Israel Matzav

When the government interferes with the phones

The Wall Street Journal tells the fascinating story of how Egypt's mobile phone carriers were forced this past week to shut down and then to send out pro-government SMS's.

Vodafone entered Egypt in the late 1990s and India in 2007, pleasing many investors by seeking growth opportunities outside the European market.‬Now, the political risks in both countries have turned ugly: Vodafone has taken billions in write-downs on its India investment, in part due to regulatory issues and a costly tax dispute with the government. In Egypt, the company is scrambling to protect its infrastructure and employees—while delivering the Egyptian army's messages.

"When armed police arrive at your offices there is not much one can do," France Télécom Chief Executive Stephane Richard said on the sidelines of a press conference Thursday, when asked about last week's decision to sever access to all of its services. Mr. Richard said a clause in the company's Egyptian mobile-phone license allows the government to shut down mobile services in the country.

Earlier this week, Vodafone said in a statement that there were "no legal or practical options" open but to comply with the demand to shut off its mobile services.

Both carriers registered their dissatisfaction with the pro-government texts on Thursday. "France Télécom strongly disapproves of any message of a political nature that runs against the neutrality principle which defines our role as a network operator," the company said in a statement. Vodafone said it had "protested to the authorities that the current situation regarding these messages is unacceptable."

...

Research In Motion Ltd. has been under pressure from several governments, especially in the Middle East and Asia, to provide access to the secure networks used by its popular Blackberry device. Last year's decision by Google Inc. to leave China because of search-engine censorship marked a rare case of a multinational company forsaking a business opportunity because of political factors.

Telecom companies face particularly acute risks when dealing with governments in countries where they rely on state-owned infrastructure or state-awarded spectrum contracts for their business.In Egypt, operators often depend on Telecom Egypt's fixed-line infrastructure to carry their mobile services. They also usually employ hundreds of people.

"What is happening in Egypt just goes to show the leverage that governments have over telecom providers," said Cynthia Wong, the director of the Global Internet Freedom project at the Center of Democracy and Technology in Washington. "They can get these companies to do what they want because of the number of employees in the country and the amount of infrastructure in place."

Paradoxically, Google was able to shut down in China because it dominates the World market. Were Vodaphone and France 2 to leave Egypt, there are too many other countries who would be willing to take their place. That and the need for infrastructure allows local governments to dictate their own terms in these matters.

Labels: Egyptian riots, France 2, Mobile phone service, Vodaphone

posted by Carl in Jerusalem @ 9:33 AM