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Spreading The Web

Monopoly is finally over—the entry of private players will spur the proliferation of the Internet

Spreading The Web
outlookindia.com
-0001-11-30T00:00:00+0553

THERE'S excitement in cyberspace. Private Internet Service Providers (ISPs) are soon to be a reality—as announced by Prime Minister Vajpayee—and a potential 18 million telephone subscribers and three million computer owners in India may now have easier access to the global village.

Currently, the only ISP—an organisation that provides Internet connections to subscribers—in the country is the public sector Videsh Sanchar Nigam Ltd (VSNL).

ISP licences are being offered to all and sundry—all it takes is a bank guarantee to the Department of Telecommunication (DoT) to get one. The main bottleneck has been the number of telephone lines that subscribers can dial and access. With private players coming in, the number of lines will multiply. VSNL has so far provided Internet connectivity to a mere 42 cities. That number should also now go up.

The biggest names in the infotech, telecom and consumer electronics industries—Wipro, BPL, HCL, MTNL—and nearly 150 others have already worked out plans. The pace at which it's all happening is largely because the government, as recommended by the National Task Force on Information Technology, has waived licence fees for the first five years. For the rest of the 10 years the licence is valid, a token sum of one rupee per connection per year is to be charged. Naturally, any time lost for potential ISPs also means the loss of subscribers.

But the intense competition that open licensing entails will mean several ISPs may not survive. With no restriction on the number of licencees, there could be five or 10 ISPs to a city. And with no licence fees, there will be no takers for the licence if the business plans of any ISP goes haywire. It will just have to close shop.

There are also some home truths potential entrants should be aware of. India has three million computers against 5.6 million in New York City alone. With computer penetration levels so low, the ISPs may well have to first educate people on the Net's potential benefits. If that was not enough exertion, of the mere 18 million telephone lines in the country, Delhi and Mumbai alone account for 3.5 million.

That may be just the start of the ISPs' problems. Funds will be tough to come by in a dead primary market. Bank loans may be as tricky to get. "Every company has to give a substantial bank guarantee. Presumably, these companies have their plans worked out as niche players," says U.V. Nayak, managing director of the Ban-galore-based Manipal Control Data Electronic Commerce (MCDEC).

But even if they have worries, would-be entrants aren't showing them. Says Wipro Communications CEO Anand Talwai: "We have applied for a national licence and plan to expand on the network of eight locations—the five metros and Hyderabad, Ahmedabad and Pune." But that's just the market everyone's targeting. Confirms a confident Ravi Sharma, vice-president, market development, at British Telecom, which has tied up with the Delhi-based Bharti group for Internet services: "Certainly, we will focus on the metros."

SATYAM Infoway managing director R. Ramaraj also plans to apply for a national licence and operate in the top 12 cities. With an investment of Rs 40 crore, he's confident of living up to subscribers' expectations. Satyam has already tied up with the US-based Sterling Commerce and Open Market for e-commerce products and services. "DoT has forecast a market potential of two million Internet subscribers in the next two years," Ramaraj points out. With just 150,000 subscribers now, the opportunity is too big to miss.

Holders of basic telecom service licences who have not defaulted on their fees have the edge of bundling Internet services on their network. But just providing access won't suffice. More so since the arrival of private ISPs would primarily mean that access ceases to be a problem. Warns British Telecom's Sharma: "After some time, access will be taken for granted and people will only look for quality service." Some are already thinking of segmenting the market and positioning themselves accordingly. Says Nayak of MCDEC: "Our services will be best suited for export houses. It will help them cut their fax bills, which often run into crores of rupees. We hope to do business worth Rs 4-10 crore a year."

Companies like British Telecom are also excited about the possibility of the international gateway being opened for private companies. Currently, all Internet traffic is routed via VSNL's monopoly gateway.

Internet traffic could increase manifold since DoT has allowed cable networks—now carrying television programmes to homes—to provide Internet services. That means that many of the 18 million cable-connected households can start surfing without a computer; all that's needed is a little investment for some add-on parts.

But in that scenario, basic telecom service providers will lose out. That's why the Association of Basic Telecom Operators is opposing this clause in the draft licence agreement. "The cable TV model will be more successful. But over time, computers will come," predicts Sharma of British Telecom.

But whether via telephone or television cable, the Internet is poised to come into the country in a big way. The excitement is palpable right down the line. Says Delhi-based Value Web Computers' managing director Deepak Chandwani: "There will be an exponential increase in the number of Internet users with private ISPs coming in." That should see more Indian companies set up sites of their own. Chandwani will be a happy man if even a fraction of those give their business to his website design house. As will millions of surfers if all the promises are kept.

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