Barking up the wrong tree!

Last week, the Indian government announced a ban on Chinese Telecom equipment. While this has been discussed for quite some time now, the news of the ban still came as a surprise, because it takes a lot of guts by the government to come up with such a confrontational move.

The rationale for this ban is that Chinese Telecom imports could jeopardize India's security - while no one bothered to explain how security could be jeopardized, I guess the main worry is about things like sabotaging equipment, using a timebomb that is already present in the software, or sending instructions to disrupt functioning of the equipment as part of a regular software update. In the event of a war between India and China, it will be extremely foolish for India to rely on Chinese telecom equipment - even for civilian use.

However, what is the guarantee that American equipment has no security issues? Or for that matter Swedish equipment? Or Israeli equipment? While it is unlikely that India will fight a war with the US, Sweden or Israel, security considerations are not just about wars. What about spying, corporate espionage, etc?

Indian telecom market has grown to be one of the most significant markets in the industry. We add over 20 Million mobile users each "month" - this is the population of Australia! We spend tens of billions of dollars every year on telecom equipment. In fact the amount of money India pays for telecom equipment each year to foreigners dwarfs how much we pay foreigners for defence equipment. When it comes to defence, we have technology transfer clauses, we have requirements for domestic manufacturing, etc - because we realize that we have to be in control of the equipment eventually, and cannot afford to depend on outside help forever. When it comes to telecom equipment, why are we not insisting on such clauses? Telecom equipment is as important for our national security as defence equipment is.

Most telecom equipment is purchased by private sector telecom companies - but the government can atleast set the agenda when it comes to purchases by BSNL. What if BSNL insists that 10% of any contract has to be locally fulfilled by Indian partners. Or gives incentives for local procurement of the equipment? In fact if TRAI can step in and ban Chinese Telecom equipment purchases even by private telecom operators, why not mandate that private telecom operators have to procure 10% of their requirements locally? And mandate that this 10% should not be passive equipment like cables, towers, etc - but active equipment like Switches, base stations, etc. Because this industry does not even exist in India, they can start small, and slowly scale up the local content over time.

If we really care about security, it is in our long term interest to set up a thriving domestic telecom infrastructure industry. Initiatives like banning the Chinese will not work in long term - India is a big enough market, and Chinese equipment has a big enough price advantage, that it becomes attractive to setup dummy entities in some other jurisdictions to bypass these artificial restrictions. Do you expect Indian customs officials to pore through base station components and firmware to determine the origin of the product?

There is another important reason for India to encourage a domestic telecom industry. The Nano project by Tatas has shown that Indian engineering is second to none, and is best suited to create products specifically targetting Indian markets. Indian requirements are dramatically different from requirements in Sweden, US, etc. Nokia has done a great job customizing their product for the Indian market when it comes to handsets, but when it comes to infrastructure equipment, India uses pretty much same equipment as the rest of the world. One problem caused by this one-size fits all approach is the power situation. Power is not reliable in India - so towers need to have power backup solutions, generators, etc. Also because of extreme heat and dust in India, airconditioning requirements are also higher. The power backup needs to be capable of handling airconditioning requirements as well - so it adds very significantly to the cost of the deployment.

Maybe a solution engineering specifically for Indian conditions would do away with the requirement for Air-Conditioning. Maybe someone can create a solution that uses much lesser power. These solutions would be much better suited for Indian conditions, and would reduce the cost of deployment. The best part of this example, is that it is not a hypothetical example. Sloka Telecom - an Indian startup has created WiMAX base stations that do not require any air-conditioning, and use very little power, so that power backup requirements are lowered quite significantly. This makes the cost of deployment lower, and allows the operator to recover his investment at much lower ARPU.

Whether the ban on Chinese equipment stays or goes, it is high time India put policies in place to promote domestic companies to create telecom infrastructure. We should ensure that at least some of the billions of dollars that we spend on telecom each year comes back to us.