Internet service providers in India: abroad view

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India wants to install around 25 million direct exchange lines by 2001 and this will require an investment of
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National Taskforce on Information Technology & Software Development

Electronic& Computer Software Export Promotion Council

Telecom Equipment & Services as a sector to export to

Telecom Equipment & Services as a sector to invest in

National Association of Software & Service Companies

The federal government of India ended the monopoly of VSNL over provision of Internet services with effect from October 7, 1998. Today, there are more than 200 private sector ISPs (Internet Service Providers) either already active or about to start operations. Satyam Infoway Ltd. is the first private sector ISP in India.

There is no bar on the number of companies which will be given licences and licence fees is virtually non-existent – none for the first five years and a mere Rs. 10 for the next 10 years. The equity for foreign investment has been kept at 49 per cent as is the norm with other telecom services opened to the private sector.

The interested companies are free to fix their tariff and there is no insistence on coverage. E-mail companies have been allowed to automatically become Internet Service Providers (ISPs). However, pending a more defined policy, 'conditional licences' will be given to companies which have defaulted on licence fees in other services such as cellular, radio paging and basic phone services.

The present policy is not very different from the previous one prepared by a committee headed by Dr. Bimal Jalan and announced by a previous government. The policy based on Dr. Jalan Committee recommendations was announced on January 15, 1998. But barely a month later, the Telecom Regulatory Authority of India (TRAI) invalidated the Internet licensing policy on grounds that its recommendations on the terms and conditions of licences were not obtained. The DoT filed an appeal in the Delhi High Court, which on July 16 upheld its appeal. The case is now (as at November 29, 1998) pending before a multi-member bench, but its verdit is unlikely to affect the overall progress of matters in this field.

The few points of departure from the Dr. Jalan report are a result of inputs provided by the national task force on information technology, the TRAI and the Law Ministry where the policy was held up for seven weeks. As compared to the previous policy, the licence period has been extended from 10 years to 15 years and the fees to be paid from the sixth year onwards has been fixed at Re. 1 per year per licensee. The Government was in favour of waiving licence fees altogether instead of the initial period of five years but was compelled to fix a token amount of Re. 1 following objections from the Law Ministry.

Three categories of ISPs have been specified. In the category A, licences are given on an all-India basis, under the second category fall the 20 territorial circles and the four metro telephone systems of Delhi, Mumbai, Chennai and Calcutta as well as Bangalore, Hyderabad, Ahmedabad and Pune. Any secondary switching area (equivalent to a district) form a separate category C service area with the exception of the eight cities defined in B category. The security deposit has been fixed at Rs. 2 crores, Rs. 20 lakhs and Rs. 3 lakhs (note: 1 lakh=100,000, 1 crore=100 lakhs) respectively.

Private companies have been allowed to establish their own gateways in addition to using the gateways of DoT, VSNL or authorised public/government organisations. But this concept is only in principle because the Government has set up an inter-ministerial committee which will first go into security-related issues before granting permission to ISPs to set up alternate international gateways. Till then subscribers to ISPs will have to grapple with the problem of congestion facing existing Internet subscribers unless the VSNL dramatically increases the number of access nodes.

In addition to leasing transmission links from the DoT, ISPs are also allowed to utilise the infrastructure planned to be set up by the railways, State Electricity Boards, Power Grid Corporation etc. A point of discord might arise over the lease charges with the DoT likely to insist that these organisations should charge the same amount as DoT. The railways is planning two optical fibre-based networks between Chennai and Mumbai and Delhi and Mumbai with branches at a number of places.