US Sanctions on Huawei & ZTE Pose Hard(ware) Questions for India

The concerns of US & India pertains to how China requires companies to share data if requested by the government.

The Federal Communication Commission’s (FCC) action against Huawei & ZTE is not a ban but more of an economic sanction and comes a day after India imposed a ban on 59 Chinese apps.

(Image: The Quint/Aroop Mishra)

A day after the Indian government issued an order banning 59 Chinese apps including TikTok, the United States’ telecom regulator announced, on 30 June, that it has designated Huawei and ZTE as “national security threats”.

The Centre, in its 29 June press statement, had stated that the banned apps have “engaged in activities which is prejudicial to sovereignty and integrity of India, defence of India, security of state and public order.”

The Federal Communication Commission’s (FCC) action, however, is not a ban but more of an economic sanction. What this means is money from the FCC’s $8.3 billion a year Universal Service Fund will no longer be used to “purchase, obtain, maintain, improve, modify, or otherwise support any equipment or services produced or provided by these suppliers,” it said in its statement.

FCC Chairman Ajit Pai stated that the decision was “based on the overwhelming weight of evidence,”and claimed “both companies have close ties to the Chinese Communist Party and China’s military apparatus.”

While many analysts have viewed the Centre’s decision to ban the apps as a geopolitical move in the backdrop of the Indo-China tensions along the LAC, the press statement issued by the Ministry of Electronics & IT makes no mention of China.

Identical Concerns Expressed by India & US

However, the concerns raised by both, the FCC and the Union Electronics & IT Ministry are nearly identical.

The concern pertains to how legislation in China requires companies originating in China to share user data if requested by Chinese government or intelligence agencies.

The legislation at the heart of these concerns is China’s National Intelligence Law, which came into effect in July 2017. Within this controversial law, Article Seven stipulates that “any organisation or citizen shall support, assist, and cooperate with state intelligence work according to law.”

According to reports, a panel comprising joint secretaries in the ministries of IT, Law, Telecom and Home is likely to raise the issue to seek information from the banned entities on requests received from Chinese intelligence agencies and the number of the times such requests were complied with.

Raising the same concern, the FCC statement said, “Both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services.”

Gunjan Chawla, Programme Manager, Technology and National Security at National Law University’s Centre for Communication Governance, said this is a matter of concern and the government would be right to be weary of Chinese vendors but one must look at it from the bigger picture on the question of banning Chinese products for security reasons.

“Huawei is not the only company that is subject to this law, there are a plethora of Chinese companies. The tradeoff would be we would be we pay extra for our hardware for some level of information security,” Chawla told The Quint.

Hard(Ware) Questions For India

Ravi Chauhan, who headed telecommunication equipment makers Nortel and Juniper Network’s Asia operations said the competitive bidding by Chinese companies for network infrastructure projects has traditionally posed a big challenge for companies worldwide.

“Chinese companies have regularly not only quoted extremely low prices for optical fibre projects but ticked on every feature requirement in the tender regardless of whether they actually did offer such features,” Chauhan explains.

“Securing network infrastructure in today’s time is critical especially in an environment where China’s infrastructure is deeply entrenched in India’s networks and China is hostile,” he adds.

Brajesh Chandra Jain, vice president, Internet Service Providers Association of India (ISPAI), outlines the apprehensions among the internet service providers following the trend of boycotting Chinese technology and the subsequent ban on Chinese products at the application layer of services.

“Whatever the government does it should do with clarity. We hope there doesn’t arise a situation where service providers procure equipment and then that gets banned post-facto retrospectively,” Jain told The Quint.

“What we want is to be provided a positive list of companies that we can buy from and not a negative list of banned companies,” Jain added.

Could India Follow Suit?

However, with this ban, it seems the government maybe playing itself into a corner with respect to Huawei and hardware companies.

“After banning 59 entities at the application layer they are suggesting at the application layer these Chinese companies are a threat to sovereignty and security then there remains no justification to retain Chinese companies at the hardware layer,” Chawla explained.

“It would nullify the effectiveness of the security measures taken at the application layer,” she said.

Any move to restrict products at the hardware layer of the internet, be it smartphones, routers, optical cables or components, involves added layers of complication, unlike banning apps.

Jain explained there are several hardware products that are currently imported from China. These include optical fibre cables, customer service equipment and components to join the cables and protect them.

“These equipments come primarily from China and cost is a big factor here. Once we start using these products, we shouldn’t be told later to stop using them. This will result in even higher costs,” Jain told The Quint.

Such a move is also bound to impact telecom players.

“The situation right now is JIO is the only company that is not using Huawei equipment. Banning Huawei will have very real implications for Airtel and Vodafone, which are still using Huawei equipment,” said Chawla.

According to Chauhan, “Keeping in mind the cost factor, if India is to look for alternatives outside Chinese infrastructure it must happen with long term strategic plan which has to begin now.”

“It will come as a big cost to them in hundreds of crores at one go. The bigger challenge is it may promote monopolistic behaviour in the telecom space,” she added.

Tackling China’s Cost Factor

A look at the broader trend of cyber diplomacy beyond 5G suggests that India, having joined the Global Partnership on AI recently, has indicated a drift towards the western side of things. The Partnership is driven by the G7 countries and is aimed at limiting China’s influence on technical standards in AI development.

Assuming that such a move by the US may translate into pressure on India to also go down a similar route, what are India’s options?

Industry observers, however, say the challenge is if Huawei is in the race, Chinese companies have the advantage because of their competitive pricing.

Acknowledging that “decision makers would be feeling the pressure on this,” Chawla explained that India can either chose to outright ban Huawei and keep them out of 5G trials altogether or it can take a middle ground, like the US has done, by banning federal agencies from procuring their equipment.

“If state on state espionage is the main concern, then with a measured approach, it can be managed. Government agencies will have some assurance that their information is not compromised by malicious code in hardware and the consumer also has a choice and is not subject to the prohibitive costs that the government is being subjected to,” Chawla told The Quint.