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Google, Facebook Build a Data Highway to Asia—Financed by a Chinese Developer
It’s the first such cable to be majority owned by a Chinese company; 500 million dollars project highlights growing interest in high-tech investments
By EVA DOU in Beijing and DREW FITZGERALD in New York
March 15, 2017 7:00 a.m. ET
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BEIJING—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. His son, Eric Wei, 33, who grew up in California, is spearheading the half-billion-dollar project, which needs to clear regulatory hurdles.
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.
The two Silicon Valley companies, along with Microsoft Corp., have filled many of the roles phone companies traditionally played by financing their own fiber-optic-cable projects. Executives in charge of the cables say the investments help their cloud-computing operations by cutting out intermediaries, making the companies’ networks more reliable and less expensive to run.
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.
Born in China’s northern Hebei province in 1961 to farmer parents, Mr. Wei made his early fortune in steel in Shanxi province. In the late 1990s, he jumped to Beijing real estate, developing properties with names like “The Great Mall.” But frothy prices and tightening regulation had Mr. Wei seeking other investments.
“The housing market is getting tougher,” said Eric Wei. “My father wants to shift to some new sunrise industries.”
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.
An FCC spokesman said the agency has an open proceeding looking at ways to streamline the review process. It hadn’t yet received an application on behalf of Pacific Light. Representatives of the departments of justice and homeland security didn’t respond to requests for comment.
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.
The agreement will be negotiated and executed by one of the U.S. partners, and Eric Wei said they would comply with all U.S. requirements. Pacific Light has already secured a Hong Kong landing license, he said. Google and Facebook declined to comment on the project’s progress.
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.
Eric Wei said Pacific Light is a commercial project with no government funding. His family has sought out Chinese government partnerships for previous projects, although that is hardly unusual in China. One of the family’s businesses is a domestic alternative to the QR code called a D9 code, which the company promotes as a “safe” alternative to foreign technology.
It isn’t unusual for Chinese entrepreneurs who found success in old-line industries to move into technology, which is viewed as “the next big thing in China,” said Kitty Fok, IDC’s China managing director.
Like other successful Chinese business families, the Weis have shown a willingness to switch gears. After his start in steel in Shanxi province, Mr. Wei and his business partners moved on to other sectors, including Beijing real estate, a banking venture in the eastern port town Yantai, and an industrial fan company, according to business filings.
His Beijing real-estate developments include an apartment complex in the city’s university district and an office block in the central business district with tenants that include China’s state-owned Global Times newspaper and the sports unit of national broadcaster CCTV.
—Yang Jie in Beijing contributed to this article.
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