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S Swarn, Mumbai New ISP Policy Will Boost In a major policy decision, the government of India has thrown open Internet services to private companies, thus ending the monopoly of the state-owned Videsh Sanchar Nigam Ltd (VSNL) in this sector. The new Internet service provider (ISP) policy is more liberal than the policy announced by the government in early 1997, which was subjected to litigation over the past year. As per the new policy, licences to private ISPs would be issued for a period of 15 years, with a condition to commence services within 18 months of signing of licence agreement and a cap of 49% foreign equity. The licence period can be extended beyond 15 years for a period of five years or more, by the telecom authority on suitable terms and conditions. The ISPs will not have to pay any licence fee for the first five years and thereafter pay a token fee of 1 rupee per year. There is no limit on the number of licences to be issued for a particular area or the number of licences owned by a company. The private ISPs would be allowed to set up their own transmission links and gateways, after getting security clearance from an interministerial committee comprising experts from the Ministries of Defence, Home Affairs, Telecommunications, Departments of Electronics and Space. Alternatively, the ISPs can obtain transmission links on lease from the DoT, Basic Service Providers, the Railways, State Electricity Boards, National Power Grid Corp and similar other authorized organizations. This ends the DoTs monopoly over domestic long distance data networks. The private ISPs would be allowed to set up “last-mile linkages, that is, use the telephone lines” linking the operator to users. They can also use the networks run by private cable TV operators to provide Internet services. The ISPs will also be allowed to use very small aperture terminals (VSAT) networks. While VSAT operators would also be allowed to offer Internet services, the licensees of certain VSAT-based closed user group (CUG) networks (like stock exchanges and travel reservation networks) will not be allowed to offer Internet services as part of their existing licence. The ISPs would have freedom to fix their own tariff-structure, which will be governed by “market forces.” “TRAI may, however, review and fix a tariff during the validity of a licence, which shall be binding on the licensees,” said Kabindra Purkaystha, Minister of State for Com-munications, while anouncing the policy. There are three categories of licenses: Category A, which includes whole of the country. Category B comprising 20 territorial telecom circles (roughly equivalent to a state) each and four metro cities, Delhi, Mumbai, Calcutta and Chennai. The cities like Ahmedabad, Bangalore, Hyderabad and Pune will jointly constitute category B service area. Secondary service areas (roughly equivalent to a district) of DoT circles would form category C service areas. ISPs will be required to submit a bank guarantee of 20 million rupees for category A, 2 million rupees for category B, and 300,000 rupees for category C service areas.
Fierce Competition Expected The announcement of the ISP policy has set the stage for fierce competition in India’s Internet market. Within a week of the announcement, as many as 12 companies, out of 47 applicants, had signed up licence agreements with the DoT to operate Internet services. One private company, Satyam Info Ltd, has since commenced its Internet services in Delhi and Mumbai. Undaunted by the incoming competition from private ISPs, VSNL plans to invest 100 million rupees (US$2.36 million) to improve its Internet services. VSNL has also slashed its tariff by 30% . “We are going in for complete revamp of the service with new features like automatic, online registration, online billing and software download facilities,” said Amitabh Kumar, chairman and managing director of VSNL. According to Kumar, VSNL expects its percentage of revenue from Internet accounts, which now stands at 1% to increase to 7% in a couple of years. With the private ISPs entering the fray, and many of them becoming operational within three to six months, the number of Internet connections in India is likely to touch 1.5 million by turn of the century. The use of the cable TV network for Internet services alone will provide a big boost to Internet market. There are approximately 20 million cable TV connections in the country. According to industry estimates about 40% of these could opt for Internet services, when offered. VSNL currently provides Internet services using its international gateways at six metros or major city locations, and earth stations at 42 other locations which together forms an India-wide Internet backbone.
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