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Living in the Russian Digital Bubble

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Vladimir Putin, Russia’s president, has portrayed his aggression on the Ukrainian border as pushing back against Western advances. For some time he has been doing much the same online. He has long referred to the internet as a “CIA project”. His deep belief that the enemy within and the enemy without are in effect one and the same… Faced with such “aggression”, Mr Putin wants a Russian internet that is secure against external threat and internal opposition. He is trying to bring that about on a variety of fronts: through companies, the courts and technology itself.

In December 2021, VK, one of Russia’s online conglomerates, was taken over by two subsidiaries of Gazprom, the state-owned gas giant. In the same month a court in Moscow fined Alphabet, which owns Google, a record $98m for its repeated failure to delete content the state deems illegal. And Mr Putin’s regime began using hardware it has required internet service providers (ISPS) to install to block Tor, a tool widely used in Russia to mask online activity. All three actions were part of the country’s effort to assure itself of online independence by building what some scholars of geopolitics, borrowing from Silicon Valley, have begun calling a “stack”.

In technology, the stack is the sum of all the technologies and services on which a particular application relies, from silicon to operating system to network. In politics it means much the same, at the level of the state. The national stack is a sovereign digital space made up not only of software and hardware (increasingly in the form of computing clouds) but also infrastructure for payments, establishing online identities and controlling the flow of information…

China built its sovereign digital space with censorship in mind. The Great Firewall, a deep-rooted collection of sophisticated digital checkpoints, allows traffic to be filtered with comparative ease. The size of the Chinese market means that indigenous companies, which are open to various forms of control, can successfully fulfil all of their users’ needs. And the state has the resources for a lot of both censorship and surveillance. Mr Putin and other autocrats covet such power. But they cannot get it. It is not just that they lack China’s combination of rigid state control, economic size, technological savoir-faire and stability of regime. They also failed to start 25 years ago. So they need ways to achieve what goals they can piecemeal, by retrofitting new controls, incentives and structures to an internet that has matured unsupervised and open to its Western begetters.

Russia’s efforts, which began as purely reactive attempts to lessen perceived harm, are becoming more systematic. Three stand out: (1) creating domestic technology, (2) controlling the information that flows across it and, perhaps most important, (3) building the foundational services that underpin the entire edifice.

Russian Technology

The government has made moves to restart a chipmaking plant in Zelenograd near Moscow, the site of a failed Soviet attempt to create a Silicon Valley. But it will not operate at the cutting edge. So although an increasing number of chips are being designed in Russia, they are almost all made by Samsung and TSMC, a South Korean and a Taiwanese contract manufacturer. This could make the designs vulnerable to sanctions….

For crucial applications such as mobile-phone networks Russia remains highly reliant on Western suppliers, such as Cisco, Ericsson and Nokia. Because this is seen as leaving Russia open to attacks from abroad, the industry ministry, supported by Rostec, a state-owned arms-and-technology giant, is pushing for next-generation 5g networks to be built with Russian-made equipment only. The country’s telecoms industry does not seem up to the task. And there are internecine impediments. Russia’s security elites, the siloviki, do not want to give up the wavelength bands best suited for 5g. But the only firm that could deliver cheap gear that works on alternative frequencies is Huawei, an allegedly state-linked Chinese electronics group which the siloviki distrust just as much as security hawks in the West do.

It is at the hardware level that Russia’s stack is most vulnerable. Sanctions imposed may treat the country, as a whole,  like Huawei is now treated by America’s government. Any chipmaker around the world that uses technology developed in America to design or make chips for Huawei needs an export license from the Commerce Department in Washington—which is usually not forthcoming. If the same rules are applied to Russian firms, anyone selling to them without a license could themselves risk becoming the target of sanctions. That would see the flow of chips into Russia slow to a trickle.

When it comes to software the Russian state is using its procurement power to amp up demand. Government institutions, from schools to ministries, have been encouraged to dump their American software, including Microsoft’s Office package and Oracle’s databases. It is also encouraging the creation of alternatives to foreign services for consumers, including TikTok, Wikipedia and YouTube. Here the push for indigenization has a sturdier base on which to build. Yandex, a Russian firm which splits the country’s search market with Alphabet’s Google, and VK, a social-media giant, together earned $1.8bn from advertising last year, more than half of the overall market. VK’s vKontakte and Odnoklassniki trade places with American apps (Facebook, Instagram) and Chinese ones (Likee, TikTok) on the top-ten downloads list.

