India Clears Way for Chinese Imports

In a bid to resolve the ongoing security issues surrounding imported telecom network technology, India's Department of Telecommunications (DoT) has issued amendments to the Unified Access Services Licenses held by the country's network operators.

The amendments are designed to help ease the current constraints imposed on purchase orders for imported network technology placed by India's telecom operators, which are currently being vetted by government agencies because of national security concerns. Few orders have been cleared since February, though some carriers have been gaining clearance to deal with specified suppliers during the past few weeks.

India's operators and their suppliers -- particularly the Chinese vendors that have been affected the most by the current situation -- are keen for the security issue to be cleared up as soon as possible, as it's holding up procurement processes and network rollouts. (See No Respite for Chinese Vendors and BSNL Blocks Huawei, ZTE Bids.)

It's also been hitting the top and bottom lines of the major international vendors. (See Ericsson CFO: India Bottleneck Easing and India Holdups Smack NSN's Q2.)

But the plans are likely to spell frustration for carriers and vendors, as procurement processes will take longer and be more costly. They could also land the operators with big fines and expenses if security breaches are discovered, and lead to the blacklisting of vendors.

The new rules will, though, provide new business opportunities for independent technology certification labs and equipment test vendors, and also clear the way for operators with new 3G and broadband wireless access (BWA) spectrum to start planning their network rollouts with a greater degree of certainty. Billions of dollars are set to be spent on new networks and supporting systems in the coming few years. (See India's 3G Players Ready for Swift Launch, India's 3G Auction Ends, Raises $14.6B, India's BWA Auction Ends in $8.2B Drama, and WiMax, 3G to Dominate India's Broadband Future.)

In a letter to license-holders issued today, the DoT says India's operators must formulate a "well outlined organizational policy on security and security management of their networks," and submit that policy to the DoT for approval within 30 days. The DoT adds that the operators "shall be completely and totally responsible for security of their networks," so placing the onus of ensuring the security of their networks and services entirely on the carriers.

In addition, operators will in future need to engage the services of "international accredited network audit and certification agencies" when importing telecom systems. These agencies should perform tasks such as "network forensic, network hardening, network penetration tests, risk assessment, actions to fix problems," and so on.

The DoT is to provide the operators with "a tentative list" of potential agencies, and notes that "the services of more than one agency may be required to be engaged for various network elements." In addition, the DoT says the agencies cannot be in the same country as the vendor, so a Chinese agency could not sign off equipment from Huawei Technologies Co. Ltd. , UTStarcom Inc. (Nasdaq: UTSI), or ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), for example.

The DoT also notes that if "any security breach is detected at later stage after deployment/installation of equipment as a result of security audit or in any other manner, the relevant equipment supplied by the vendor shall be taken out of service" and a penalty of 500 million Indian rupees (US$10.7 million) "for each purchase order" plus the value of the initial order will be imposed on the operator.

Following any such incidents, the DoT reserves the right to blacklist any vendor whose equipment is involved in a security breach.

Huawei, which had been expecting a positive development, is clearly celebrating the news. "We are glad to see the resolution of this issue. However, our experts are studying the notification and its overall implications of the industry," stated a Huawei spokesperson in a statement sent to Light Reading Asia. (See Huawei Confident of Indian Import Resolution and BSNL Blocks Huawei, ZTE Bids.)

— Gagandeep Kaur, India Editor, Light Reading

bergea 12/5/2012 | 4:28:35 PM
re: India Clears Way for Chinese Imports

Indian operators, licensees and their foreign  vendors may want to take a more careful look at these rules and procedures before they breathe a sigh of relief. It seems inevitable that procurement processes will take longer and be more costly than expected.

India's operators will also need to move quickly to meet the 30 day deadline to submit a "well outlined organizational policy on security and security management of their networks" to the DoT for approval.

One solution that has not been recently discussed is for operators to source equipment from local Indian manufacturers that

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do not raise the same security concerns.&nbsp;&nbsp; This could create opportuniies for foreign suppliers&nbsp;like Ericsson, NSN and Alcatel Lucent&nbsp;to partner with Indian vendors such as Gemini Communications, Tejas Networks and&nbsp;others that manufacture telecom gear in India.&nbsp; &nbsp;

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