Telecom service providers may face stiff financial penalty for spyware

The Union law ministry has suggested a penalty on telecom service providers (licensees) equivalent to 100 per cent of their contract value if any equipment bought and installed by them is found to have any spyware or malware.

Security agencies had raised concerns that telecom equipment from some countries, particularly China, could have spyware or malware that could intercept sensitive conversations and access government documents. Following this, the government had in December last year made it mandatory for service providers to seek security clearance before placing any order for telecom equipment.

The law ministry proposal came on a draft of an agreement between service providers and their equipment vendors sent to it by the Department of Telecommunications (DoT). They would have to sign this before getting security clearance for import of equipment. DoT had suggested a penalty of Rs 50 crore on service providers if spyware or malware was found in the equipment.

The Ministry of Home Affairs (MHA) had suggested imposition of a penalty of 100 per cent of the contract value, but on the vendor, not the licensed service provider. But the law ministry has said this is not legally tenable, as the vendor is outside the scope the licence agreement. The agreement is signed between the operator and the government and any security lapse is the responsibility of the operator.

It is for a licensee to enter into any agreement with its vendor to recover the loss or get indemnified if it has to make a penal payment, the ministry added.

DoT, in consultation with MHA, has been working on amendments in the licence conditions to address security concerns, after taking comments from industry and other stakeholders.

Many equipment orders placed by Indian mobile phone operators with China’s Huawei Technologies and ZTE Corp have not been cleared by the government for the past six months. The Chinese companies say the Indian government has blacklisted them, a charge denied by New Delhi. The move has had an adverse impact on many telecom operators, who have been banking on cheaper Chinese equipment to roll out third generation (3G) services as early as possible. Any delay may force them to postpone the launch of these services, despite the fact that spectrum would be given to them by September 1. Recently, Tata Teleservices demanded spectrum be allotted to none till the government made up its mind on the issue.

The government has also told state-run Bharat Sanchar Nigam not to take equipment from Chinese firms such as Huawei for the border areas in the northern, southern and western parts of the country.