This diverse system is obviously less vulnerable to sanctions—which are nothing like as appealing a source of leverage here as they are elsewhere in the stack. Making Alphabet and Meta stop offering YouTube and WhatsApp, respectively, in Russia would make it much harder for America to launch its own sorties into Russian cyberspace. So would disabling Russia’s internet at the deeper level of protocols and connectivity. All this may push Russians to use domestic offerings more, which would suit Mr Putin well.

As in China, Russia is seeing the rise of “super-apps”, bundles of digital services where being local makes sense. Yandex is not just a search engine. It offers ride-hailing, food delivery, music-streaming, a digital assistant, cloud computing and, someday, self-driving cars. Sber, Russia’s biggest lender, is eyeing a similar “ecosystem” of services, trying to turn the bank into a tech conglomerate. In the first half of 2021 alone it invested $1bn in the effort, on the order of what biggish European banks spend on information technology (IT). Structural changes in the IT industry are making some of this Russification easier. Take the cloud. Its data centres use cheap servers made of off-the-shelf parts and other easily procured commodity kit. Much of its software is open-source. Six of the ten biggest cloud-service providers in Russia are now Russian…The most successful ones are “moving away from proprietary technology” sold by Western firms (with the exception of chips)…

Information Flow

If technology is the first part of Russia’s stack, the “sovereign internet” is the second. It is code for how a state controls the flow of information online. In 2019 the government amended several laws to gain more control of the domestic data flow. In particular, these require ISPS to install “technical equipment for counteracting threats to stability, security and functional integrity”. This allows Roskomnadzor, Russia’s internet watchdog, to have “middle boxes” slipped into the gap between the public internet and an ISPS’ customers. Using “deep packet inspection” (DPI), a technology used at some Western ISPS to clamp down on pornography, these devices are able to throttle or block traffic from specific sources (and have been deployed in the campaign against Tor). DPI kit sits in rooms with restricted access within the ISPS’ facilities and is controlled directly from a command center at Roskomnadzor. This is a cheap but imperfect version of China’s Great Firewall.

Complementing the firewall are rules that make life tougher for firms. In the past five years Google has fielded 20,000-30,000 content-removal requests annually from the government in Russia, more than in any other country. From this year 13 leading firms—including Apple, TikTok and Twitter—must employ at least some content moderators inside Russia. This gives the authorities bodies to bully should firms prove recalcitrant. The ultimate goal may be to push foreign social media out of Russia altogether, creating a web of local content… But this Chinese level of control would be technically tricky. And it would make life more difficult for Russian influence operations, such as those of the Internet Research Agency, to use Western sites to spread propaganda, both domestically and abroad.

Infrastructure

Russia’s homegrown stack would still be incomplete without a third tier: the services that form the operating system of a digital state and thus provide its power. In its provision of both e-government and payment systems, Russia puts some Western countries to shame. Gosuslugi (“state services”) is one of the most-visited websites and most-downloaded apps in Russia. It hosts a shockingly comprehensive list of offerings, from passport application to weapons registration. Even critics of the Kremlin are impressed, not least because Russia’s offline bureaucracy is hopelessly inefficient and corrupt. The desire for control also motivated Russia’s leap in payment systems. In the wake of its annexation of Crimea, sanctions required MasterCard and Visa, which used to process most payments in Russia, to ban several banks close to the regime. In response, Mr Putin decreed the creation of a “National Payment Card System”, which was subsequently made mandatory for many transactions. Today it is considered one of the world’s most advanced such schemes. Russian banks use it to exchange funds. The “Mir” card which piggybacks on it has a market share of more than 25%, says GlobalData, an analytics firm.

Other moves are less visible. A national version of the internet’s domain name system, currently under construction, allows Russia’s network to function if cut off from the rest of the world (and gives the authorities a new way to render some sites inaccessible). Some are still at early stages. A biometric identity system, much like India’s Aadhaar, aims to make it easier for the state to keep track of citizens and collect data about them while offering new services. (Muscovites can now pay to take the city’s metro just by showing their face.) A national data platform would collect all sorts of information, from tax to health records—and could boost Russia’s efforts to catch up in artificial intelligence (AI).

