U.S. Tech Firms Protest China’s Rules on Wi-Fi

U.S. electronics companies, eager to supply a rapidly growing Chinese market, are protesting a decision by Beijing to regulate the sale of wireless networking equipment inside the country.

The rules, which went into effect Dec. 1 but include a grace period until June, require that wireless networking gear sold in China incorporate a locally developed encryption scheme to which only 11 Chinese companies have access, said Dennis Eaton, chairman of the Wi-Fi Alliance, an industry group.

Eaton said U.S. industry and government officials, concerned about the disruption the measure could have on shipments, have appealed to the Chinese to consider alternatives.

“The Chinese have not offered any compromise position,” Eaton said. “We don’t have any expectations at this point that they’ll repeal it.”

Wireless fidelity, or Wi-Fi, is the most popular wireless networking system and has blossomed into a $3-billion industry. It is quickly transforming the way businesses and consumers connect to the Internet. China remains a tiny piece of the market but is expected to grow to $250 million in sales by 2005, Eaton said.

Publicly, large U.S. technology suppliers such as Intel Corp. and Cisco Systems Inc. will say only that they are studying the rules.

Eaton, however, said suppliers of Wi-Fi products have expressed confusion about the rules and concern about the effect they might have on developing products, which would need to accommodate the Chinese encryption technology called Wired Authentication and Privacy Infrastructure, or WAPI.

“Our member companies are very concerned ... due to the very abrupt nature of things and the lack of information and the little time they’ve had to prepare and work WAPI into their product plans,” Eaton said.

Wi-Fi has faced little interference from regulatory regimes. The technology is based on standards developed by an international industry body and relies on radio frequencies for which the United States and some other countries require no license.

A representative of the Chinese Embassy in Washington did not immediately return a call for comment. A call to the U.S. trade representative in Washington was not returned.

The Chinese, according to Eaton, have said they have mandated an entirely different encryption technology to ensure national security and protect the privacy of the Chinese people.

However, the encryption system itself is a national secret, Eaton said. As a result, he said, companies looking to develop Wi-Fi products must work with one of the 11 authorized Chinese companies.

The measure, some electronics company representatives speculate, could have been implemented to provide a degree of protection for growing Chinese technology companies, or to procure a source of revenue from fees paid to the authorized Chinese companies.

The rules also could allow the Chinese government to decrypt any communication by its citizens over wireless networks, which in other parts of the world have sprouted in coffee shops, airports, businesses and homes.

Some industry leaders said the requirement could be met without difficulty.

Accommodating national or regional standards should be nothing new to electronics companies, which have to deal with various systems for cellular phone networks and high-speed Internet connections, said Patrick Lo, chief executive of Netgear Inc., a large supplier of Wi-Fi networking equipment.

“If you have three or four standards, that is something the tech world has been accustomed to,” Lo said. “We’re familiar with that. We can deal with that.”