India Calls for Web Data From Google, Skype

The electronic security crackdown in India appears to be far from over.

Indian authorities announced Wednesday that they would request Google (GOOG) and Skype set up servers in India and allow government officials to access their web data.

The announcement follows India's month-long campaign to require Research in Motion (RIMM) to provide access to encrypted data from email and other communication services conducted using BlackBerry devices. RIM agreed Monday and presented the government with several options for tracking its data.

The newest push for access to mobile communications information suggests Indian officials remain concerned that an unmonitored flow of email, instant messaging and video chatting could pose a threat to national security.

For the targeted companies, India's requests to access encrypted communications data could create significant hassles in terms of capital and operations. A settlement between RIM and India could set a precedent that may require RIM to revisit its international growth strategy, Sameet Kanade, an analyst at Northern Securities, wrote in a report. Google and Skype could face similar pressures.

Ignoring India's requests could lead to being shut out from a growing market with more than a billion potential consumers.

For Google shareholders, the data request comes at a sensitive time. Last week, ComScore released results of its July survey of social networking sites suggesting that Facebook had expanded its membership within India significantly faster than Google's Orkut had over the last year.

Separately, Skype filed an initial public offering on Aug. 9 and is expected to come to market at some point this fall. Should India pressure on Google further, potential Skype shareholders could start questioning the impact that the country s demands would have on a newly-publicly traded company.

Mobile communications networks have expanded recently within India.

"In recent months technology has increased the communication between the government and villagers in the countryside," Monty Guild and Tony Danaher of Guild Investment Management wrote in a report, projecting that India's gross domestic product would grow 8% to 10% during the next two or three years. "Handheld phones and village computer terminals have given farmers an unprecedented opportunity to sell their crops directly and avoid middlemen. The Indian economy is expanding more rapidly due to the fact that rural as well as urban citizens are enjoying the growth."

Villagers' rising incomes and consumption could lead to greater competition among companies trying to increase their share of the subscriber pie.

INVESTOR CENTER

MARKETS:
Chart
TODAY
Portfolio Chart

RESEARCH STOCKS & FUNDS

Subscriber Tool

Stock Screener

Portfolio Tracker

Track your own buys and sells

See More Tools

Answer Engine
Find Answers to Life's Challenges  

Find solutions to this and many other problems using

Answer Engine from SmartMoney. 

Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
www.djreprints.com.