Stringent telecom rules: After 5G, China being left out in equipment too

After barring firms like Huawei and ZTE from participating in 5G trials, the government is now going to curtail Chinese link in the telecom equipment space for products by European and US vendors. According to sources, some non-Chinese vendors, which despite being certified as ‘trusted’ by National Security Council Secretariat (NSCS), are not getting approvals for certain products that are manufactured at their factories located in China.

If a firm fails to get the ‘trusted’ approval for certain products, it can’t be deployed in a network. The mandate is part of the National Security Directive on telecommunication sector, which came into effect on June 15 last year. So far, around 20 Indian and global firms have been approved as trusted, barring Chinese majors like Huawei and ZTE.

In terms of providing details, the security directive is onerous for telecom operators as well as vendors. The operators are required to submit all the details regarding their networks -– core equipment, access equipment, transport equipment, and support systems to the NSCS. The information includes every detail about the vendors from whom they procure as well details about rollout of networks, expansion and upgrades, every time such things take place. Similarly, the telecom vendors have to submit all details about their company, directors, businesses, manufacturing, shareholding pattern, etc, to the NSCS.

Multinational firms, which have a India registered subsidiary, have to provide shareholding pattern up to three levels down, including nationality, to ascertain ultimate beneficiaries. The global vendors need to provide nationality details about their key people such as board of directors, global president/CEO and ownership breakdown by type of owner and country. The vendors also need to submit details about global locations of manufacturing, service delivery centres, locations for R&D, etc.

The sources added that as NSCS has access to wide variety of information, it is in a better position to take a decision around any kind of vulnerabilities that may arise in the communication networks. For instance, when a trusted firm seeks approval for a product that may be manufactured outside India, it submits details of several manufacturing units across the world as probable sourcing locations, but approvals are not coming for their units located in China. Effectively, this means that if an equipment is coming from outside, it should not come from China.

But even as the intent is to stop Chinese involvement in new network rollout, permissions are being given occasionally to telecom operators for upgrade and maintenance of their existing networks, at places which may not be critical. Like if a telco wants to upgrade its network in metro cities or border areas, Chinese players may not get approval but for other telecom circles, an exemption can be given. As per sources, Huawei has got exemption for some upgrade contracts for 4G.

As per industry estimates, 30%-40% 4G network was rolled out by Chinese players in the past. The share is now going to come down as telecom operators have started to replace Chinese vendors with European firms such as Ericsson and Nokia.