WASHINGTON (Reuters) - The Federal Communications Commission voted on Thursday to propose new rules governing undersea internet cables in the face of growing security concerns, as part of a review of regulations on the links that handle nearly all the world's online traffic.

The FCC voted 5-0 on proposed updates to address the national security concerns over the global network of more than 400 subsea cables that handle more than 98% of international internet traffic.

"With the expansion of data centers, rise of cloud computing, and increasing bandwidth demands of new large language models, these facilities are poised to grow even more critical," FCC Chair Jessica Rosenworcel said.

Baltic nations said this week they are investigating whether the cutting of two fiber-optic undersea telecommunication cables in the Baltic Sea was sabotage.

Rosenworcel noted that in 2023 Taiwan accused two Chinese vessels of cutting the only two cables that support internet access on the Matsu Islands and Houthi attacks in the Red Sea may have been responsible for the cutting of three cables providing internet service to Europe and Asia.

"While the details of these incidents remain in dispute, what is clear is that these facilities -- with locations that are openly published to prevent damage -- are becoming a target," Rosenworcel said.

The Chinese Embassy in Washington said "turning undersea cables into a political and security issue severely disrupts international market rules, threatens global digital connectivity and cybersecurity, and denies other countries, especially developing countries, the right to develop their undersea cable industry."

The FCC is conducting its first major review since 2001 and proposing to bar foreign companies that have been denied telecommunications licenses on national security grounds from obtaining submarine cable landing licenses.

It also proposes to bar the use of equipment or services in those undersea cable facilities from companies on an FCC list of companies deemed to pose threats to U.S national security including Huawei, ZTE (Shenzhen:000063) 601728.SS, China Telecom and China Mobile.

FCC Commissioner Geoffrey Starks said the commission is considering whether to bar companies from getting undersea cable licenses that are on other lists like the Commerce Department's Consolidated Screening List. "China has made no secret of its goal to control the market, and therefore the data that flows throughout the world," Starks said.

Last month, a bipartisan group of eight U.S. senators called on President Joe Biden to undertake "a review of existing vulnerabilities to global undersea cable infrastructure, including the threat of sabotage by Russia and China."

The United States has for years expressed concerns about China's role in handling network traffic and potential for espionage. 

Since 2020, U.S. regulators have been instrumental in the cancellation of four cables whose backers had wanted to link the United States with Hong Kong.

In June, the FCC advanced a proposal to boost the security of information transmitted across the internet after government agencies said a Chinese carrier misrouted traffic.