Excerpt from Digital geopolitics: Russia is trying to build its own great firewall, Economist, Feb. 19, 2022

Who Owns the Real Information System

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In January 2022, the head of the UK’s armed forces has warned that Russia submarine activity is threatening underwater cables that are crucial to communication systems around the world. Admiral Sir Tony Radakin said undersea cables that transmit internet data are ‘the world’s real information system,’ and added that any attempt to damage then could be considered an act of war.

The internet seems like a post- physical environment where things like viral posts, virtual goods and metaverse concerts just sort of happen. But creating that illusion requires a truly gargantuan—and quickly-growing—web of physical connections. Fiber-optic cable, which carries 95% of the world’s international internet traffic, links up pretty much all of the world’s data centers…

Where those fiber-optic connections link up countries across the oceans, they consist almost entirely of cables running underwater—some 1.3 million kilometers (or more than 800,000 miles) of bundled glass threads that make up the actual, physical international internet. And until recently, the overwhelming majority of the undersea fiber-optic cable being installed was controlled and used by telecommunications companies and governments. Today, that’s no longer the case.

In less than a decade, four tech giants— Microsoft, Google parent Alphabet, Meta (formerly Facebook ) and Amazon —have become by far the dominant users of undersea-cable capacity. Before 2012, the share of the world’s undersea fiber-optic capacity being used by those companies was less than 10%. Today, that figure is about 66%.  In the next three years, they are on track to become primary financiers and owners of the web of undersea internet cables connecting the richest and most bandwidth-hungry countries on the shores of both the Atlantic and the Pacific.

By 2024, the four are projected to collectively have an ownership stake in more than 30 long-distance undersea cables, each up to thousands of miles long, connecting every continent on the globe save Antarctica. In 2010, these companies had an ownership stake in only one such cable—the Unity cable partly owned by Google, connecting Japan and the U.S. Traditional telecom companies have responded with suspicion and even hostility to tech companies’ increasingly rapacious demand for the world’s bandwidth. Industry analysts have raised concerns about whether we want the world’s most powerful providers of internet services and marketplaces to also own the infrastructure on which they are all delivered. This concern is understandable. Imagine if Amazon owned the roads on which it delivers packages.

But the involvement of these companies in the cable-laying industry also has driven down the cost of transmitting data across oceans for everyone, even their competitors….Undersea cables can cost hundreds of millions of dollars each. Installing and maintaining them requires a small fleet of ships, from surveying vessels to specialized cable-laying ships that deploy all manner of rugged undersea technology to bury cables beneath the seabed. At times they must lay the relatively fragile cable—at some points as thin as a garden hose—at depths of up to 4 miles.

All of this must be done while maintaining the right amount of tension in the cables, and avoiding hazards as varied as undersea mountains, oil-and-gas pipelines, high-voltage transmission lines for offshore wind farms, and even shipwrecks and unexploded bombs…In the past, trans-oceanic cable-laying often required the resources of governments and their national telecom companies. That’s all but pocket change to today’s tech titans. Combined, Microsoft, Alphabet, Meta and Amazon poured more than $90 billion into capital expenditures in 2020 alone…

Most of these Big Tech-funded cables are collaborations among rivals. The Marea cable, for example, which stretches approximately 4,100 miles between Virginia Beach in the U.S. and Bilbao, Spain, was completed in 2017 and is partly owned by Microsoft, Meta and Telxius, a subsidiary of Telefónica, the Spanish telecom.  Sharing bandwidth among competitors helps ensure that each company has capacity on more cables, redundancy that is essential for keeping the world’s internet humming when a cable is severed or damaged. That happens around 200 times a year, according to the International Cable Protection Committee, a nonprofit group. 

There is an exception to big tech companies collaborating with rivals on the underwater infrastructure of the internet. Google, alone among big tech companies, is already the sole owner of three different undersea cables…

Excerpts from Christopher Mims, Google, Amazon, Meta and Microsoft Weave a Fiber-Optic Web of Power, WSJ, Jan. 15, 2022

Conquering Virgin Digital Lands a Cable at a Time

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Facebook  said it would back two new underwater cable projects—one in Africa and another in Asia in collaboration with Alphabet — that aim to give the Silicon Valley giants greater control of the global internet infrastructure that their businesses rely on.

The 2Africa project, a partnership between Facebook and several international telecom operators, said that it would add four new branches: the Seychelles, Comoro Islands, Angola and Nigeria. The project’s overall plan calls for 35 landings in 26 countries, with the goal of building an underwater ring of fiber-optic cables around Africa. It aims to begin operating in 2023… Separately, Facebook that it would participate in a 7,500-mile-long underwater cable system in Asia, called Apricot, that would connect Japan, Taiwan, Guam, the Philippines, Indonesia and Singapore. Google said that it would also join the initiative, which is scheduled to go live in 2024.

