China Censorship Debate Circles Cisco
That's the stance Cisco Systems Inc. (Nasdaq: CSCO) is sticking to as it continues to catch flack from some who say the company is encouraging Internet censorship when it sells some of its products to Chinese authorities –- and then trains those customers how to conduct Internet surveillance.
That Cisco is tied to a China controversy isn't surprising, given how the company's sales, profile, and visibility in the country have all been raised considerably over the past year. (See Cisco Places Gaming Bet, Cisco CRS-1 Wins in China, Shanghai Telecom Uses CRS-1, and Cisco Turns to ZTE in China.) Also, the idea of Internet censorship is fresh on everyone's mind, given the recent debate in this country about service provider QOS fees. (See QOS Fees Could Change Everything .)
But is Cisco doing anything wrong? That may be a debate for the ages, but analysts say it doesn't look like it will harm Cisco in the near term. "As long as orders are up and the company's moving forward, I don't think anyone cares," says one financial analyst.
Still, Cisco's critics are stepping up the pressure, as they are on all big Internet companies that have business ties to China.
In her testimony before the U.S. House's subcommittee on International Relations a week ago, Lucie Morillon, the Washington representative of Reporters Without Borders, took aim at Cisco, Google (Nasdaq: GOOG), Yahoo Inc. (Nasdaq: YHOO), and Microsoft Corp. (Nasdaq: MSFT) as companies that are helping the Chinese government shut down one of its "only open windows to the world" -– the Internet.
"Cisco Systems has marketed equipment specifically designed to make it easier for the Chinese police to carry out surveillance of electronic communications," Morillon said. "Cisco is also suspected of giving Chinese engineers training in how to use its products to censor the Internet."
But Cisco says it can't be held responsible for what China does with the equipment it buys. Especially because Cisco isn't selling China anything different than it sells to any other country.
"Cisco's networking products are designed to improve communications and productivity of common law enforcement activities that take place in China, as they do in the United States," says a Cisco spokeswoman in an email to Light Reading. "This equipment that we sell in China is the same equipment that we sell globally."
In his testimony before the House subcommittee, Cisco's senior VP and general counsel Mark Chandler said that China isn't the only country using "off the shelf" networking gear for political purposes. "Some Middle Eastern countries block sites critical of their leadership. And judicial action has been taken in France due to the failure of an operator to block French users’ access to some types of information," Chandler said.
That appears to be quite a different approach than the one taken by Google, which altered its search engine to fit the Chinese market. (See Google Backlash Builds.) Elliot Schrage, VP of global communications and public affairs, told the House subcommittee last week that Google's Chinese version allows users access to "all but a handful of politically sensitive subjects."
As Cisco's Chandler reiterated in his testimony, his company "has not and does not design products to accommodate political censorship. The tools built into our products that enable site filtering are the same the world over, whether sold to governments, companies, or network operators."
On Wall Street, that message is good enough for now. Cisco's shares were down $0.28 (1.41%) to $19.58 in trading on Tuesday, but that's still 5 percent above where the stock was on Feb. 1.
— Phil Harvey, News Editor, Light Reading