Written by: Techub News Compilation

In a recent dialogue hosted by a16z, U.S. Navy Chief Technology Officer (CTO) Justin Fanelli engaged in an insightful exchange with John Doyle, co-founder and CEO of the emerging secure telecom operator Cape. This dialogue is significant because it touches on two critical and urgent issues: firstly, the deep penetration of national-level adversaries into global critical communications infrastructure has become a reality; secondly, how defense agencies are transforming their thinking to adopt commercial innovative technologies at an unprecedented pace to address these threats. Cape's pilot project in Guam is a successful example of this new public-private collaboration model.

1. Crisis Emergence: From "Salt Typhoon" to Guam Predicament

The dialogue began with a shocking fact. John Doyle shared his experience at the cybersecurity sub-forum of the World Economic Forum in Davos last year. At that time, a speaker mentioned a sophisticated persistent threat (APT) organization named "Salt Typhoon," which is considered to belong to a Chinese government-affiliated hacking group. Doyle asked the approximately 60 cybersecurity professionals present how many knew about this matter. Only 5 raised their hands.

"Salt Typhoon" revealed much more than an ordinary cyber attack. According to subsequent public reports, this organization has "comprehensively" infiltrated major U.S. telecom operators. This means that attackers can effectively listen to phone calls, obtain call details, track internet connections, and even control interfaces used for legal surveillance. "They can switch on their listening capabilities at any time," Doyle emphasized, "Think about how much of your life is on your phone? Basically everything. And we now understand this applies to everyone in the U.S., including the highest levels of leadership."

This threat began to show signs during the 2024 U.S. presidential campaign when it was reported that Senator J.D. Vance's phone was being tapped. More seriously, attackers could also determine who is being legally surveilled by law enforcement, directly jeopardizing investigative actions and the safety of involved personnel.

This macro threat became particularly acute and tricky in a specific location—Guam. Guam is a key strategic hub for the U.S. in the Western Pacific. Justin Fanelli pointed out that the Navy is clearly aware that the local telecom operator in Guam may have been infiltrated. However, the traditional mindset of "scan and scrub" faces significant challenges: in a system as complex as telecom networks, it is difficult to be confident that all backdoors have been found and threats completely eliminated.

"Rather than trying to painstakingly search for all (Chinese) implants in Guam's existing operator network and attempting to scrub them—while never being certain if it's completed or successful," Doyle articulated Cape's fundamental approach, "it’s better to cleanly install a telecommunications network directly on top of the existing physical infrastructure." In other words, assuming the physical infrastructure is hostile but still providing trustworthy communication services through innovative software and architecture on top. This idea became the core of Cape's collaboration pilot project with the Navy in Guam.

2. Cape's Solution: Building a "Network of Networks"

So, what exactly is Cape? How does it achieve its claimed "more private, more secure, and more resilient"?

John Doyle explained that Cape is a global commercial cellular network that user phones can access. It is essentially a mobile virtual network operator (MVNO), but the "virtual" is key. Cape does not own or build physical cellular towers; instead, it rents tower capacity from existing operators around the world. In the U.S., this means partnering with mainstream telecom companies; overseas, for instance, through the recently announced collaboration with Japan's Rakuten Mobile.

This model brings unique advantages:

• Resilience: Cape has built a "network of networks," weaving together resources from different physical infrastructure providers. Therefore, users do not rely on any single vendor. Doyle mentioned that in the past six months, two of the three major telecom operators in the U.S. experienced significant outages, but the impact on Cape users was much less because they could failover to other networks.
• Security: When Cape was founded four years ago, its team had almost no telecom industry experience, mostly coming from a defense technology background. They found the cybersecurity status in the telecom industry to be "very, very poor." Therefore, Cape chose to deploy on commercial clouds, adopting industry-best cybersecurity practices and independently developing components that do not meet security standards. Doyle confidently stated that from a cybersecurity perspective, Cape is "significantly better than other operators."
• Privacy: Cape highly differentiates in the way it manages user data and mobile identifiers. Just like Apple rotates MAC addresses for iPhones, Cape periodically rotates various identifiers used in its network, making it harder to track users.

The Guam project perfectly illustrates the value of this architecture. The Navy did not ask Cape to fix or clean up the existing network but instead directly overlaid Cape's software-defined core network on top of it. By encrypting communications across potentially infiltrated physical layers, Cape provided trustworthy cellular connectivity for military personnel in Guam. This pilot project was completed ahead of schedule, did not exceed budget, and achieved all predetermined success indicators (WHAMs).

Doyle also shared a stunning story revealing the vulnerability of the telecom industry supply chain. In building its own network, Cape needed to integrate a system from a third-party vendor to respond to legal surveillance requests from law enforcement (a legal requirement). This vendor serves many large telecom companies. However, Cape's site reliability engineering (SRE) team, when evaluating the installer provided by this vendor, discovered an unencrypted text file containing the usernames and passwords of all the vendor's customers. "And this happened just three months before the 'Salt Typhoon' news broke," Doyle said, "We later learned that China compromised all these main telecom companies’ X1 interfaces... it doesn’t seem difficult for them." This incident prompted Cape to change vendors and strengthened their resolve for in-house development and rigorous audits.

