Sino-American trade war threatens the Philippines’ digital future

Posted by on September 1, 2019  /  0 Comments

The US Department of Justice (DoJ) has objected to the completion of the 12,971km Pacific Light Cable Network (PLCN), according to the Wall Street Journal. Once commercially launched in Q3 2019, the roughly $400 million PLCN system will plug El Segundo (California) with multiple Asian destinations: Aurora and San Fernando City (both in Philippines), Deep Water Bay (Hong Kong) and Toucheng (Taiwan).

GU Holdings (a subsidiary of Google), Edge Cable Holdings (a subsidiary of Facebook) and Pacific Light Data Communication (PLDC) have teamed up to build this 144 Tbps capacity of transpacific cable, which is composed of six fiber pairs. It will be the first cable connecting Hong Kong and the U.S. directly with shortest latency (roundtrip delay) of 130ms between Hong Kong and Los Angeles. PLCN also interlinks both the city’s carrier-neutral data centers, which further connects other data centers like Amazon Web Services etc.

Planning and construction of PLCN began in 2015 and the system will be commercially operational within next few months. But now the DoJ, the Department of Homeland Security and the Department of Defence (also known as ‘Team Telecom’) have raised ‘national security and law enforcement concerns’ alleging Beijing’s espionage due to PLDC’s investment in the PLCN cable. Team Telecom suspects that PLDC, a subsidiary of Dr Peng Telecom & Media Group, is linked with the Chinese government thought its partnership with Huawei.

It will be a body blow for the Philippines if U.S. government doesn’t allow the activation of PLCN. Because the cable passes through the infamously seismic active Strait of Luzon. It has prompted Facebook to strike a unique deal with the Filipino government in the history of submarine cable.

Facebook, Google and PLDC jointly own the main trunk between the U.S.A. and Hong Kong. But Facebook has decided to bypass the Strait of Luzon by terrestrially crossing Luzon. Its one branch lands in Baler, Aurora at the eastern coast of Luzon while the other branch lands at Poro Point, San Fernando in Luzon’s western coast (see the map above).

And both the landing stations will be interconnected through Luzon Bypass Infrastructure (LBI), a 250-km of overland terrestrial corridor of the Philippine government. State-owned Bases Conversion and Development Authority (BCDA) builds the LBI optical fiber link. This is how the Philippines government is providing a terrestrial transit to Facebook to safeguard it from the Luzon Strait.

In exchange, Facebook provides the Philippine government 2 Tbps of bandwidth at free of cost. It will be more than the combined capacity (1.5 Tbps) of Globe and Smart-PLDT (June 2017 TeleGeography data). Two years ago, LIRNEasia’s Research Fellow Grace Mirandilla-Santos elaborated the significance of this deal in now defunct Telecom Asia:

The Facebook-PH LBI exchange deal will translate to huge savings for the government. As a big client, the government buys transit through the local telcos in large chunks, which now totals 40Gbps. For a 10Gbps capacity, for example, we can estimate the cost at a low of $10-12 to a high of $15-20 per Mb per month. This cost includes the telcos having to “fetch” capacity from the USA or Hong Kong or wherever, using their international submarine cable and telco partners, then bringing it back to the Philippine.

With the Facebook deal, the Philippine government will simply pay for the internet port capacity, which can be as low as a dollar to a few centavos per Mb per month. Let’s assume that the government would now exclusively use the PLCN for all its bandwidth needs. If it used to pay $15/Mb per month, this would amount to $600,000 per month for all 40Gbps. Using the PLCN, the government would now only have to spend   $40,000 per month if it had to pay   $1 per Mb. That’s a savings of $560,000 per month! Now that is value for taxpayers’ money.

Are the Filipinos worried about the fate of Pacific Light Cable Network due to the Team Telecom’s move? “Of course, we are worried if it will affect our Luzon Bypass agreement,” DICT Undersecretary Eliseo Rio Jr. told the Inquirer on Thursday. It’s too early to jump into a conclusion. But the Philippines nervously stands at the line of fire of ongoing trade war between Washington and Beijing. So sad!

P.S. The following two articles on this topic have been published at later dates. Unsurprisingly there is no reference to the Philippines.

  1. Pressure on Huawei Shifts Closer to Home
  2. US-China subsea terror! The curious case of Dr Peng and PLCN

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