Driving the investments are costs and control. More than 400 commercially operated underwater cables, also known as submarine cables, carry almost all international voice and data traffic, making them critical for the economies and national security of most countries…Telecom companies own and operate many of these cables, charging fees to businesses that use them to ferry data. Facebook and Google used so much bandwidth that they decided about a decade ago that it would make sense to cut out the middleman and own some infrastructure directly.

Excerpts from Stu Woo, Facebook Backs Underwater Cable Projects to Boost Internet Connectivity, WSJ, Aug. 17, 2021

Addictive Ads and Digital Dignity

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Social-media firms make almost all their money from advertising. This pushes them to collect as much user data as possible, the better to target ads. Critics call this “surveillance capitalism”. It also gives them every reason to make their services as addictive as possible, so users watch more ads…

The new owner could turn TikTok from a social-media service to a digital commonwealth, governed by a set of rules akin to a constitution with its own checks and balances. User councils (a legislature, if you will) could have a say in writing guidelines for content moderation. Management (the executive branch) would be obliged to follow due process. And people who felt their posts had been wrongfully taken down could appeal to an independent arbiter (the judiciary). Facebook has toyed with platform constitutionalism now has an “oversight board” to hear user appeals…

Why would any company limit itself this way? For one thing, it is what some firms say they want. Microsoft in particular claims to be a responsible tech giant. In January  2020 its chief executive, Satya Nadella, told fellow plutocrats in Davos about the need for “data dignity”—ie, granting users more control over their data and a bigger share of the value these data create…Governments increasingly concur. In its Digital Services Act, to be unveiled in 2020, the European Union is likely to demand transparency and due process from social-media platforms…In the United States, Andrew Yang, a former Democratic presidential candidate, has launched a campaign to get online firms to pay users a “digital dividend”. Getting ahead of such ideas makes more sense than re-engineering platforms later to comply.

Excerpt from: Reconstituted: Schumpeter, Economist, Sept 5, 2020

See also Utilities for Democracy: WHY AND HOW THE ALGORITHMIC
INFRASTRUCTURE OF FACEBOOK AND GOOGLE MUST BE REGULATED (2020)

A Nasty Divorce: US-China Internet Cables

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United States officials granted Google permission to turn on a high-speed internet link to Taiwan but not to the Chinese territory of Hong Kong, citing national-security concerns in a ruling that underscores fraying ties between Washington and Beijing.“There is a significant risk that the grant of a direct cable connection between the United States and Hong Kong would “pose an unacceptable risk to the national security and law enforcement interests of the United States,” the U.S. Department of Justice said in its decision, which was backed by the departments of Homeland Security and Defense. The agencies instead urged the Federal Communications Commission to grant Google owner Alphabet  permission to start using the portion of its 8,000-mile underwater Pacific Light cable that connects California to Taiwan. .

The decision threatens to end Hong Kong’s dominance as a top destination for U.S. internet cables and puts at risk several ongoing projects, including a Facebook backed fiber-optic line linking Los Angeles to Hong Kong and a Google-backed project linking Hong Kong to the U.S. territory of Guam.

Washington is turning to the self-ruling island of Taiwan, which the U.S. supports with arms sales and unofficial political ties despite Beijing’s claims that it is part of China. U.S. officials are also considering alternatives such as Indonesia, Philippines, Thailand, and Vietnam.

Google and Facebook originally teamed up to build Pacific Light to Hong Kong in 2016, continuing the Silicon Valley giants’ long-term strategy to take more control of the network pipes that connect their data centers. The web companies and their Chinese investment partners kept building the cable even as U.S. authorities withheld the regulatory approvals they needed to start using it.

Major international data projects are subject to review by Team Telecom, a coalition of federal agencies with national-security oversight. The panel has taken a hard line against China in recent years. Team Telecom in 2018 recommended for the first time the denial of a Chinese application—that of China Mobile —to provide telecom services through U.S. networks, citing national-security and law-enforcement concerns.

President Trump on April 4 2020 signed an executive order that puts the attorney general in charge of overseeing Team Telecom and gives the panel direct authority to review existing licenses to provide such services, including those issued earlier to Chinese state-owned operators China Telecom and China Unicom.

