Jan. 11 (Bloomberg) -- Verizon Communications Inc., the second-biggest U.S. phone company, won permission to operate an underwater cable system that will connect the U.S. and mainland China.

The 17,000-kilometer (10,600-mile) cable will give U.S. businesses faster voice, Internet and data connections to Asia, Verizon said today in a statement. The system can carry the equivalent of 62 million simultaneous phone calls, 60 times more than an existing underwater cable linking the U.S. and China.

Verizon and Asian companies are building the cable because they expect communications between the regions to surge over the next decade, IDC analyst Mark Winther said in an interview. Verizon's corporate sales unit, which accounts for more than a fifth of revenue, is looking to international customers to fuel growth as the U.S. economy slows.

Verizon and its partners, which include Beijing-based China Telecom Corp. and Chunghwa Telecom Co. in Taipei, are spending $500 million on the project, which received approval from the Federal Communications Commission today. Construction on the system is under way and should be completed before the 2008 Olympics in Beijing, Verizon said.

Verizon fell 95 cents, or 2.2 percent, to $42.50 at 4 p.m. in New York Stock Exchange composite trading. The shares climbed 17 percent last year.

The Trans-Pacific Express fiber-optic cable will connect to the U.S. through Oregon. New York-based Verizon also owns stakes in 18 cables that already connect the U.S. to the Asia-Pacific region.

Slowing Growth?

The Chinese government said today that its trade surplus narrowed in December and that money-supply growth slumped, suggesting the pace of economic growth has waned. A slowdown won't affect demand for phone services because the expanding middle class will fuel Internet use and business growth, said IDC's Winther, whose research firm is based in Framingham, Massachusetts.

``Even with some economic overhang that retards it, it's still going to be growing,'' Winther said. ``There's no way traffic volumes slow down.''

The FCC gave its approval on the condition that Verizon meet national-security requirements negotiated with the departments of Justice, Homeland Security and Defense. The safeguards aim to prevent foreign governments from gaining unauthorized access to classified U.S. data.

To contact the reporters on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net; Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: January 11, 2008 16:07 EST