Silicon Valley’s bid for control of transoceanic connectivity

The parasitic use of telecommunications networks by large global content repositories, such as Facebook, Google, Amazon or Netflix, is one of the major points of tension with telecommunications operators; a conflict that could be resolved thanks to various transoceanic connectivity projects promoted by these companies.

Why do large Silicon Valley companies want to invest in networks?

By Gabriel E. Levy B.

Although the perception that ordinary citizens have of the Internet is that of a mainly wireless network, in practice it is quite the opposite; thanks to more than one billion meters of undersea fiber optic cable on five continents, it is possible for broadband to flow into every home and business.

The first submarine cable was installed in the 1950s, making intercontinental telegraphy feasible. Since then, many more submarine cables have been installed by telecommunications companies in consortia.

At present, the global network is composed of more than 426 submarine cables, distributed throughout the world’s seas[1].

Companies such as CW Networks, ATT, America Movil, Sprint, News Corporation, Verizon, Deutsche Telekom or Vodafone own most of the submarine fiber optic networks, especially those crossing the North Atlantic[2].

Abusive use of telecommunications networks

As we have analyzed many times in the past, the distribution mechanism of most of the contents of the large Silicon Valley companies is carried out over external networks, without paying for their use, under the principle of net neutrality.

In simple terms, a telecommunications company must invest a lot of money in deploying networks, whether wired or wireless, to bring the Internet to the end user. A service that, in theory, should allow the user to consume all kinds of content and services originating from around the world.

This powerful concept at the beginning of the century was very pluralistic, as no single corporation accounted for more than 10% of total data traffic over the network.

All submarine fiber optic networks are financed with resources from telecommunications companies, without them receiving compensation from companies such as Facebook, Netflix or Uber for their use, regardless of the fact that these companies amass fortunes on these cables.

Currently, Statista data show that on average between Google, Facebook, Amazon and video OTTs such as Netflix, 70% of the total global Internet traffic is concentrated, which represents a colossal problem, considering that most of that content is video and this demands, permanently, greater bandwidth capacities.

This situation forces telecommunications companies to make huge investments to support this traffic, without being able to increase service costs due to the market’s own logic and without Silicon Valley technology companies assuming the cost overruns.

A useful but insufficient palliative

As a solution to the problem of network congestion, Google, Facebook, Netflix and many other large corporations have opted to install data servers called CDN (Content Delivery Network), which greatly reduce the burden of international traffic and relieve the pressure on the networks of telecommunications companies. However, this scheme only benefits large telecommunications corporations and leaves out small operators, especially those of community, cooperative and WISP (Wireless Internet Server Provider) origin.

Another potential risk of CDNs is that they are installed at the discretion of corporations such as Google in the operators they deem appropriate, altering the very balance of technological neutrality of the network, since they favor some operators over others. But, above all, the greatest risk lies in the fact that Google is the owner of the equipment that it gives in commodatum, which allows the company to remove it at any time. In simple terms, this could mean the collapse of the bandwidth of any telecommunications company, a subject that we will develop more extensively in a future article.

Control everything to avoid risks and conflicts

As large content platform technology companies such as Amazon, Microsoft, Google and Facebook began to demand more bandwidth for data transmission, there was also a need for greater control over the infrastructure, i.e. network sovereignty. This reduces the risk associated with the lack of infrastructure management. In other words, it avoids virtual eviction as a result of parasitic use of networks, which, although theoretically not possible due to the principle of network neutrality, is a latent risk.

It is because of the above that in 2016 content management companies, driven by the explosion of video demand and online sales, began to invest, first, in projects led by telcos and, then, in their own connectivity initiatives, with multiple technologies both experimental and traditional.

Google went from relying on third-party cables in the middle of the decade to having a stake in 8.5% of the world’s submarine cable extension by 2020[3]. It is also the sole owner of 1.4% of this network.

The same steps were followed by Facebook, with 91,000 km of cables; Amazon, with 30,500 and Microsoft, with 6,600 km. And so, all of a sudden, these new players are beginning to occupy an important niche in the most fundamental communications infrastructure of the moment.

The key word: the cloud

The question is, why did it become so essential for these companies to own networks that they used to rent? The answer lies in the concept of cloud, which paradoxically refers to something that is on terrestrial servers and CDNs scattered around the planet and whose data transmission, 96%, runs through the dark and icy ocean floor. Only a tiny fraction, less than 3% of internet backbone data traffic, uses satellites or spectrum, especially for last-mile services, although the advent of 5G will surely increase this percentage.

The enormous amount of information stored in the cloud requires not only stable transmission, but also speed and low latency, which forces both storage providers (the largest in the world is, precisely, Amazon) and the services that use this storage the most (such as Google, with Youtube and Drive) to have more and more cables.

On the other hand, the submarine superhighway between the U.S. and Europe has been confronted with serious competition: the Pacific Highway, which links the U.S. market with Japan and with the growing and promising economies of Southeast Asia (remember that Indonesia, for example, is the fourth most populous country in the world, and its 300 million inhabitants are increasing their Internet consumption year by year).

The Internet and its cables: at the center of geopolitical intrigues

Of course, the big player that changed the balance in the cable business in the 21st century is China, and it was to China that all eyes of Western investors turned. So much so that the largest mega-project of the technology companies Google, Facebook and Amazon, CAP-1, started in alliance with China Mobile and started from the port of Hong Kong to reach California, passing through the Philippines. The six-strand fiber optic cable, which will allow a transmission capacity of 108 Tbps, was planned to be 14,000 kilometers long and was intended to be inaugurated this year (2022)[4].

However, in 2019 the project was interposed by the trade and political war between the Donald Trump administration and China, caused in part by alarm at the Asian giant’s growing control of global information and in part by the populist need to find an external enemy that “threatened” U.S. trade.

Following the controversial accusation that Beijing was using the data networks it invested in to steal essential information from other countries, the Trump administration launched a plan called Clean Networks. This put pressure on the country’s investors to keep new networks from touching Chinese-controlled hubs. Against this backdrop, China Mobile withdrew from the CAP-1 project, and other projects, such as the Google and Amazon “Apricot” network, which will strengthen communications between Japan, Taiwan, Guam, the Philippines, Indonesia and Singapore, also left China and its companies out.

Although with the early end of the Trump administration these populist measures were relaxed, for now China was left out of those plans, which is why, in practice, this and other projects ended up being exclusively leveraged by Silicon Valley companies, which most likely before the end of the decade will become the main providers of network and connectivity in the world, constituting a new type of monopoly even more dangerous, since it would no longer be only about content, but also about networks.

In conclusion, submarine connectivity is the main technological infrastructure that supports and hosts the so-called cloud. Thanks to the fiber optic cables that cross oceans and connect continents, hundreds of millions of people have daily access to the network, which has turned this technology into the most neuralgic for the control of contemporary geopolitics.

Governments and technology providers have invested colossal sums of money in an effort that is now being joined by content providers such as Google, Amazon or Facebook, who, in search of greater sovereignty, are promoting submarine connectivity projects around the world, and will most likely be able to take over most of this infrastructure before the end of this decade.