Excerpts from Drew FitzGerald and Kate O’Keeffe, U.S. Allows Google Internet Project to Advance Only if Hong Kong Is Cut Out, WSJ, Apr. 9, 2020

Why a Dumb Internet is Best

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Functional splintering [of the internet] is already happening. When tech companies build “walled gardens”, they decide the rules for what happens inside the walls, and users outside the network are excluded…

Governments are playing catch-up but they will eventually reclaim the regulatory power that has slipped from their grasp. Dictatorships such as China retained control from the start; others, including Russia, are following Beijing. With democracies, too, asserting their jurisdiction over the digital economy, a fragmentation of the internet along national lines is more likely. …The prospect of a “splinternet” has not been lost on governments. To avoid it, Japan’s G20 presidency has pushed for a shared approach to internet governance. In January 2019, prime minister Shinzo Abe called for “data free flow with trust”. The 2019 Osaka summit pledged international co-operation to “encourage the interoperability of different frameworks”.

But Europe is most in the crosshairs of those who warn against fragmentation…US tech giants have not appreciated EU authorities challenging their business model through privacy laws or competition rulings. But more objective commentators, too, fear the EU may cut itself off from the global digital economy. The critics fail to recognise that fragmentation can be the best outcome if values and tastes fundamentally differ…

If Europeans collectively do not want micro-targeted advertising, or artificial intelligence-powered behaviour manipulation, or excessive data collection, then the absence on a European internet of services using such techniques is a gain, not a loss. The price could be to miss out on some services available elsewhere… More probably, non-EU providers will eventually find a way to charge EU users in lieu of monetising their data…Some fear EU rules make it hard to collect the big data sets needed for AI training. But the same point applies. EU consumers may not want AI trained to do intrusive things. In any case, Europe is a big enough market to generate stripped, non-personal data needed for dumber but more tolerable AI, though this may require more harmonised within-EU digital governance. Indeed, even if stricter EU rules splinter the global internet, they also create incentives for more investment into EU-tailored digital products. In the absence of global regulatory agreements, that is a good second best for Europe to aim for.

Excerpts from Martin Sandbu,  Europe Should Not be Afraid of Splinternet,  FT, July 2, 2019

US v. China: The Slow and Sure Conquest of Internet Infrastructure

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A new front has opened in the battle between the U.S. and China over control of global networks that deliver the internet. This one is beneath the ocean. While the U.S. wages a high-profile campaign to exclude China’s Huawei Technologies Co. from next-generation mobile networks over fears of espionage, the company is embedding itself into undersea cable networks that ferry nearly all of the world’s internet data.

About 380 active submarine cables—bundles of fiber-optic lines that travel oceans on the seabed—carry about 95% of intercontinental voice and data traffic, making them critical for the economies and national security of most countries. 

The Huawei Marine’s Undersea Cable Network majority owned by Huawei Technologies, has worked on some 90 projects to build or upgrade submarine cables around the world…US o fficials say the company’s knowledge of and access to undersea cables could allow China to attach devices that divert or monitor data traffic—or, in a conflict, to sever links to entire nations.  Such interference could be done remotely, via Huawei network management software and other equipment at coastal landing stations, where submarine cables join land-based networks, these officials say.

Huawei Marine said in an email that no customer, industry player or government has directly raised security concerns about its products and operations.Joe Kelly, a Huawei spokesman, said the company is privately owned and has never been asked by any government to do anything that would jeopardize its customers or business. “If asked to do so,” he said, “we would refuse.”

The U.S. has sought to block Huawei from its own telecom infrastructure, including undersea cables, since at least 2012. American concerns about subsea links have since deepened—and spread to allies—as China moves to erode U.S. dominance of the world’s internet infrastructure…..Undersea cables are owned mainly by telecom operators and, in recent years, by such content providers as Facebook and Google. Smaller players rent bandwidth.Most users can’t control which cable systems carry their data between continents. A handful of switches typically route traffic along the path considered best, based on available capacity and agreements between cable operators.

In June 2017, Nick Warner, then head of Australia’s Secret Intelligence Service, traveled to the Solomon Islands, a strategically located South Pacific archipelago. His mission, according to people familiar with the visit, was to block a 2016 deal with Huawei Marine to build a 2,500-mile cable connecting Sydney to the Solomons.  Mr. Warner told the Solomons’ prime minister the deal would give China a connection to Australia’s internet grid through a Sydney landing point, creating a cyber risk, these people said. Australia later announced it would finance the cable link and steered the contract to an Australian company.  In another recent clash, the U.S., Australia and Japan tried unsuccessfully in September 2018 to quash an undersea-cable deal between Huawei Marine and Papua New Guinea.

