Dial @PC

Ever made those cheap phone calls over the Net to friends or family in the US or UK? The software's easily available, but it left behind mixed emotions. The thrill, since it was so easy to make calls. And the guilt—for, till recently, internet telephony was illegal. Well, last week the telecom ministry did away with the second factor by legalising internet telephony for both STD and ISD calls. But it was clear that the move would have a cataclysmic impact on both the Rs 80,000-crore telecom sector and several individual players.

Days after the announcement, a few firms had already decided to take the plunge. GAIL announced it will apply for the NLD (national long distance) licence. The state-owned gas distribution firm, which had recently tied up with PowerGrid and RailTel to create a 60,000 km line of optical fibres (the second largest across the country), hopes to provide a virtual private telecom network to corporate customers. Other telecom firms, when asked to comment on the development, said they were still considering the repercussions and their options in the new scenario.

Two things are likely to be natural fallouts though. Internet telephony, used illegally by thousands of customers till now, is pretty much certain to boom. "The current relaxations and increasing broadband access in India will allow the various service providers to collaborate more easily, combining Net applications with human voices, either in the same building or across localities," says Preeti Desai of the Internet and Mobile Association of India.

More importantly, the government's decision will redefine the rules in one of the fastest-growing telecom markets in the world. According to some estimates, call rates may come nose-diving down to as little as Rs 7 per minute for calls to the US, compared to the current tariff of Rs 40-odd per minute. For existing telecom operators, such a dramatic drop would surely upset all calculations and force them to rejig business models. At present, the Indian mobile market alone is growing at an astounding rate of 60 per cent per month.

Says a senior manager in a leading telecom firm, "Internet telephony, especially for international calls, is becoming popular with more Indians travelling or working abroad. Its growth till now had been restricted by legal hurdles. Now, with increased bandwidth and new rules, we can expect the quality of the experience to improve...consumer usage too should go up as a result." But, as Vikram Mehmi, CEO, Idea Cellular, says, "Some investments will be required to make internet telephony happen."

Still, there's a certain lack of clarity on the possible impact. For instance, the new regulations state that stand-alone ISPS (Internet Service Providers) like Satyam and Spectranet can only offer Net access and content services in India, and will not be able to enter the telephony segment (in the STD segment). However, the ISPS can enter the ISD arena. Therefore, it's the fully-integrated company players like Bharti, BSNL, MTNL and Reliance who will benefit the most as they will be able to provide a range of services, including STD and ISD Net telephony.

"Stand-alone ISPS have been restricted, they cannot offer internet telephony for users to make calls within India," explains Desai. According to Amitabh Singhal, ex-president of the Internet Service Providers Association of India (ISPAI), this may represent the beginning of the end for smaller ISPS. "Consumers will now want to choose a service provider who offers a package, which includes all services like access, content and telephony," he feels.

While experts are sure rates will drop for ISD calls, they are uncertain about the impact in the STD segment. Will the new regulations bring about a fresh round of STD rate cuts? Several factors suggest that it's a given. The new rules have also lowered the revenue share licence fee from 15 to 6 per cent and has brought down entry fee for a new NLD licence from Rs 100 crore to Rs 2.5 crore. But with STD rates already down in the past few years, the overall impact may not be significant. "If the government had opened up domestic internet telephony a few years ago, when STD rates were nearly Rs 9 per minute, it would have had a stronger impact," feels Kobita Desai, telecom analyst, Gartner. Today, a Delhi-Mumbai call is as cheap as Rs 2.40 a minute.

So, in the domestic arena, companies may draw up different strategies to take advantage of the new rules. For example, some of them may continue to offer existing services, but use the internet protocol technology on their backbone infrastructure networks to transact various calls within the country. In addition, integrated telcos could even set up virtual private networks for large corporate clients. Using its huge optic-fibre network, GAIL can help customers purchase gas over the Voice Protocol Network. Finally, non-telecom corporates may seek the help of the telcos to connect internet phones with the traditional telephone networks. In all the above cases, the telcos will be able to cut costs and also pass on benefits to customers.

A few analysts, however, maintain that the regulations should have been more transparent and equitable. At the moment, a new entrant like Skype, a popular global Net telephony firm, needs to take separate licences for providing mobile and internet services or to be in a position to offer integrated services. And it's no secret that getting a mobile licence is both difficult (there's not too much spectrum available) and expensive (an all-India one could cost over Rs 1,000 crore). Therefore, there's an inherent bias in favour of the existing players.

Such grey areas only prove that governments will never be able to grasp the full implications of new technologies continually emerging in sectors like the telecom and internet. Policymakers will invariably be late on the mouse. For example, India dithered for years before legalising net telephony, which had already become popular with customers. Even when it happened, the bureaucrats were unable to frame rules that would be seemingly fair. Such half-baked measures can only lead to more legal battles, as was the case with the fight between GSM and CDMA firms. Perhaps it's time to involve the technocrats again when it comes to dealing with a new technology.