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However, UTStarcom, one of the equipment companies under security radar, said the government announcement was a “milestone” and that it would pave the way for an “end to the impasse” over imports of Chinese telecom equipment. The two other big Chinese telecom equipment importers -- ZTE and Huawei -- declined comment.
The government on Wednesday amended telecom licences making it mandatory for equipment suppliers to share the source code and design details to address security concerns.
The department of telecommunications (DoT) said the source code and design details would be kept in an escrow account in an encrypted form and would be used only in case of a security emergency.
Anil Kumar Sardana, managing director of TTSL, told Financial Chronicle, “There is a movement forward but there are critical operational issues that need clarity. The operational issues, to my mind, are many and these include as to how will this escrow account actually work? Questions like who will keep it and where would it be kept remain unanswered.”
He, however, said he had directed his technical team to interface with the vendors to see if they were comfortable with the new rules.
TTSL boss sounded apprehensive about the approval procedure outlined under the new rules. “There is some confusion. I am not sure but I am given to understand that even if an agreement is signed between the government, the operator and the vendor, there is still a need to go back to DoT and the home ministry. If this is correct, then we are not going anywhere. This is just going back and forth and perhaps not relevant.”
TTSL had on June 29 written to the telecom secretary arguing for a level playing field in issuing security clearance to ensure that there was no commercial disadvantage to those using Chinese equipment. While Reliance Communications and BSNL are the other big users of Chinese equipment, Bharti and Vodafone are the two big operators that primarily use non-Chinese equipment.
Reliance Communications declined comment on the telecom licence amendment.
SC Khanna, secretary-general of the Association of Unified Telecom Service Providers of India, or AUSPI, said, “We cannot make a comment unless and until we hear from our members. Our members have engaged the vendors to be able to get their feedback on the issue.”
An optimistic Vijay Yadav, south Asia managing director of UTStarcom, a big Nasdaq-listed telecom equipment supplier founded by a Chinese-American, said, “This (government order) indeed is a milestone. This would pave the way for a broader balance between meeting industry requirements and meeting security considerations.”
On whether UTStarcom would meet the new guidelines, including sharing the source code, he said, “We intend to comply with the requirement of the government but to be able to do so we will have to study carefully whether the business imperative under the new rules is able to handle the load of compliance. If it does, we will do it.”
On the precedent of an escrow account in the telecom space, Yadav said, “There is a global precedent on escrow account both in the telecom and the IT space, and this involves the government, telecom/IT operator and the vendor on one hand and the government and the operator on the other.”
He said, generally, escrow accounts were maintained in the telecom space by large operators who place mega orders with vendors to store safely the source code. This helps hedge against the vendor getting into any financial difficulty, he added.
ZTE India managing director DK Ghosh could not be reached for his comments. ZTE spokesman in India Amrit Madur said, “We cannot comment right now. We will come out with a statement in a couple of days after our managing director is back in India.”
Chief marketing officer of Huawei Device, Victor Xu, said, “We are reviewing the issue right now and soon will come out with a response.”
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