Thursday, December 17, 2009


Regulation with respect to illegal cell phones, most warranted

Given the nomenclature of the Indian market, any offering that is cheap, finds immediate takers. Purposefully, I write cheap here, as more than half a billion people lack adequate education, thus awareness and lack of productive engagement, thus purchasing power, breeds a market which are governed just on account of prices. It is no secret that anything cheap in the immediate run is costly in the long run. And the same is true, wrt Chinese goods, which have successfully established itself in the Indian market!

To understand what the Chinese products have done to India, one should take a peep into the cell phone handset market. One can easily get the most loaded (features) cell phone, for a fraction of price, of the existing branded phones. And if the phone serves the purpose of receiving and making calls, and that too with a mega pixel camera and a touch screen, then who is bothered about the make? And even if someone is conscious about the make, then you have a Chinese version of iPhone priced at Rs 3000! And frankly at that price differential no one is bothered as whether the apple is growing in the US or in China!

But then as I said that anything that is cheap in the immediate run has a cost in the longer run. With respect to Chinese handsets it is not just the associated health hazards, but some serious security threats too. Most of these phones lack the essential IMEI numbers (International Mobile Equipment Identity Code) and thus make it difficult for the security agencies to trace the phone calls and retrieve call details. In the light of these security breaches, the government recently banned around 25 million cell phones that did not posses any IMEI numbers. Chinese made handsets entered the Indian market, in year 2007, as a result of the Chinese delicensing policy. These phones after import find its way to the flourishing grey market (without any record of monetary transaction) and escape all duties and taxes.

This move is actually in line with the decision to ban pre-paid connections in Kashmir for security reasons. This ban becomes more rational after India's intelligence agencies have warned that Chinese products could have embedded elements enabling China to launch a cyber attack or shut down the equipment. The use of mobile in terror plotting and other activities are very obvious, especially in the border areas. A recent report by Gartner estimated that sales of knock-off handsets could reach $150 million. Many leading cell phones companies are working with Chinese government in cracking down these illegal cottage industries and are simultaneously working with Indian government to put the legislation in place thus making it illegal to link a phone to a network without an IMEI.

On a deeper analysis, this type of legislation serves multi-faceted benefits. With India all set to allow 3G technologies and other sophisticated features, compliance to international standards becomes more pertinent. Such compliance will put check and balances regarding illegal hacking of mobile services viz. mobile banking and money transfer, in place. However, against the popular belief that this move may hurt the huge Chinese mobile user base, the government has already made a provision of registration of the illegal mobile or their unregistered IMEI number for merely Rs 199. This will also better off the markets of domestic players who are facing steep competition from the products from the grey market.

All in all, cheap mobiles would exist as there exists a market for it, just that a little bit of regulation can do a wonderful balancing act!


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