By Jocelinn Kang and Jessie Jacob*
Australia has an opportunity to strengthen its position as a regional digital hub in the Indo-Pacific, as the submarine cable industry undergoes a transformation. Capitalising on this chance will take strategic focus and decisive action. (The Australian Strategic Policy Institute. The Strategist.)
This presents both risks and opportunities for Australia, as we explain in our report released today, Connecting the Indo-Pacific: the future of subsea cables and opportunities for Australia.
The globe’s relentless demand for data has transformed submarine telecommunications cables, which have grown in number from 130 cables networks in 2010 to more than 550 today. Submarine cables are the fastest and most cost-efficient means to transport data internationally, with a capacity that far surpasses satellites. They carry 99 percent of transoceanic public internet and private network data traffic, facilitating critical global economic and financial activity as well as government and military communications and operations.
The proliferation of submarine data cables in the Indo-Pacific is opening up unparalleled information access, communication and technological opportunities. The demand for data will grow with advances such as 6G, which is expected to enter pre-commercial trial from 2028, continuing advances in artificial intelligence, and the uptake of burgeoning technologies such as holographic communications. Business analysts estimate that the global subcable system market will grow at a compound annual rate of 10.3 percent in the period to 2029.
Previously the domain of telecommunications carriers, today the industry is increasingly being shaped by a small group of US-based hyperscalers—the cloud and content services giants—as well as the strategic actions of major powers and minilateral groups. Hyperscale cloud and content providers bring unprecedented capital investments. And as their needs increase, hyperscalers are transitioning from being primary purchasers of network capacity to owning and operating subcable systems. These hyperscalers have an increasing influence on the subcable industry that hasn’t yet been fully recognised or seriously considered; they account for the majority of total submarine cable capacity usage, with that share continuing to grow.
This shift means that an increasing portion of the world’s data is under the stewardship of only a few entities, making the availability of that data highly dependent on their seamless operation. Such a concentration creates a digital supply-chain dependency risk, in which potential disruptions could lead to widespread consequences. The flip side of this is that hyperscalers are now increasingly in control of the ‘internet services stack’—content services, data centres and now network transport. This consolidation of control additionally raises concerns about the principle of an open internet.
The increasing presence of hyperscalers is occurring at a time of heightened political tension between major powers the US and China. That tension is most acute in the Indo-Pacific. The control of data—in this case manifested in the routing, laying, landing and repair of subcables—has been used as one of many platforms for political signalling. For example, in the South China Sea, China’s permit requirements for subcables traversing
its claimed territorial waters and exclusive economic zone—an area marked by territorial disputes—allow Chinese authorities to influence the management of those cables and to secure the involvement of Chinese companies.
But within this changing environment, Australia is well positioned to secure its emerging role as a regional digital hub for subcables, and for AI and cloud-data centres in the Indo-Pacific. It should capitalise on this increased subcable connectivity and these digital investments by leveraging its secure and resilient digital infrastructure to offer alternative routes for global data traffic, away from tense geographic choke points, which would help foster better regional connectivity.
To enable this outcome, our report makes five key recommendations, including that the Australian Government supports and strengthens regional repair and maintenance capabilities, and ensures that the management and protection of cables remains best practice, while it continues to work with regional partners to shape the regulatory norms and standards of the region.
To manage risks to Australia’s data security and economic ambitions, the report also recommends that the Australian Government engages more closely with industry, and maintains oversight and vigilance to digital supply-chain dependency risks and anticompetitive behaviour. Not only will those measures build connectivity and resilience domestically and regionally, but they align with Australia’s foreign policy, development, security, and cyber objectives.
It also ensures that Australia’s subcable network, and that of the region, is as resilient as possible in the face of a tense geopolitical future.
