REGULATORY AND NATIONAL SECURITY REFORMS AFFECTING THE SUBMARINE CABLE INDUSTRY
By Andrew D. Lipman, Ulises R. Pin and Ross Slutsky
March 17, 2021
While COVID-19 rightfully remains the primary focus of the international business community, over the course of the past year, there have also been a number of important policy and regulatory changes in the United States affecting the submarine cable industry which warrant closer examination. This article discusses primarily the reforms to the “Team Telecom” review process and its impact on the submarine cable industry.
The global demand for data has never been greater. Submarine cable systems are key to meeting this demand. Subsea systems carry over 99 percent of all international communications, and remain the primary method of transporting internet traffic because of their speed, capacity and security. Currently, there are about 400 submarine cables worldwide, with an estimated total length of more than 1.2 million kilometers, or enough to circle the Earth 30 times. The combined submarine cable industry is expected to increase in value from approximately US $12 billion in 2018 to approximately US $30 billion by 2027.
At the same time as the demand for connectivity rises, the challenges of constructing a submarine cable project have never been greater. Geopolitics present an obvious hurdle, as the United States experience a heightened national security profile and economic nationalism that threaten international cooperation. Navigating national security, data privacy, cybersecurity and other regulations will continue to be challenging in the coming years.
Overview of Executive Order on Establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector
On April 4, 2020, President Trump signed an Executive Order (EO) clarifying and formalizing the role of the ad hoc interagency body historically known as “Team Telecom.” The EO authorized the newly formed Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (“Committee”) to conduct a national security and law enforcement review of any applications and licenses that pose risks to national security and law enforcement interests of the United States. Practically speaking, the EO brought structure to the Team Telecom process by implementing deadlines for review of applications while also expanding the reach and scope of applications subject to review.
Background on Team Telecom
The Federal Communications Commission (FCC) regulates submarine cable landings in the United States. Operators of submarine cables must obtain an FCC license pursuant to the Submarine Cable Landing License Act of 1921 and Section 1.767 of the FCC’s Rules. In theory, the application process for a submarine cable license (or the transfer of an existing license) can take just 45 days from the date the application is put on public notice. In practice, however, the process takes far longer: as national security reviews drag on.
Most subsea cable applications have some amount of foreign ownership or participation, and so the United States subjects cable landings to considerable scrutiny by “Team Telecom,” an ad hoc task force comprised of the Departments of Defense, Homeland Security, and Justice, including the Federal Bureau of Investigation. With so many actors, when a national security review is required, prior to the adoption of the EO, the FCC rarely granted a cable landing license in fewer than six months, and review periods of over a year were not uncommon.
In the normal course, Team Telecom conducted review of a new submarine cable system if (1) the system would connect the United States, and (2) the system would have aggregate direct or indirect foreign ownership of 10% or more – that said, Team Telecom has recently scrutinized even 100% American projects. In the review, Team Telecom asked a series of initial questions pertaining to issues such as equipment type, storage and security of network data, encryption key usage, and entities with access to the applicant’s network and data. Where ownership, operation, or financing arrangements raise concerns, Team Telecom makes additional inquiries and may impose certain conditions for approval. These conditions often include letters of assurances or national security agreements. Frequently, there are limitations on equipment types used or requirements to establish a network operations center located in the United States and operated by screened U.S. citizens. Such agreements facilitate U.S. national security and law enforcement surveillance programs, such as those conducted by the National Security Agency. The agreements also aim to block foreign governments from gaining visibility into U.S. telecommunications networks and communications.