By Richa Chakravarty
The furore over imported telecom equipment requiring security clearance has finally cooled down as the Department of Telecommunications (DoT), Government of India, lifted the eight-month ban. Although a temporary halt, the telecom industry experienced a major jolt in the past eight months. However, telecom equipment manufacturers/importers have agreed to abide by the tough new rules laid down by the government.
New government norms
As per the latest norms for telecom companies sourcing equipment from foreign manufacturers, particularly Chinese companies, penalties of 100 per cent of the contract value will be imposed on mobile phone operators if any spyware is found in their imported equipment. International telecom equipment makers keen to do business in India will now have to deposit source codes and detailed designs of all products and services they sell in India, into an escrow account, in encrypted form. This can be accessed by security agencies and operators in case of an emergency.
Equipment orders pending
Since February 2010, the government had not cleared over 450 equipment orders worth close to US$ 3 billion, placed with Chinese vendors. As of March 2010, India had 621.3 million telecom subscribers, up 44.6 per cent from the previous year, and this is expected to reach 700 million by 2012. At this crucial time, when India is all set to roll out 3G/BWA services, any further delay in giving the security clearance would have thwarted this accelerated growth.
Abiding by the latest security rules, operators are left with no option but to sign an undertaking of Rs 500 million (with an indemnification letter) assuring the government to self certify their equipment. Signing of the indemnification letter will at least help the operators in importing core equipment for their expansion and launch programmes.
Loss of revenue
Imports in these eight months had dropped to zero. Looking at the statistics, the industry is estimated to have lost business of more than Rs 100 billion. However, some see this as a short term halt as it would reap benefits in the longer run. Opines Desi Valli, COO, Net 4, “Loss of revenue cannot be evaluated against the interests of national security.”
Industry analysts feel that the government should not have targeted only the Chinese vendors. Negating all allegations of spyware found in Chinese equipment, Suresh Vaidyanathan, head, PR, Huawei, says, “We operate in 100 countries, including India. We have a proven track record and have 6000 Indian employees working in 11 locations in India. We cannot afford to do this. The government is just strengthening its monitoring mechanism.”
The lift on the ban comes as a big relief for many operators who have been banking on cheaper Chinese equipment to roll out 3G services. Moreover, operators who had pulled back on spending while waiting for the outcome of 3G auctions, have hope with this new mandate. “Even the government had to incur losses due to the loss in earnings from duties earned by importing these devices. The government completely understands the losses that the operators had to bear, but there is no escaping the fact that if this network comes down, it will be a national problem,’’ explains Rajan S Mathews, director general, Cellular Operators Association of India (COAI).