fund the 8,000-mile Pacific Light Cable Network
from Los Angeles to Hong Kong, and offered the compromise after a
national security panel led by the Justice Department held up final
approval to use the cable, which is already in place.
In light of regulators' refusal, other tech firms are, like
Google, exploring destinations other than Hong Kong for future
links, the people said. The U.S. concern reflects growing U.S.
distrust of China's technology ambitions, a stance exemplified by
Washington's fight against electronics giant Huawei Technologies
Co., they said.
It also raises questions for U.S. companies trying to meet a
growing need for bandwidth to handle customers' video chats,
social-media posts and YouTube videos: Where should they route the
cables, and who should they work with if Chinese partners are now
potentially off the table?
A Google spokeswoman said the company is seeking approval for
various undersea cables and will abide by the relevant agencies'
decisions. A Facebook spokeswoman said the company is "navigating
through all the appropriate channels on licensing and
permitting."
Hong Kong has long been a top destination for American internet
cables. While Chinese authorities have blocked U.S. firms like
Facebook and Google from operating on the mainland, the
semiautonomous Chinese territory has unfiltered access to the web
and has served as a stopping-off point for global companies seeking
connections around the region.
But Hong Kong's rule of law can no longer be counted on as
Beijing uses a heavier hand, U.S. officials say. Hong Kongers have
spent months resisting Beijing's efforts to integrate the territory
more closely with mainland China. A string of public protests
followed by violent police responses has altered daily life in the
city of 7.5 million and stressed its economy.
"This is a harbinger of things to come," said Glenn Gerstell, a
longtime telecom attorney who recently retired from his post as
general counsel at the National Security Agency to advise the
nonpartisan Center for Strategic and International Studies.
"Until recently, Hong Kong had been thought of in sort of
separate terms from China," said Mr. Gerstell, who wasn't involved
in the Pacific Light cable's review. "The demonstrations over the
past months and Beijing's reaction greatly eroded that
confidence."
Some industry executives are now considering alternative landing
spots around the region for underwater internet cables, such as
Taiwan, Vietnam, the Philippines and Guam, according to people
familiar with the matter.
Another idea is routing more traffic through satellites instead
of cables as the technology improves. Amazon.com Inc., for
instance, is launching a constellation of low-earth-orbit
satellites designed to connect far-flung locations.
There is no clear best path forward yet, and U.S. regulators
have been loath to provide guidance, according to people involved
in the discussions.
In a filing proposing their compromise last week, lawyers for
Google and Facebook told the Federal Communications Commission they
were "not aware of any national security issues" with the Pacific
Light cable's links to Taiwan and the Philippines. They emphasized
their request excluded the portion of the cable that lands in Hong
Kong and the participation of their Chinese partner, Beijing-based
Dr. Peng Telecom & Media Group Co.
A Pacific Light executive declined to comment. Dr. Peng
representatives didn't respond to emailed questions. A Justice
Department spokesman declined to comment.
An FCC spokesman said the telecom regulator is waiting for the
other agencies to finish their review before it acts on Pacific
Light's application.
The request from the U.S. firms to effectively hive off the
China portion of the cable followed months of uncertainty after the
Justice Department, which took the lead on the multiagency panel
that reviews telecommunications matters, signaled opposition due to
the China-related issues, The Wall Street Journal reported in
August last year. While the FCC makes final decisions on submarine
cable licenses, it typically heeds the assessments of the panel,
known as Team Telecom.
The panel has approved similar cable projects in the past,
including ones directly linking the U.S. to mainland China or
involving state-owned Chinese telecom operators, once it was
satisfied the company responsible for its U.S. beachhead had taken
steps to prevent foreign governments from blocking or tapping
traffic.
The panel's assessment of the Pacific Light cable could spell
trouble for multiple outstanding projects. A planned Hong
Kong-Americas cable follows a similar route between Los Angeles and
the Chinese territory and includes investment from Facebook. It
remains under Team Telecom review.
Another cable between Hong Kong and the U.S. territory of Guam
known as HK-G faces an uncertain fate. Project backers including
Google started building that system in 2017.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Kate
O'Keeffe at kathryn.okeeffe@wsj.com
(END) Dow Jones Newswires
February 07, 2020 17:39 ET (22:39 GMT)
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