Equitable regulatory charges for submarine cables: towards a fair model

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Equitable regulatory charges for submarine cables: towards a fair model

Regulatory fees serve several purposes: to compensate states for the use of their maritime space, to ensure environmental protection, and to support administrative processes related to the protection of submarine cables, including instances of conflict with other new seabed infrastructure. However, these fees are often not adapted to the realities of the submarine cable industry, resulting in delays in permits for installation and repair, unpredictable financial obligations that hinder long-term planning, or even discriminatory practices that may violate international treaties.

In this article, we will analyse the main types of regulatory charges that affect any installation of submarine cable systems, how these charges interact with current market trends, and finally propose a way towards a more equitable treatment of all stakeholders. Special emphasis will be placed on considering the current market gaps between telecommunication companies and OTTs.

Overview

It is well known that there are two main types of regulatory charges in the submarine cable industry. Those collected by the local authority that issues the permit for the installation of the submarine cable within its jurisdictional waters, and the others that are related to the use of such a system, usually paid to the national telecommunications entity. 

This scheme may vary with the countries, both permits combined into a single one, payment to only one entity or other variables, but for the purpose of this article we will maintain this differentiation in order to analyse each revenue source and its rationale. 

In addition, there are other charges to be taken into account, both during the installation phase of the submarine system and during its operation, such as payments to environmental authorities for the granting or renewal of the environmental permit, customs duties on the import of cables and their spare parts, as well as other charges that are beyond the scope of this article. Strictly speaking, regulatory charges are only those imposed by the national telecom regulator, but in the context of this article we will consider all those paid to any government agency in accordance with a national legal framework.

Installation permits

For each installation permit or use of the seabed, countries use different methods to calculate regulatory fees, including:

• Flat fees: Standard amounts applied universally, regardless of cable length or total capacity. They can be applied per system or per segment (e.g. two segments of the same system reaching the same cable landing station).

• Length-based fees: Charges based on the length of the cable within a country's territorial or exclusive economic zone (EEZ). The longer the cable, the higher the fee.

• Total design capacity-based fees: Charges determined by the technical specifications of the entire cable system (e.g. number of fibre pairs) or its design capacity, the maximum theoretical capacity that such a submarine cable can carry.

Each model has its drawbacks. Flat fees do not take into account differences in cable length or potential use (e.g. a 2002 submarine cable may pay the same as a newer system with 16 fibre pairs), or where there are two segments reaching the coastal country (e.g. a branch may not be treated differently), while length-based fees do not take into account the economic benefit of higher capacity systems.

In some cases, the charge is calculated against the area it occupies, including the protection zone up to half a nautical mile on either side of the cable, as this is considered to be an area reserved for such infrastructure. In others, it is not an area but only the length of the submarine cable in kilometres, also multiplied by a fixed factor. 

Other nations have also decided to charge for cables crossing their EEZ without landing on their territory. It is therefore always advisable to obtain a local legal opinion before carrying out survey activities to assess the amount of regulatory fees that will be paid over the next 25-30 years. Indeed, this is a good reason to change the cable route before it affects the business case, and in-house counsel should be ready to raise a red flag before it is too late to re-route.

We believe that in all these cases there should be proportionality with respect to the actual use and benefits derived from the marine areas. Ideally, there should be a hybrid model combining the following 2 factors:

• Length of cable: Fees based on the physical footprint of the cable. If there is a protection zone granted by the coastal state, such an area should not be included in the calculation as it is in fact an obligation of the coastal state to protect its own digital sovereignty, even though in most cases a private investment is involved.

• Total design capacity: Additional charges for higher capacity systems. This would ensure that operators who benefit more from the use of the seabed contribute proportionately without penalising smaller projects.

In addition, the quantum should optionally allow for the loss of tax revenue due to the reduction in fish catches, if any, for this new cable route. This is one of the most significant revenue losses for the government, especially given the well-known global crisis in the fishing industry due to overfishing and inefficient management of resources. Projections based on historical data from the past decade can guide these estimates, ensuring that fees are both fair and data-driven, especially if the fishing zone moves towards the cable zone or further away from it.  

Above all, governments would demonstrate transparency and cooperation by providing clear guidelines and the rationale for how fees are calculated. Over the 25-30-year lifespan of the subsea system, regulatory fees could be adjusted based on losses in the fishing industry and the overall capacity of each submarine cable system.

