By Newley Purnell
NEW DELHI -- Indian policy makers are looking for ways to tamp
down American tech behemoths, a shift that could crimp growth
potential in one of the biggest remaining open markets for their
expansion.
India wants to slap new rules on Amazon.com Inc., Apple Inc.,
Alphabet Inc.'s Google, Facebook Inc. and other firms, using a page
from China's playbook to take control of its citizens' data and
shelter homegrown startups.
The proposed rules, which have emerged in recent weeks in a
series of private, draft government policies, have U.S. tech
companies concerned, according to people familiar with the matter.
American firms are betting billions on the Indian market because,
unlike China's, it has been relatively open to foreign competitors.
That might be about to change.
"It is unprecedented and it needs to be taken very seriously,"
said Vinay Kesari, a Bangalore-based technology lawyer specializing
in regulatory matters who has worked with U.S. tech firms. "It
could have huge implications."
A draft of a new e-commerce policy, reviewed by The Wall Street
Journal, repeatedly calls for a "level playing field" and outlines
new rules for "encouraging domestic innovation and boosting the
domestic digital economy to find its rightful place with dominant
and potentially non-competitive global players."
Data created by users in India from e-commerce platforms, social
media and search engines would need to be "stored exclusively in
India," the draft says, adding that the government would have
access to it.
The policy draft also suggests closing some of the loopholes
that allow foreign e-commerce companies to skirt restrictions on
foreign ownership of retail.
Indian policy makers and some local startups are worried the
South Asian nation is missing an opportunity to develop its own
world-beating tech titans. They see how China's restrictive
policies have helped it create some of the world's biggest and most
innovative tech brands, including Alibaba Group Holding Ltd. and
Tencent Holdings Ltd., and want to give Indian companies more
breathing room to grow.
For U.S. companies, India is a prize worth fighting for. It now
has 390 million internet users, more than the U.S. and second only
to China, according to a report from consultancy Bain & Co. Its
e-commerce market is expected to be worth $33 billion this year,
three times greater than what it was in 2015, according to research
firm eMarketer.
Amazon is spending $5 billion to boost its operations here. It
dominates the e-commerce market along with Flipkart, a homegrown
company that Walmart Inc. bought for $16 billion earlier this year.
A handful of smaller, local online shopping startups are vying for
the few remaining online shoppers. Amazon and Walmart declined to
comment.
While it is still uncertain if or when the new policies will be
implemented, they could hamper Google, Facebook and its WhatsApp
messaging service, which have hundreds of millions of Indian users
and typically use servers around the world. Google, Facebook and
WhatsApp declined to comment.
To house data locally, the companies could have to make use of
local data centers, which would be costly and could prove
disruptive to their operations, said Tarun Pathak, an analyst at
research firm Counterpoint. Another concern would be ideological:
American tech firms typically want to protect data from government
snooping except in extreme cases.
Many Indian companies, which also store their data outside of
the country, would also be affected, said Ashish Aggarwal, head of
public policy at Indian tech-industry group Nasscom.
Separately, a draft report from a panel working on the Indian
government's cloud-computing policy recommends data normally kept
in the cloud be stored in India. That could affect Amazon's popular
cloud-services business, along with a similar service offered by
Microsoft Corp. Electricity, which data centers demand, costs more
in India than in many countries, and a surge in demand here could
incur additional costs. A Microsoft spokeswoman declined to
comment. A spokesman for Amazon Web Services didn't respond to a
request for comment.
Similar data-storage requirements in China forced Apple this
year to begin shifting iCloud accounts of China-based customers to
a local partner's servers. It also will store encryption keys for
those accounts in China, a change that alarms privacy specialists.
It historically stored encryption keys exclusively in the U.S. for
all global users.
Meanwhile, India's main telecom regulator has threatened to
punish Apple for refusing to make a spam-blocking app created by
the regulator available on its App Store, according to an official
at the Telecom Regulatory Authority of India. Apple has been
reluctant to accept the app, which is designed to counter unwanted
text messages and phone calls, because it violates users' privacy,
analysts said. Indian authorities have told telecommunications
companies to cut off iPhones if Apple doesn't cooperate, the
official said. An Apple spokesman didn't respond to requests for
comment.
The proposed policies come on the back of an outcry by Indian
politicians and authorities about a spate of lynchings triggered by
rumors spread on WhatsApp. WhatsApp has tried to slow the flow of
information on its messaging service but authorities say the
company isn't doing enough. They want more control to see who is
spreading rumors and try to stop them, analysts say. A WhatsApp
spokesman declined to comment.
--Rajesh Roy, Tripp Mickle and Jay Greene contributed to this
article.
Write to Newley Purnell at newley.purnell @wsj.com
(END) Dow Jones Newswires
August 13, 2018 13:00 ET (17:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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