INTERNET TELEPHONY: Quacks Are Showing

The transmission of two-way voice communication through over the public

Internet is called Internet telephony. For various reasons, the most important

of which are assurance of quality voice transmission and national security, Net

telephony is not allowed in most of the countries. However, because of its cost

efficiency, some countries have allowed it through a regulatory framework.

Ministry of Finance, Govt of India, has also announced a regulatory policy

allowing ISPs to provide Internet telephony services, subject to grant of

special licenses. Nobody other than an ISP is allowed to provide Internet

telephony services.

Why Regulations?



For

various obvious purposes, the Internet telephony activity is regulated. Some of

the important reasons are stated here:

l Government of

India has opened only a small section of Internet telephony. It is only the

outbound international call that is permitted. The monitoring to ensure that

only permitted type of calling is carried on is possible only if the entire

activity is regulated through licensing.

l The providers

of the necessary international infrastructure are foreign companies. The Indian

service providers are, therefore, required to get into agreements with

international players and make payments to them through the official channel.

l The regulatory

guidelines empower department of telecommunication to prescribe service levels,

which licensed service providers are bound to follow. This is to ensure the

desired quality of service to the users.

l Government of

India is empowered to levy fees, taxes and other charges on such activity. At

present, the government has already covered Internet telephony services within

the ambit of service tax. The government desires to exercise control over tax

administration by regulating the activity through license regime.

l Internet

telephony results in two-way voice communication through the public Internet

network. Like any other medium of communication, this medium is also subject to

misuse for criminal and/or anti-national activities. In such circumstances, the

administration must have the rights to monitor the activity. Such a monitoring

is possible only if the government has access to the providers of services.

l Regulation

through licensing serves the purpose of single-point monitoring of the entire

set of activities–tax administration, foreign exchange transactions,

interception of suspicious communications, and obtaining trails in cases of use

of channel for unlawful purposes.

With this background, only those providers that are holding legal licenses

from Government of India can offer their Internet telephony services in the

Indian market.

Illegal Operators…



As anybody would guess, services from authorized legal providers are

costlier than the illegal services due to various compliance, fees and taxes.

The important point is to understand how illegal vendors achieve the cost

differentiation.

l The legal

providers of Net telephony services pay to the foreign service providers through

official banking channels. On the other hand, illegal operators can make use of

the illegal hawala channels, which are free of any transaction fees

l Legal services

are subject to 5 percent service tax. On the other hand, illegal operators

achieve the cost benefit by tax evasion.

l ISPs are

supposed to give quality of service to both, the customers and DoT–the license

providing authority. However, illegal operators are not answerable to anybody.

Assurance of quality has required ISPs to make investments in equipment and

bandwidth provisioning, and 24x7 helpdesk for client servicing. Nothing of this

sort is needs to be done by illegal operators.

l ISPs are always

subjected to contingent levies of fees and charges by DoT, while no such

contingency bother illegal operators.

All these factors have placed illegal operators in such a position that they

can offer Internet telephony services at very low rates.

…And The Damages



The overall Indian market for Internet telephony is worth Rs 150 crore.

Gujarat enjoys 10—12 percent share of this market, which is approximately Rs

15—20 crore market. The potential growth of market, as estimated by the

professionals, is very high and very soon, it’s likely to become a

multi-million dollar market.

The following pointers should establish the threats posed by the fast growing

dens of illegal operations and bring forth the need to check them at the point

of very beginning:

l Economy: An

illegal operator pays to the international service providers in terms of foreign

currencies through illegal channels. Looking at the market size, the volume of

hawala transactions can support many other illegal rackets, requiring in-bound

flow of foreign exchange through illegal channels. If not checked at this level,

this activity bears a potential to catch the attention of international

traffickers. They would like to support the activity as a means for hedging

their smuggling of contraband goods/services.

Needless to say, this will translate into huge loss of revenues to the

government in terms of service tax and income tax.

The following string of actions are needed by the government to check the growing menace of illegal Internet:
	Public awareness through media campaign
	Crackdown on cyber cafe’s offering such illegal services
	Crackdown on vendors of such illegal services
	Any other action that enforcement agencies may think fit under the circumstances

The illegal provisioning of services can give rise to a chain of illegal

activities as follows:

The illegal wholesale vendors will pump in illegal services to customers at

large, forcing them to pay through cash or unaccounted money.

Intermediaries such as cyber cafés, which are not regulated by any law or

guidelines, are forced to carry on the legally provided activity through illegal

means. The government has to come out with clear-cut measures to deter them from

carrying out such activities.

Availability of illegal communication network will directly and indirectly

support hordes of illegal activities that are looking for shelter from regulated

channels.

l Industry: An

unbridgeable price difference will render the legal service providers’

offerings uneconomical to users. This will attract a large number of genuine

users to opt for illegal services.

Threat will be directly in terms of the very existence of licensed service

providers. Eventually, if the business is commercially not viable, this will

lead to closures, thus leaving only illegal operators in the market. The market

will be deprived of any legal offerings.

l Society: Every

mass economic activity, which offers easy illegal ways to make money, has

attracted large number of illegal operators. The simple reason–quick bucks at

low risk and no efforts.

Large accumulation of illegal cash resources in hands of mafia endangers the

very foundation of any society or nation.

l Nation:

Internet telephony services through illegal channels would be entirely out of

the regulatory channels of the Government of India.

A foreign service provider, selling his services through local illegal

vendors/peddlers, can not be brought under Indian jurisdiction to find out any

criminal trail through any kind of monitoring network. However, such measures

can be enforced through licensed service providers.

Licensed ISPs in Gujarat are among the first to be directly affected by this

illegal activity. However, checking such an activity in time is of prime

national importance. If not checked in time, the menace has the potential to

spread to other parts of the country as well. Effects of such an illegal

activity can be widespread on the society, of which Gujarat will again be the

epicenter.

Chirag Mehta CEO and MD, IceNet.Net and secretary, ISP Association of Gujarat