Private ISPs: When will they be affordable?

6 November

1998. Private Internet Service Providers (ISPs) allowed in the

country. Following that several players have begun to provide

the services as either a national A, B or C category licensee.

Around 30 operators in all the circles started services to be

the early birds in the Internet market-place. Opening of private

services for a "common man" meant affordable Internet

access.

The under

currents that were expected to come overboard were better services

and accessibility at lower tariffs. Satyam Online, the country''s

first national private ISP, was anticipated to show and lead

the way. And it was a matter of time before the price war started.

At that time, Satyam could not afford to roll out services at

rates lower than VSNL as the network implementation costs and

other factors like depending on VSNL for bandwidth had to be

absorbed. It started out with rates that were equal to or marginally

higher than that of VSNL and what it chose to do was market

its brand name on the service platform. Slogans like "Off-the-shelf,

ready-to-use Internet. No more form filling. No more waiting

in queues," were used as its sales pitch.

The question

being asked after one year of liberalization of the services

is, has the quality of Internet access improved and tariffs

reduced? It has been seen that the market, when allowed to dictate

terms, finally brings the prices down. In the year that has

transpired, the tariffs-even though not substantially lowered-have

marginally dropped. Despite the fact that only a few companies

like Satyam and Bharti-BT along with MTNL can compete with VSNL

on providing Internet access at the national level.

Things are

likely to be much better on the price front once the local ISPs

raise their hoods. There are already a handful of them operating

in several states and cities across the country. But, they have

not yet made a significant impact yet. They might have spread

the Net to newer regions but not enough has happened to make

the Net as popular as it is aching to be. Most private ISPs

are blind to the Indian market''s legendary price sensitivity.

Rather, they seem to believe that better services for a slightly

higher price would be more attractive in this segment.

The trouble

is that before the private ISPs were allowed in, VSNL had the

monopoly over Internet access business and the gateway connectivity.

Being the only ISP between 1995 and 1998, it caught the first

wave of early adopters and the second wave of elite users. When

the private ISPs came in, all that the VSNL had to do was to

hold back its subscribers by not giving them a chance to migrate

to other ISPs. This was attempted through regular price drops.

With its free control over the Internet bandwidth, VSNL was

seen to have much more muscles than one thought. Only one ISP

could think of matching the behemoth in pricing. And that was

MTNL with its active local network in India''s two most lucrative

cities-Mumbai and Delhi.And here

lies the fear of the private ISPs. They have to connect to the

Internet through VSNL, and have to depend on MTNL/DoT for the

telephone lines that deliver the Internet access to one''s doorstep.

If these two want, they can actually reduce the Internet access

industry into a no-contest in terms of pricing. According to

Pradeep Lakshmanan, vice-president (Internet sales), Satyam

Infoway, the cost of bandwidth, the infrastructure equipment

like routers, switches, and value-added services like the CDs

that have licensed software on it, are counted before deciding

on the tariff. The bandwidth and prices of the local telephone

lines are the most important factors in the long run. And, in

a scenario where the two most important components are in the

hands of competition (VSNL and MTNL), things can get only tougher.

Also the question of unhealthy practices by the monopolies often

arise. Private ISPs can only struggle to keep pace with these

two ISPs in terms of pricing.

A partial

solution to the private ISP''s dilemma is to set up one''s own

gateway. Satyam Online and Mantra Online are planning to reduce

the prices after setting up their own gateways. But again there

is no time frame for this.

How soon

will the government allow private gateways? How long will the

financing and implementation of such a project take? Moreover,

a private gateway is just a partial solution. What about the

local telephone lines? No telco, other than DoT and MTNL, has

an extensive telephone network. Hence it appears that waiting

is the only option available presently.

However,

the real value-addition in both pricing and product could come

in another arena somewhat distant from the access and bandwidth

brouhaha. And that area is Corporate Internet access and Internet

commerce. Though both of these require reliable Internet connection,

security and government laws are their main stumbling blocks.

The Cyber Laws Bill is in the threshold of being debated in

the parliament and will possibly be passed as a law. Things

could be much better then.