The World's Defense Against Subsea Espionage

[The Bleeding Edge]( The World's Defense Against Subsea Espionage By Jeff Brown, Editor, The Bleeding Edge Yesterday in [The Bleeding Edge]( we explored the vast subsea cable network – the literal backbone of the world’s internet carrying 99% of the world’s data traffic. Most of us don’t even know it exists. And yet we depend on it daily for conducting business, receiving news, making calls that cross oceans or borders, sending funds internationally, and so much more. It’s an immensely valuable communications network for a wide range of reasons… including surveilling data traffic as well as curtailing it. Nation-states or bad actors can disrupt data traffic to achieve geopolitical or intelligence objectives. After all, these subsea cables are vital lifelines to keep the world connected. Twenty or thirty years ago, because of the expense involved, primarily governments and large telecommunication companies funded and owned these subsea networks. For example, a transatlantic subsea fiber optic cable will cost between $200-250 million. Subsea Espionage While the big tech giants have taken a direct interest in controlling the subsea networks, nation-states have a direct interest in staying involved as they lease capacity on these global fiber optic lifelines. Just this past May, the U.S. State Department identified some suspicious activities of vessels belonging to China’s state-controlled company S.B. Submarine Systems. The vessels were hiding their locations from both radio and satellite tracking systems. In other words, they didn’t want their location or activities to be known. S.B. Submarine System’s ships would simply disappear, for days or even weeks, from tracking… and surface somewhere completely different. What were they doing during the time they were “offline”? The reality is that fiber optic lines can be tapped and surveilled, and they can also be severed entirely. In April of 2023, that’s exactly what happened. Two Chinese ships over six days severed the two subsea cables between Taiwan’s Matsu islands and Taiwan’s mainland. The Matsu islands are located right off the coast of mainland China, as seen at the top of the image below within the red arch. The cuts in the two cables completely severed communication links to the Matsu islands. It was damaging to the local economy, and the costs to repair the damages was around $30 million. Given the sensitivities between Taiwan and China, Taiwan suggested, rather than state outright, that the subsea cable cuts may have been intentional. Given the proximity of the Matsu islands to the mainland, I believe the cuts were intentional and designed to make a point. It was China’s way of showing it can control all communications to and from Taiwan. Including those carrying critical communications with the U.S. For those of us who might think this isn’t a serious situation, just this May, China conducted its largest set of military drills completely surrounding Taiwan. The drills included China’s army, navy, and air force, and they not only encompassed all sides of the main island of Taiwan but also Matsu and the other island groups closest to mainland China. The drills were meant as “punishment” for Taiwan electing Lai Ching-te as President, a candidate that China considers a separatist. The People’s Liberation Army Naval Colonel Li Xi summed China’s position up this way: the military actions were “a strong punishment for the separatist acts of Taiwan's independence forces and a serious warning against interference and provocation by external forces.” Again, I believe China was demonstrating its ability to control Taiwan’s communications… as well as sending a clear warning to the U.S. It reminded me of a similar story from just a year prior… Unknown Reasons These subsea cables are deep. So it might come as a surprise that subsea cable damage – or a complete cut – is not unusual. Source: Congressional Research Service The majority of the time (~56%), the damage is caused by fishing boats or an anchor slicing through a cable. But about 27% of the time, the damage comes from a known party or for unknown reasons. And that 27% is precisely the concern. Case in point, in January of 2022, a critical 900-mile cable between the mainland of Norway to the northern island of Svalbard was severed. Svalbard is probably a name that most of us have never heard of. And yet ironically, it is one of the most strategic sites on Earth. It is home to the [Svalbard Satellite Station]( which is the largest ground station on the planet for collecting data from polar-orbiting satellites. Those satellites are critically important to both U.S. and European governmental agencies and serve both research and intelligence services. The cable that was severed is shown above in purple. An underwater drone was sent to survey the site in January 2022 to find that something had dug out deep trenches in the ocean floor directly above the subsea cable, which had been intentionally laid well beneath the sea floor. Norwegian journalists discovered that a Russian trawler had passed directly over the cable 130 times before the subsea cable was severed. That appears to be far too much of a coincidence. Even more notable: It happened just one month before Russia