U.S. and allied officials point to China’s record of cyber intrusions, growing Communist Party influence inside Chinese firms and a recent Chinese law requiring companies to assist intelligence operations. Landing stations are more exposed in poorer countries where cyber defenses tend to be weakest, U.S. and allied officials said. And network management systems are generally operated using computer servers at risk of cyber intrusion. Undersea cables are vulnerable, officials said, because large segments lie in international waters, where physical tampering can go undetected. At least one U.S. submarine can hack into seabed cables, defense experts said. In 2013, former National Security Agency contractor Edward Snowden alleged that Britain and the U.S. monitored submarine cable data. The U.S. and its allies now fear such tactics could be used against them. American and British military commanders warned recently that Russian submarines were operating near undersea cables. In 2018, the U.S. sanctioned a Russian company for supplying Russian spies with diving equipment to help tap seabed cables.


The Ionian Sea Submarine Cable Project (Greece) 

China seeks to build a Digital Silk Road, including undersea cables, terrestrial and satellite links, as part of its Belt and Road plan to finance a new global infrastructure network. Chinese government strategy papers on the Digital Silk Road cite the importance of undersea cables, as well as Huawei’s role in them. A research institute attached to China’s Ministry of Industry and Information Technology, in a paper published in September, praised Huawei’s technical prowess in undersea cable transmission and said China was poised to become “one of the world’s most important international submarine cable communication centers within a decade or two.” China’s foreign and technology ministries didn’t respond to requests for comment…

Huawei Marine Networks

Bjarni Thorvardarson, then chief executive of the cable’s Ireland-based operator, said U.S. authorities raised no objections until 2012, when a congressional report declared Huawei Technologies a national security threat. Mr. Thorvardarson wasn’t convinced. “It was camouflaged as a security risk, but it was mostly about a preference for using U.S. technology,” he said. Under pressure, Mr. Thorvardarson dropped Huawei Marine from Project Express in 2013. The older cable network continued to use Huawei equipment.

The company is now the fourth-biggest player in an industry long dominated by U.S.-based SubCom and Finnish-owned Alcatel Submarine Networks. Japan’s NEC Corp is in third place.Huawei Marine is expected to complete 28 cables between 2015 and 2020—nearly a quarter of all those built globally—and it has upgraded many more, according to TeleGeography, a research company.

Excerpts from America’s Undersea Battle With China for Control of the Global Internet Grid , WSJ, Mar. 12, 2019

The Power of Submarine Cables

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Access to ultra-fast internet cables in London is likely to make financial firms reluctant to move out of London even after Britain leaves the European Union, a study by the European Central Bank has found.

But an ECB study found that any withdrawal from London would likely be gradual as firms would be loath to give up on Britain’s fibre-optic cables, crucial for ultra-fast electronic trading.

“The UK’s advantage as a hub for trading using fibre-optic cables, combined with institutional inertia, suggest that any relocation of trading after Brexit, if at all, would likely be gradual,” the ECB said in its study.  Around 84 percent of transactions in euro are initiated outside the euro area, with Britain taking the lion’s share at 43 percent, according to a survey by the Bank for International Settlement cited in the ECB study.

“Technology has economically important implications for the distribution of foreign exchange transactions across financial centres, as a result,” the ECB said.   “Undersea fibre-optic cables provide a competitive advantage to financial centres located near oceans, like Singapore, because they are directly connected to the internet backbone, at the expense of landlocked cities like Zurich,” it added.

Excerpts from Fast Internet Likely to Keep Trading in London After Brexit: ECB, Reuters, July 5, 2017.

Internet Cables and US Security

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A real-estate magnate is financing Google’s and Facebook Inc.’s new trans-Pacific internet cable, the first such project that will be majority-owned by a single Chinese company.  Wei Junkang, 56, is the main financier of the cable between Los Angeles and Hong Kong, a reflection of growing interest from China’s investors in high-tech industries.   It will be the world’s highest-capacity internet link between Asia and the U.S.

