This article originally appeared in Rethink Wireless
The major wireless equipment vendors have voiced mixed responses to India's new rules on security checks for suppliers of key systems.
The Chinese giants, ZTE and Huawei, which have come under the heaviest scrutiny from the Department of Telecom, seem ready to comply with new regulations, but Ericsson is denouncing the safeguards as "unjustly onerous."
Major procurements of 2G kit, and the forthcoming 3G tenders, have been delayed by the DoT's attempts to ensure that suppliers cannot access sensitive information or threaten national security.
Earlier this year, the heat was on Chinese suppliers, with some politicians calling for a blanket ban. More recently, the aim has been to devise a set of rules that would apply to all vendors. The operators have become increasingly restive at the uncertainty, which makes it difficult for them to select equipment, and at possible limitations on their freedom to choose the most cost effective systems.
Two weeks ago, the government made its biggest step so far to come up with standardized guidelines, but they are tougher than those of many other countries - many more mature telecoms economies faced these issues a decade ago.
It has already implemented a rigorous set of checks before purchases can be approved, but these should become more consistent.
Non-public vendors, notably Huawei, may have to open up their corporate structures in order to be eligible for contracts, something the Chinese supplier - which denies allegations of close ties to Chinese military and intelligence agencies - has indicated it is ready to do.
The most controversial clause in the new guidelines is a demand that vendors should lodge source code in an escrow account, which could be accessed by the government for reasons of national security or emergency.
Ericsson said suppliers should not have to share their hardware “source code” as this was proprietary information. “Source code is a vendor's proprietary information and most valuable asset of the company,” the company said. “We believe that the escrowing of source code requirement [should] be exempted/deleted from the agreement.”
The firm added that, once products have been certified by an “agency of repute,” the need to meet other demands made by the Indian authorities should be removed. A number of international trade bodies are also reported to have made official submissions, calling for a compromise.
By indicating that they would accept even the most onerous rules, ZTE and possibly Huawei would be positioning themselves to snap up quick deals while their rivals remain clouded in uncertainty. This is a reversal of the position earlier in the year when the western suppliers appeared to be a safer bet in terms of regulatory clearance.
Huawei and ZTE are estimated to have an order backlog of $750m between them from Indian companies. Nokia Siemens and Alcatel-Lucent both cited delays in Indian infrastructure orders as a negative factor in their recent Q2 results and Cisco is also understood to be affected to a significant degree.