Foreign telecom vendors seek DoT relief

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"Telecommunications are emblematic of the highly integrated nature of modern economies: while the sector's own economic momentum depends on the existence of dynamic user industries, world-class communication links are today a sine qua non for a wide range of economic activities within services and beyond. Open and competitive markets are clearly decisive in this integrated environment. Indeed, sectors such as computer services and mobile telephony are thought to have experienced remarkable growth precisely because they were introduced in an environment relatively free of trade restrictions," stated Director-General Pascal Lamy on the occasion of the WTO Symposium on Telecommunications organized in Geneva to commemorate the 10th anniversary of agreement among WTO members to open basic telecommunications services.

Telecommunication, undisputedly, in the last one decade has emerged as a potent tool for economic development and integrating trade and commerce in the world. The pace with which telecommunications has expanded its footprint all across the world, has raised serious concerns before regulators and law makers. In India, the telecommunication revolution started in 1995 and currently, India has close to 700 million mobile connections, with 10 to 15 million subscribers being added every month.

Every jurisdiction has its own reasons and concerns including security, interconnect ability, taxability etc in relation with telecommunication.

The dilemma for the governments is to balance their concerns with free trade in telecommunication so as to increase its economic activities resulting in creation of all around development and value in business, commerce and society.

The four major aspects of World Trade Organization in relation with telecommunication are; be transparent, don't discriminate, increase competition and regulate reasonably. India, currently, has heavy dependence on foreign telecom infrastructure companies and till date an arrangement, where Indian telecom service providers have been assisted by foreign companies in setting up network infrastructure, operating  and managing telecom services, has worked very well.

In fact, telecom infrastructure and telecom services shared by various telecom service has resulted in reduction in capital as well as the operational cost of the telcos, which in turn has benefited the consumers in terms of low call rates.

India, like many other countries, has faced security threats in different proportions and dimensions, where technology and telecommunication play a vital role. Keeping in mind security concerns, the Indian Government through Ministry of Home and Ministry of Telecommunication has proposed certain serious modifications in its licensing obligation qua the telecommunication licensees and vendors providing physical telecom infrastructure and telecommunication services.

The telecom majors such as Alcatel Lucent, Nortel, IBM, Cisco, Eriksson, Huawei, Nokia etc. along with Indian telecommunication service providers are finding the regulatory changes onerous and un-implementable in its current form.

To put things in perspective, the telecom service providers operate as licensees where Department of Telecommunication (DoT) issues license for operating and managing telecom services in specified circles all across India. The license issued by DoT acts as a contract as well as a regulatory guideline for the service providers, so as to define their obligations in relation with operation and management of telecom services in India.

The Government of India on 28.07.2010 amended the terms of license issued to the service providers, which is in exercise of powers vested in the Department of Telecommunications under certain clauses of unified access services (UAS) license agreement. By way of amendment, Department of Telecommunication has added many clauses in the license and casted certain arduous obligations, on the licensees as well as the vendors to the licensees including telecom equipment suppliers, telecom service providers, telecommunication technology companies and sub-contractors to all the vendors.

In the name of security concern, the Government of India has gone to the extent of providing a template of the agreement to be signed between the telecom service provider and the vendor of the equipment, product and services, besides the regular purchase order between the parties. These changes have created a flutter among the vendors and in turn, various Governments. The changes suggested on 28.7.10 have posed certain serious commercial, technological, legal and regulatory hurdles for the smooth functioning of telecom sector in India.

Various telecom service providers, since January 2010, have been unable to source telecom products and services due to the Indian Government's harsh stand against such players on the ground of security threat posed by the telecom equipment and service providers. In order to mitigate the security risk, in its mind, Government of India has suggested certain un-implementable propositions.

Firstly, the draft template agreement has provided for transfer of technology from vendors to the service providers and divulging vendor's intellectual property to Government and telecom service provider and any other third party appointed by the Government.

The mere thought of transfer of intellectual property in the form of technology has send shivers down the spine of various vendors including technology companies, software companies and telecom equipment manufacturers. Intellectual property in the telecom sector is created by these companies over a period of time and by spending billions of dollars.

Now, with the stroke of a pen, the Government of India has cast an obligation to provide such intellectual property to the Indian companies.

Interestingly, the Government of India in the template agreement has suggested the requirement of a mandatory escrow account for source code and other sensitive licenses with respect to 'material' including software.

Although in the template agreement it is provided that there are no known cases of malware disruptive telecom, yet, however, it has been provided that the vendor shall enter into an escrow arrangement and deposit information documentation in relation to supplies including hardware, software all source code, "gold" build software, high level design, detailed design documents, listings and programmer notes (escrow information).

This escrow information can be accessed by telecom service providers as well as Government of India at any point of time in terms of template agreement, as escrow key will remain with the controller of certifying agencies, Government of India.

These obligations have been found onerous and unprecedented and unacceptable by the global ICT industry. In the name of security concerns, Government of India has overstretched its authority by asking for sensitive proprietary information, which is at core of any company in the world.

The understanding of global vendors, till 28.7.2010 was that the Indian telecom license holder can enter into any kind of private purchase agreement with them and Government of India cannot put any obligation or restriction on them unilaterally.