For Alphabet Inc.’s Google and Facebook, the undersea cable provides a new data highway to the booming market in Southeast Asia. Google and Facebook, which are blocked in China but seeking ways back in, declined to comment on market possibilities in China. Google said the project, called the Pacific Light Cable Network, will be its sixth cable investment and will help it provide faster service to Asian customers…

Backers hope to have Pacific Light operating in late 2018. The elder Mr. Wei’s company, Pacific Light Data Communication Co., will own 60%, Eric Wei said, and Google and Facebook will each own 20%. The project cost is estimated at $500 million, and the Chinese company hired U.S. contractor TE SubCom to manufacture and lay the 17-millimeter wide, 7,954-mile long cable…

The cable project requires U.S. government approval, including a landing license from the Federal Communications Commission and a review by Team Telecom, a committee of officials from the departments of defense, homeland security and justice….

Pacific Light will likely face higher scrutiny from Team Telecom due to the controlling interest by a foreign investor, said Bruce McConnell, global vice president of the EastWest Institute and a former senior cybersecurity official with the Department of Homeland Security.

Team Telecom rarely rejects a landing license application, Mr. McConnell said, but cable operators must agree to security terms.“The agreement is usually heavily conditioned to ensure that (U.S.) security concerns are met,” he said.

The terms often require an American operator of the cable to assist U.S. authorities in legal electronic surveillance, including alerting regulators if foreign governments are believed to have accessed domestic data, according to copies of agreements filed with the FCC. The U.S. landing party usually must also be able to cut off U.S. data from the international network if asked…

More than 99% of the world’s internet and phone communications rely on fiber-optic cables crisscrossing continents and ocean floors. That makes these cables critical infrastructure to governments and a target for espionage.

One of the Eric Wei’s businesses is a Chinese alternative to the QR code called a D9 code, which the company promotes as a “safe” alternative to foreign technology.

Excerpts from  China Firm Backs Asia-US Cable, Wall Street Journal, Mar. 16, 2017

The Power of Data Pipelines: google, facebook and co.

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The ships that lay electronic cables across the ocean floor look like cargo vessels with a giant fishing reel on one end. They move ponderously across the open water, lowering insulated wire into shallow trenches in the seabed as they go. This low-tech process hasn’t changed much since 1866, when the SS Great Eastern laid the first reliable trans-Atlantic telegraph cable, capable of transmitting eight words per minute. These days, the cables are made of optical fiber, can carry 100 terabits of data or more in a second, and aren’t owned only by telephone companies.

Among the newcomers are a few of the world’s leading internet companies, which have concluded that, given the cost of renting bandwidth, they may as well make their own connections. Facebook and Microsoft have joined with Spanish broadband provider Telefónica to lay a private trans-Atlantic fiber cable known as Marea. The three companies will divide up the cable’s eight fiber strands, with Facebook and Microsoft each getting two. The project, slated to be completed by the end of 2017, marks the first time Facebook has taken an active role in building a cable, rather than investing in existing projects or routing data through pipes controlled by traditional carriers. Marea will be Microsoft’s second private cable; a trans-Pacific one is scheduled to come online in 2017.

In June 2016, Google said it had finished a data pipeline running from Oregon to Taiwan, and it has at least two more coming: one from the U.S. to Brazil; the other, a joint project with Facebook, will connect Los Angeles and Hong Kong. Amazon.com made its first cable investment in May, announcing plans for a link between Australia and New Zealand and the U.S. Worldwide, 33 cable projects worth an estimated $8.1 billion are scheduled to be online by 2018, according to TeleGeography. That’s up from $1.6 billion worth of cables in the previous three years. And bandwidth demand is expected to double every two years. ..

Cables are just one way to increase the supply of bandwidth and cut costs, says Chetan Sharma, an analyst and telecom consultant. Facebook is also working on satellites, lasers, and drones to deliver internet access to remote places, and Google has experimented with hot air balloons. So far, undersea cables remain the best option for crossing oceans—they’re cheaper, far more reliable, and largely unregulated. The United Nations treats ocean cables in much the same manner as boat traffic, meaning companies can lay and repair cables in international waters pretty much wherever they please, provided they don’t damage existing ones.So Silicon Valley will continue to pour money into technology pioneered in the telegraph era. “It’s about taking control of our destiny,” says Mark Russinovich, chief technology officer for Microsoft’s cloud services division, Azure. “We’re nowhere near being built out.”

Excerpt from Bet you Own Broadband, Bloomberg, Oct. 20, 2016