DoJ May Block Google-Backed Fiber-Optic Project Over 'National Security' Fears

Offering a glimpse of complications that are arising from Washington's campaign to stamp out 'national security'-related issues emanating from the Chinese telecom sector, WSJ reported on Wednesday about a major project to lay high-speed fiber-optic cable across the Pacific that would increase the Internet connectivity between China and the US. The project, known as the Pacific Light Cable Network, involved laying 8,000 miles of undersea fiber-optic cable between Los Angeles and Hong Kong, creating a new link between the US and Hong Kong.

The project, which is already in its final stages, with most of the cable having already been laid, is being financed by Facebook, Google-parent Alphabet and a major Chinese telecoms company.

But now, a committee of US officials responsible for granting the project final approval are getting cold feet, and the project's backers are worried it might not pass its final 'national security' review led by the DoJ, DHS and other US federal agencies. These agencies make a recommendation to the FCC, which makes the final decision whether to allow the project will receive a license to operate.

Years ago, when the project started, the feeling was that increasing connectivity between Hong Kong and the US wasn't controversial. But now, with Beijing seeking to exert more control over the territory as pro-democracy protests rage, officials at the DoJ have changed how they feel about this distinction. Moreover, although the project is being managed by a Hong Kong company, one of its backers is Dr. Peng Telecom & Media Group, mainland China's fourth-largest broadband provider. The company faces scrutiny in the US because it participates in the Chinese government-mandated censorship and surveillance of the Chinese population.

Right now, the project is operating under a temporary license. But that license expires in September, and although Washington could extend that temporary permit, that outcome is seen as unlikely. If the FCC refuses to grant a permanent license because of national security concerns raised by the DoJ-led committee, it's unclear what would happen.

Right now, the cable is one of roughly 380 submarine cables that transmit nearly all of the world's intercontinental Internet traffic.

But the possibility that Washington could withhold a permanent operating license highlights the fact that American tech giants have been helping Asian firms lay thousands of miles of fiber optic cable to improve connectivity between Asia and North America, and haven't exactly thought through how the changing political landscape might impact some of these projects.

Contacted by WSJ, the company managing the project, which affirmed that it has already installed nearly 7,000 miles of fiber optic cable, said it hasn't heard about any opposition from Washington. Google, meanwhile, gave a comment that made it sound like the company knows the project is doomed.

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.

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.

So, what might happen if the FCC doesn't grant the license? Would all that cable go to waste? Probably not. Presumably, just like Chinese owner of Grindr was forced to do after CFIUS raised issues about the sale of the LGBTQ-focused hookup app, the Chinese owners would presumably be forced to divest their stake. 

But that would leave the project vulnerable to the whims of the market. And if the Chinese telecoms giant is forced to brook a significant loss, it could have a chilling effect on future projects like this one.