3. Navy CTO's Transformation: From "Builder" to "Gardener", Accelerating Innovation Adoption

Cape's quick collaboration and success with the Navy stem from a fundamental shift in the way the Navy, especially the team led by Justin Fanelli, approaches innovation adoption.

Fanelli recalled that the Navy, and the entire Department of Defense's procurement system, relied heavily on a "demand axis," spending years detailing requirements, making the process slow. This model is outdated for software and rapidly evolving commercial technologies. Now, the Navy is shifting to a more flexible, forward-looking "small bets" model: validating promising technologies through small pilot projects and rapidly scaling them if successful.

"We used to be better at building everything ourselves," Fanelli said, "Now, we are transitioning from 'builders' to 'gardeners'." His team is dedicated to discovering and nurturing promising technology seeds, clearing obstacles for their adoption within the Navy.

The core of this transformation is changing internal processes and culture. Fanelli noted that personnel responsible for procuring aircraft and ships in the past were accustomed to applying the same lengthy processes to software procurement. To address this, his team, along with supporters, held "boot camps" for project managers and contracting officials, teaching them how to accomplish what used to take 18 months in just 3 months. He emphasized that it’s not just about external startups learning to navigate government, government itself also needs "inside-out" reform to eliminate bottlenecks.

Another key tool is developing clear, measurable "World-Class Alignment Metrics" (WHAMs), which are success criteria. Fanelli admitted that if technical introductions focus only on functionality rather than addressing specific pain points or delivering measurable operational or business outcomes, it is challenging to drive advocacy within the decision-making chain. In the Guam project, both parties invested considerable effort to refine these metrics, ensuring aligned goals, laying the foundation for smooth execution thereafter.

To scale innovation, Fanelli's team has implemented an "Innovation Adoption Toolkit" and encourages the formation of a "network of networks." They no longer attempt to have a small team monopolize all innovation discoveries but instead activate "champions" within diverse Navy communities (e.g., munitions, autonomous robotic systems) and maintain close connections with external investors and ecosystems to jointly identify and drive new technologies.

4. Advice for Entrepreneurs and Future Opportunity Areas

For entrepreneurs aspiring to enter the defense tech or dual-use sectors, both guests provided pragmatic advice.

John Doyle pointed out that there was once a "conventional wisdom" in the industry: if you're going to sell to the government, you should approach the Navy last, as they are perceived as the slowest adopters. But this is changing. He advised entrepreneurs to emphasize shareable, non-sensitive technology validation reports, such as the third-party deep penetration test report sponsored by DIU for the Guam project. This type of objective evidence can dramatically accelerate the dissemination and adoption of technology across different military branches and government agencies.

Justin Fanelli's advice was more straightforward: dive deep into the problem area. "Go to San Diego or Norfolk, where many ships are docked." He suggested entrepreneurs talk to end-users (sailors, Marines), listen to their pain points, participate in hackathons, and pay attention to the "structured challenges" issued by the Department of Defense. The key is to identify those "migraine-level" urgent real problems, rather than minor inconveniences. He also mentioned that there is a significant amount of "technical debt" in the software sector, with many outdated systems urgently needing replacement. If a new application can consolidate and replace five old systems, it would be highly attractive.

Regarding opportunity areas, Fanelli highlighted several key focuses:

• Maritime Industrial Base and Distributed Manufacturing: Rapid manufacturing and repair of critical components through technologies like 3D printing, addressing the issues where expensive equipment is grounded for months due to shortages of small parts, can have a tremendous impact.
• Software Modernization: There are excess systems and poor user experience issues across nearly all software sectors. New solutions that can provide secure data delivery and intuitive user interfaces, while also replacing multiple legacy systems, have substantial space for growth.

For passionate entrepreneurs without specific ideas yet, Doyle suggested they might first join an excellent defense tech startup to gain experience, while Fanelli once again emphasized that identifying problems in the field is the best starting point.

5. Conclusion: Building Bridges, Facing Challenges Together

At the end of the dialogue, Justin Fanelli used a metaphor: Pittsburgh is a city with hundreds of bridges, originally not intentionally designed this way, but these bridges ultimately provide immense benefits to the city. He believes that at this unprecedented level of support for national security, we need more "bridge builders"—those who can connect technological innovation with defense missions, understanding the languages and needs of both sides: "warrior engineers" and bilingual talents.

"We care more about outcomes, and we can measure these outcomes," Fanelli summarized, "Bring forth solutions that can create 'overwhelming advantages' and demonstrate the change you can bring. We will enhance value, increase influence, and strengthen deterrence. The more people can connect various nodes and speak the same language, the better our situation will be from the perspective of national security and economic prosperity for all of us."

This dialogue clearly indicates that in the face of increasingly complex and severe cyber threats and geopolitical challenges, the close collaboration between agile commercial innovation and proactive government reform is no longer an option but a necessity. The partnership between Cape and the Navy in Guam provides a replicable model for this new type of relationship.

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