Sinophobia

While it would be foolhardy to dismiss outright the concerns of Indian intelligence agencies with respect to Chinese firm Huawei Technologies’ proposal to expand its telecom equipment business in the country, on the grounds that it has links with the Chinese military and intelligence, the fears do seem exaggerated.

At the core of the opposition (which saw Huawei being first made a target in 2001) is that the company, which has supplied equipment to both the state-owned telecom undertakings, would be able to use this to bug any conversation that takes place on their phones.

While this applies just as well to equipment supplied by other firms such as Lucent or Motorola, the reason why conversations cannot be bugged, according to officials of various Indian phone companies, is that once a supplier provides the equipment, the source codes or keys are generated by the phone companies themselves and the equipment suppliers have no access to this.

Even Bharti, which has its entire network’s maintenance outsourced to Ericsson, says that the primary operations are run by the company itself and no critical information is available to Ericsson.

If it were really so simple to bug phones, by virtue of supplying the equipment, India’s entire telecom sector would be at risk, not just that part of the sector that buys equipment from Chinese firms like Huawei and ZTE.

What’s important to keep in mind is what Chinese firms have done to drive down prices in the market for equipment supplies. In the latest bid for BSNL’s tender for fixed wireless terminal (FWT) phones, Huawei’s winning bid was a mere 37 per cent of the sum bid by its US rival, Lucent Technologies; and in the case of some critical components such as the base switching centre, the quote was only one-seventh.

The fact is that both BSNL and MTNL are on the verge of inviting bids for several billion dollars, and any controversy that involves Huawei can only benefit rival suppliers.

Indeed, this is also the line that the Cabinet Secretary is reported to have taken when the matter of Huawei’s investment plans in the country were bumped up to his level, with reports saying, on the one hand, that the company’s operations have been adversely commented upon by security agencies, and, on the other, the telecom ministry saying that BSNL’s forthcoming tender of 40 million phone lines would involve higher prices if Chinese firms are kept out.

While the Cabinet Secretary has resolved the problem for the time being by saying that Huawei would not be allowed to do turnkey telecom installation and maintenance projects unless it is partnered by an Indian firm, a more permanent solution is called for.

Perhaps the committee that has been set up will think of solutions quickly. It is also worth keeping in mind that for every potential security bogey raised against Chinese firms in India, a greater number are getting raised in the west vis-à-vis Indian BPO units.

After all, if a Chinese firm can spy into Indian telecom networks, Indian BPO units can get access to secret data in US banks. In both cases, the answer lies not in banning these companies, but in creating firewalls and security blankets that preserve security while working with low-cost suppliers.