invaded Ukraine. Whether it’s geopolitical sabotage or piracy, like the attacks of the Iranian-backed Houthi rebels which took out four subsea cables this February connecting Europe and Asia, these vital subsea communications networks are becoming a major battleground. And it’s not just the subsea cables. The soil upon which these subsea cables come aground is a geopolitical matter. I remember in 2020 when the Federal Communications Commission (FCC) denied Google and Facebook’s Pacific Light Cable Network subsea cable to connect to Hong Kong. It was a transpacific cable designed to connect Los Angeles to the Philippines, Taiwan, and Hong Kong. The FCC denied the link between Taiwan and Hong Kong, while the rest was approved and is in operation today. After all, any cable that lands on mainland China must be assumed to be surveilled. It’s a nearly invisible war. A geopolitical war. And it’s happening all under our world’s oceans. The question is, what can be done about it? In the case of China and Taiwan, preferably, the world can avoid a series of escalations into an even larger war. But the working assumption is that sabotage will continue to happen, especially with the backdrop of current geopolitical tensions. That’s where a critical factor comes into play: resiliency. Tech Resiliency As the world’s telecommunications and big tech companies lay more subsea cables with even more landing points, the global network becomes more resilient. Billions are being spent. When one cable is severed, intelligent software powered by forms of artificial intelligence is used to reroute traffic via different cables… in order to ensure that the world’s public and private data traffic is still moving. It’s not perfect, as internet speeds can slow dramatically. But it’s better than no connection at all. The other solution is to use technology to increase the throughput of existing fiber optic cables. And just days ago, a team of researchers announced that they had set a new record, with a transmission rate of 402 terabits per second over fiber optic cables. Put simply, they developed a way to increase the number of bits transmitted over varying frequencies. The bleeding edge for what’s commercially deployed is no more than 100 terabits. So this latest research is a 4X increase. Once technology like this were to become commercially available, congestion in the event of a cable being severed would be less of an issue. Existing cables would be able to absorb the additional data traffic with less congestion. And for those of us who still might be wondering, why is this suddenly an urgent, critical matter worth looking at right now? Well, the necessity for real-time communications and resilient networks has never been greater. Not only do the world’s governments and citizens depend on it, but it is particularly critical considering we’re teetering on the edge of World War III. Many have argued it has already started… Unfortunately, satellite transmissions have limitations. They have latency and are bandwidth-constrained. So while they may provide a vital lifeline for critical government traffic, they can’t keep the world interconnected at scale. This is part of our newfound reality with modern warfare. Attacks will come under the ocean floor, in space, on the moon, through cyberattacks, and by autonomous AI agents tasked with all kinds of disruption. And that’s precisely why it is so critical that we continue to invest, build, innovate, and stay on the bleeding edge of technology. Fiber optics companies like Corning (GLW) will clearly benefit over the long run from a trend like this. Subsea infrastructure build-out combined with 5G network expansion and eventually 6G networks will drive the incessant need for more fiber. And there is a private and mostly unknown U.S. company based in Eatontown, New Jersey, that has been at the center of this all. It is one of the only companies that can lay subsea cables, and it has an exclusive deal with the U.S. government to do so. Subcom was acquired by private equity firm Cerberus Capital Management in late 2018 for just $325 million. And, not coincidentally, Cerberus – with the help of the U.S. government – acquired a Philippine shipyard located on a former U.S. Navy base close to the South China Sea for $300 million in 2022. Cerberus beat out Chinese competitors in the deal. I’m pretty confident that Cerberus would have won no matter what. Subcom is now generating more annual revenue than the cost of the original acquisition paid by Cerberus. This is a company to watch as Cerberus has had it for about six years. By now Cerberus will be looking to sell for a large profit or take the company public as a way to exit. Either way, we’ll be watching closely. --------------------------------------------------------------- Like what you’re reading? Send your thoughts to feedback@brownstoneresearch.com. [Brownstone Research]( Brownstone Research 55 NE 5th Avenue, Delray Beach, FL 33483 [www.brownstoneresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Brownstone Research welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-512-0726, Mon–Fri, 9am–7pm ET, or email us [here](mailto:memberservices@brownstoneresearch.com). © 2024 Brownstone Research. 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