Other tax incentives should also be tied to the cable owner dedicating a fibre for SMART repeaters provided that the scientific data is shared with the coastal state. This approach would encourage the submarine cable industry to effectively allocate resources to these dual-purpose systems especially if local governments support their business case with real practices rather than altruistic promises.

Operating permits

The second major regulatory fee is the one related to obtaining a telecommunications licence or authorisation to provide the service in the submarine cable. While the installation licence is typically issued by an executive authority or ministry (e.g. transport, maritime affairs, industry, economic affairs) and is related to tendering and maintenance, the telecommunications licence is usually granted by the telecom regulator entity and focuses on the activity or services provided with this submarine infrastructure.

The main method of calculation may be one (or a combination) of the following:

• Flat fees or revenue based: Standard amounts or percentages applied universally depending on the services to be provided (wholesale or retail services) and their range (up to the landing station or also in the hinterland).

• Design Capacity-based fees: Fees determined by the technical specifications of the cable system (e.g. number of fibre pairs), as also indicated above.

• Capacity Usage fees: Charges based on the use of capacity (lit capacity) and not taking into account spare capacity.

Each of the three has its constraints and limitations, with an endless list of sub-types and various methods of application.  Much would depend on the telecoms policy of the local government, whether it aims to develop a universal service plan to promote interconnectivity in remote areas, or to boost a particular sector of the telecoms industry.

However, the current submarine cable industry has changed dramatically in the last 5 years with the emergence of OTTs and further transformations are expected in the future. What used to be a consortium of telecommunication companies installing subsea systems to carry their end-users' traffic between countries has now evolved into giant hyperscalers connecting data centres with their own intercontinental infrastructure. They may process local data in these data centres, or operate as regional hubs, reducing the scope for local traffic management at their physical locations.

The question then arises as to how much benefit a country that hosts such OTT data centres and submarine cables really receives when these are mainly focused on managing and processing traffic from other countries or are for the hyperscaler's internal use. What started 15 years ago as a joint effort by OTTs in consortiums with telecom companies, is now turning into a wholly owned investment by the former, with less capacity in their megaprojects dedicated to national traffic and more reserved for their internal use.

At this point it is worth recalling that international connectivity, as one of the pillars of national digital sovereignty strategies, involves securing diverse and efficient means of maintaining as many terrestrial, satellite and submarine links with other nations as possible. Therefore, those submarine systems that dedicate some of their current capacity to domestic traffic should be incentivised by offering lower regulatory charges in one of the three models described above.

This new approach would encourage higher-capacity systems to serve the needs of a landing country as well and not just a hyperscaler's own business. Otherwise, the continuation of the same old regulatory practices would create a de facto barrier to entry for telecom companies, which clearly do not have the same economies of scale as an OTT to match the investment required to install such mega-projects.

Towards a fair and updated model

The basis for calculating the regulatory fees for both installation and operating licences should be updated to reflect current trends in the sector. The installation fee should take into account the length of a submarine telecommunication system, requiring states to grant protection zones without additional payment. Furthermore, the calculation should be based on the total design capacity of the cable system and the loss of taxation revenue from fishing catches in the same areas, thus providing an additional reasonable justification for its application.

Whatever model is adopted for the operating licence, there should be incentives to pay reduced regulatory charges when submarine cables manage national traffic where cable landing stations are located. This would ensure that the coastal state prioritises the real needs of its end-users.

In conclusion, fair regulatory charges are essential for supporting a robust national digital sovereignty plan. By adopting a proportional, transparent and efficient regulatory framework, local governments would have the flexibility to adjust these regulatory charges frequently based on objective data with an evidence-based rationale, which would promote a more equitable distribution of the burden among all stakeholders.

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Andrés Fígoli is the author of the book “Legal and Regulatory Aspects of Telecommunication Submarine Cables” and is the director of Fígoli Consulting, where he provides legal and regulatory advice on all aspects of subsea cable work. Mr. Fígoli graduated in 2002 from the Law School of the University of the Republic (Uruguay), holds a Master of Laws (LLM) from Northwestern University, and has worked on submarine cable cases for more than 20 years in a major wholesale telecommunication company. He also served as Director and Member of the Executive Committee of the International Cable Protection Committee (2015-2023).

This article was first published in Submarine Telecoms Forum Magazine #143 – July 2025.