Canadian firm was added to the Entity List after Egypt's government used its software to suppress critics, said US authorities.

Iain Morris, International Editor

March 18, 2024

4 Min Read
The pyramids of Egypt
Authorities in Egypt used Sandvine's technology to weed out dissent, according to the US Commerce Department.(Source: Noureddin Abdulbari via Creative Commons)

The companies that typically find themselves on the notorious US Entity List have Chinese origins and are deemed a threat to national security. Among the likes of Huawei and the Shanghai Semiconductor Manufacturing Company, Sandvine stood out as conspicuously Canadian when it was trade-blacklisted on February 28, while the telcos that buy its products gathered in Barcelona for Mobile World Congress. The move by US authorities is "the kiss of death" for Sandvine, said one observer.

For years, negative reports have dogged the company about the use of its technology by authoritarian governments. Sandvine develops software for deep packet inspection (DPI), giving customers better visibility of the traffic that runs over their networks. Its publicly available reports include such details as how much telco traffic stems from videos on YouTube. But this same technology was used by undemocratic Egypt, according to US officials, to spy on political opponents. An Entity List designation was the recent consequence for Sandvine.

"This technology has been misused to inject commercial spyware into the devices of perceived critics and dissidents," was how the US Department of Commerce (DoC) described it. As people familiar with the Huawei story will know, US companies are forbidden from selling products to anyone named and shamed on the Entity List. It was this legislative move that cut the Chinese vendor of network products off from various critical suppliers, including chip companies with US tools.

In Sandvine's case, the listing "will impose license requirements for exports, reexports, and transfers of US technologies to this company," said the DoC in its statement. This sounds damaging because Sandvine has previously acknowledged its software runs on chips designed by Intel in servers made by Dell. Neither one of those US companies will presumably be able to serve the Canadian developer in future – at least not without licenses that may be withheld.

The grapevine about Sandvine

Less clear, at this stage, is what blacklisting means for Sandvine's customer relationships, assuming it can find answers to its new supply-chain problem. Owned by Francisco Partners, a US private equity firm, it does not publish details of its financial performance but makes about $200 million in annual revenues, according to a source. Whatever the specific constraints, US operators will not want to buy products from a company now in the same club of rogues as Huawei, said that person.

A restructuring and removal of the Sandvine name seems possible. Financial backers are thought to have dispatched a team of people to look closely at Sandvine and devise a rescue plan for it. This could involve the dismissal of senior executives and creation of a new company that reuses Sandvine's key technologies under a different brand, said a source with knowledge of the matter. The challenge will be to execute this in a manner acceptable to the Entity List's overseers. Any signs of a change that is merely cosmetic, with a renamed Sandvine carrying on as before, will certainly meet with DoC disapproval.

Approached by Light Reading, Sandvine did not have answers to specific questions about this and its arrangements with US customers but did issue the following statement: "Sandvine is aware of the action announced by the US Commerce Department. We are committed to working closely with government officials to understand, address and resolve their concerns. We will do everything we can to support our customers. Sandvine solutions help provide a reliable and safe Internet, and we take allegations of misuse very seriously."

Controversy has for years surrounded the company as an alleged enabler of digital and human rights abuses. In 2020, it cancelled a deal in Belarus following reports that Alexander Lukashenko's government, widely considered a stooge of Russian strongman Vladimir Putin, had used the DPI technology to weed out dissent and crush protests. Sandvine does not have a monopoly on DPI, and countries like Egypt may feasibly turn to Chinese developers instead. Some detect hypocrisy, pointing out that the US sells weapons to similarly oppressive regimes and buys energy from them. But realpolitik is undoubtedly a factor in those relationships. The fate of a Canadian firm generating just $200 million in annual sales is unlikely to keep US officials awake at night.

Telcos, though, will miss the company if it cannot reinvent itself. Its technology is an aid in the management of increasingly congested networks. Sandvine has also been an ally of telcos in debates about net neutrality and "fair share," the controversial idea – popular in Europe – that Big Tech companies should fund the networks on which Internet applications are made available to consumers. Among Europe's regulatory experts – as opposed to some of its Big Tech-bashing politicians – there is little apparent sympathy for the telco argument. But Sandvine has at least had some data to use in the case.

About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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