Guest Column: Miles To Go

VoicenData Bureau
New Update

Conducive policy and regulatory environment are pre-requisites for the growth

of any service and the Internet is no exception. During the financial year

2005-06, the government undertook a few major changes to regulate this

industry's growth. These will have long-term implications as well as benefit

the growth of the Internet in India.


First, VPN service was taken out from the ambit of the ISP license and

shifted into the NLD/ILD regime. Second, the ambit of the access providers which

includes fixed and mobile telephony operators was significantly enhanced. They

now include Internet and broadband access, unrestricted Internet telephony and

content on managed networks without payment of any entry fee for these

additional privileges. Third, a license fee in the form of 6% revenue share on

the Internet telephony service provided by the ISPs was imposed even as the

scope of the service remained unchanged. All these steps have resulted in the

Internet gaining mass popularity. The figures testify the spurt in growth.

Deepak Maheshwari, secretary,

Internet Service Providers Association of India (ISPAI)

Impressive Statistics, but Limited Growth

The Internet subscriber base went up from 5.55 mn to more than 7 mn, even as

the number of ISPs in operation shrank from 172 to just around 150. Gross

revenue did not show any significant change and stands in the region of Rs 1,350

crores, indicating lower ARPUs. The incumbent-BSNL and MTNL-have

collectively increased their market share from 51% to over 60%. This clearly

indicates that the non-level playing field has tilted in favor of the incumbent.  


According to statistics on Internet usage, it is estimated that there are

more than one lakh cyber cafés across the country. About two-third of the

Internet users in India rely on cyber cafés since they do not have access at

their home, office or institution. However, the imposition of service tax on

cyber café is proving to be a retardant.

Nevertheless, due to shared access at institutes and offices, the number of

Internet users has grown from 39 mn to 50 mn.

Broadband Grows but Dialup Still Rules

Surprisingly, it appears that mobile telephony is not the fastest growing

telecom service in the country. It seems to be outpaced by the growth of

broadband subscribers. Thus, while 72% growth in mobile is significant, the

broadband subscriber base grew almost seven fold. Today, broadband access is

available in more than 200 cities though metros account for the lion's share

of broadband subscribers. On the other hand, dial-up is growing more in tier 2

and tier 3 cities, especially on account of first-time users.


There has undoubtedly been a stupendous growth in the broadband subscriber

base, yet, most subscribers continue to depend on dial-up. We can't continue

to shun the unbundling of local loop. If we do so, it will be difficult to

achieve the target of 9 mn broadband subscribers by 2007. Moreover, recent

research shows that the impact of incremental broadband penetration on GDP

growth is twice that of incremental telephone penetration. It is commendable

that the government is considering classifying broadband as a key infrastructure

for economic growth.

Bandwidth Prices and Broadband Tariffs

Bandwidth cost is the biggest cost component for an ISP. In the case of

broadband, it may be as high as 60-70%. This has a proportionate impact on

broadband tariffs. The reduction in ceiling tariffs of domestic and

international leased lines by TRAI resulted in steep reductions in end-user

tariffs. This helped in bringing broadband access to more users.

The official statistics put broadband subscribers to be approximately 1.3 mn.

In reality, there would be about 2.5 mn subscribers already on the broadband

technology platform using DSL, cable, cable Ethernet, wireless, etc, albeit at

speeds below 256 kbps. All of them are potential converts to the official

broadband threshold of 256 kbps, but the high prices of bandwidth-both

domestic and international-will keep them away from the broadband experience.


As promised last year, TRAI should review leased-line prices without any

further delay. This is particularly necessary as Indian companies are being

crowned as the new “Bandwidth Barons” across the globe.

Internet Telephony: Still No Service

India has the unique distinction of being the only country in the world

where unrestricted Internet telephony is legally permitted, but unfortunately,

not legally available to most of its populace. None of the access providers are

offering this service even five months after the enabling clause came into


The Internet subscriber base

has gone up from 5.55 mn to more than 7 mn, even as the number of ISPs in

operation shrank from 172 to just around 150

Internet telephony attracts 12.24% service tax and 6% revenue share in the

form of license fees. Hence, it is only fair that the government takes immediate

steps to restrict access to the Internet telephony service provided by foreign

service providers such as Skype, Net2Phone, etc, to subscribers of Indian ISPs.

On the positive side, other service providers or OSPs are now permitted to

operate international call centers using Internet access and/or Internet

telephony alone. They are also not necessarily required to invest in IPLC or in

its similarly costly and complex variants.

Wireless Broadband: Exploring Alternatives

If we have to accelerate the growth, we need to look beyond wires, at

emerging wireless technologies such as WiMax. All the 17 products certified for

WiMax are in the 3.5 GHz profile. The band should be immediately opened up for

licensed usage, while 5.15-5.35 GHz and 5.725-5.825 GHz should be de-licensed

for outdoor usage.


government is considering classifying broadband as a key infrastructure

for economic growth

The government must carefully study and adopt the revised formation for

computation of spectrum royalty as recommended by TRAI. This is required to

provide incentives in equitable investments in broadband networks across the

country, and permit higher power output in rural areas.

Increased Participation in Internet Governance

Internationally too, India is making its presence felt in the field of

Internet technology. India is a participant in the debate on Internet governance

as well as at the recently-formed Internet Governance Forum (IGF). Similarly,

India was an intrinsic part of the World Summit on Information Society in Tunis.

The event was witness to a global recognition that information and communication

technologies are a tool in achieving the Millennium Development Goals.


More Content in Local Languages

Once the Internet penetration in the country becomes 5% of the population,

it will saturate the English-speaking market. To achieve the target of 40 mn

Internet subscribers, it is imperative to develop content in local languages

with local context and also hosted locally.

To facilitate this, National Internet eXchange of India (NIXI) can provide

the crucial linkage in the demanding scenario of Content Delivery Networks. It

can also act as the National Internet Registry of India (NIRI) besides working

as the ccTLD for “.in” domain names. Of course, development efforts are on

for the development of IDN (internationalized domain names), a need for the

Indian languages.

The Path Ahead

Considering the various developments in the market and in the policy and

regulation, the Internet technology became mainstream in the financial year


There has been increased awareness of IPv6, NGN and IPTV. A broad roadmap is

also being planned for their deployment.

An expert committee tooth-combed the Information Technology Act, 2000, and

has suggested specific changes. Its early adoption is crucial to the success of

the ambitious and ground-breaking National e-Governance Plan currently underway.

One of the most significant aspects of this project is the setting up of one

lakh Common Service Centres in villages.

The TRAI plays an equally important role. Instead of embarking upon quality

of service (QoS) norms for broadband services at this point in time, it should

look at evolving QoS norms for leased lines, which is the key input for the

broadband service.

The plurality of competition and its resultant innovations are the hallmark

of the Internet and broadband economy. These fundamental traits must be

preserved notwithstanding the direction in which the policy and regulation move.

While the Internet is and should remain global in nature, its beauty lies in

keeping the traffic local. Let us join hands in developing the Indian Internet

with this perspective.