VOIP: Skype, Yahoo, No Longer Legal?

Just when you thought calling your distant aunt in the US using

Yahoo or servicing a client via Skype's dialing facility is the coolest thing

to happen, the Indian government has decided to be a killjoy. The DoT

(Department of Telecommunication) is planning to clamp down on illegal use of

Internet telephony especially by the BPO and KPO industry. Whether the ban will

be extended to individual users is not yet clear.

Internet service providers (ISPs) had been long demanding the

ban on services of unlicensed foreign service providers such as Net2Phone,

Vonage, Dialpad, Impetus, Novanet, Euros, Skype and Yahoo. The government cites

national security and loss of revenue as the primary reasons for this move.

"As per regulation, all licensed service providers have to

pay 12.5% service tax and 6% of revenue share to the government. This 19% of tax

is being bypassed by the illegal Internet service providers," claims Col RS

Perhar, secretary, ISPAI (ISP Association of India). As per DoT's estimates,

these unlicensed service companies provide 30 mn minutes of Internet telephony

per month to corporates, call centres and BPOs in the country. This is leading

to huge revenue loss.

Besides, DoT views the foreign service providers as a serious

security threat as they do not come under any Indian regulator and policy

framework. As of now the international calls made using such illegal services

cannot be traced. The government hopes that following the proposed ban, since

minutes will be purchased from only authorized players, security agencies can

have access to call detail records and trace details of suspicious calls made.

"The government's motive is not really to trouble the

general internet user, but to address a larger issue of national security,"

says Sushil, VP-Operations, BPO-Voice, Sify. He points out that the proposed

regulation will help in growth of ISPs like Sify who provide regulated voice

solutions for the small and medium sized BPOs.

Pros and Cons



The BPO industry is currently divided in its reaction to the proposed ban.
While some welcome the move, others feel the ban is not the solution. Prashanth

MJ, VP, Technology, ICICI OneSource approves of the ban saying, "One of the

major threat is that the source code of a facility like Skype is too easy to

crack by hackers. We face a huge challenge to protect customer information, as

it is too vulnerable to a security breach. So the BPO industry needs to have one

voice in supporting the ban of such unauthorized Internet telephony

services."

The larger ITeS organizations are well aware of regulatory

issues, and most of them abide by the law. However, challenge will be in

addressing the issue in case of smaller BPOs where usage of illegal Internet

telephony is more prevalent. They are yet to warm up to the benefits of using a

regulated Internet telephony solution.

Although the SMB BPOs may find the gray market solutions

suitable to their budget, Sushil says that unregulated service provider cannot

be dependable for service and support in the long run. "When an SMB uses a

Skype like service, it has to buy local and international bandwidth and thus has

to deal with two vendors. But a regulated service provider like Sify gives a

dedicated solution and a single throat to choke. We minimize the risk for BPOs

and help them reduce cost of operation, although our service is not lower than

what the gray market offers," he adds.

Under the government's proposal, the BPO companies will have

to give an undertaking that they will not use the services of unlicensed foreign

service providers. "The DoT should put up a list of all authorized service

providers on the website and individually all BPOs should be informed such legal

ISPs from whom they can buy minutes legally," says Prehar. To curb the

menace and to have an effective monitoring system, ISPAI has proposed that the

DoT should scrutinize the bills of large BPOs once in 6 months to check for

unauthorized services being used.

Some from the industry feel that the ban maybe ineffective, as

monitoring the usage is a major challenge. "Banning the Skypes or Yahoos of

the world may not be the best of solution, instead the government must look at

pursuing ways to collect taxes from such service providers," proposes Salil

Agrawal, head, IT, BPO & Telecom Practice, ECS. He equates the problem of

avoiding service tax by foreign ISP users to that of making transaction over the

Internet. "Can the government really monitor every transaction being made

using the net where service tax is being bypassed? I think it is a huge

challenge faced by the government. Technically, if the service is taxable and

the government does not have the means to monitor, it is a loophole that can be

exploited in many ways," Agrawal warns.

Industry Watching



The ban may trigger off a wrong precedent giving way to probable options
like banning trade over Internet or eventually banning "free" Internet

telephony for the common net user. At a time when connectivity has become the

vital need for all, India cannot take one step forward and two steps backwards.

There is an urgent need to resolve the issue with an open policy. Lowering the

cost of authorized Internet telephony by Indian service providers can help stem

the gray market. By lowering the annual deficit charge and taxes now imposed on

the service providers, the difference between the regulated and gray market

solutions will be marginal, giving more impetus to the adoption of regulated

Internet telephony service.

ISPAI has also voiced the industry's demand for more support

from the government in the form of incentives for licensed ISPs. "The ISPs

should not always be seen with suspicion but need to be acknowledged as

harbingers of success by the government," says Col Perhar.

For now the foreign service providers are under the scanner and

are likely to face exit from India. The repercussions and reactions will soon

follow, but will it have a telling effect on the economy, that's yet to be

seen.

Malovika Rao





malovikar@cybermedia.co.in