Segment Analysis: Internet Services

The
Gateway Licencees
ISPNo. of Gateways
STPI Bangalore12
Macronet9
Wipronet Ltd9
Satyam Infoway8
Bharti BT Internet8
Sigma Input Output
Tech India Ltd
8
Global E-commerce
Pvt Ltd
8
Dishnet
DSL Ltd
8
Comsat Max8
India
Net Exchange Pvt Ltd
5
Wilnet
Communication Pvt Ltd
3
Data
Access India Ltd
1
Internet
Promoters India Ltd
1
Jain Studios Ltd1
In Tech Net Ltd1
Direct Internet
Ltd
1
Eleclipse Network
Pvt Ltd
1
GNFC1
Southern Online
Services Ltd
1
MTNL1
Weikfield
Mnemoniks Info
1
Pioneer Online1
BSES Telecom1
Fascel1
Asianet1
Dialnet1

Internet was the major driver of the communications and IT
industry in the country last year. It gave the initial momentum and things have
really started to move in the ICE (IT, Communications, and Entertainment)
industry. The numbers may not reflect the actual potential, but things moved
better than expectations of any industry insider.

Last year was one of setting up networks by most ISPs.
Approximately 62 new ISPs started their operations. A sizable number of that was
“A” category ISPs like BSES, Hathway, Siti Cable, Wipro, Caltiger,
Pacific Internet, and BPL Net. Even the earlier ISPs as well as the new ones
expanded their networks and moved to smaller cities and towns. It allowed Indian
subscribers to access Internet even from the remotest parts of the country. The
enthusiasm could be gauged from the fact that even cellular and VSAT companies
applied for and got the licence to operate ISP services in the country.

The DoT has issued 315 licences as on 20 May 2000. Out of
them, 54 are “A” category, 124 are “B” category, and 137 are
“C” category licences. Around 72 licencees have already started
offering services in different regions and different cities. Licences have been
taken by who’s who in the corporate world like Aptech, Lucent, HCL Group, S
Kumars, Bharti Group, Usha Group, Jain TV Group, Comsat Max, Larsen & Toubro,
HFCL Group, Hathway Group, Asianet Group, Punj Lloyd Group, Pacific Internet,
BPL Group, Arm Group, Punjab Wireless, Sprint RPG, BSES, Dishnet DSL, Crompton
Greaves, CMC, Indusind Cable, Wipro, Zee Telefilms, and Global Group.

Growth Catalysts

The subscribers benefited from the price war as this resulted
in the reduction of ISP access charges from Rs 20 per hour to Rs 5 per hour. In
some cases it was negligible as ISPs like Caltiger provided free Internet
access. This helped Caltiger to achieve a subscriber base of 2,00,000 by June
2000. The new ISPs are planning to move the Caltiger way for their business
model. The Caltiger model will be for providing plain vanilla service and
attracting the customer. Once the customer gets hooked onto the network, he will
be charged for the value-added services that he subscribes to.

The Internet subscriber base in the country has increased to
9,60,000 as on 31 March 2000, showing an impressive growth of 297 percent over
last fiscal. With PC shipments crossing the one-million mark in 1999-00 and with
Internet access becoming an important purchase decision for the home segment it
is forecasted that Internet will cross the 2 million-mark in 2000-01. The
factors that will drive the market will be free Internet connections provided by
the ISPs, decrease in the price of PC, modems, and decrease in the price of
telephone charges for accessing Internet. With lot of bundling happening,
Internet will look more like a necessity as the price of accessing Internet
becomes negligible.

Next>>>>

One can already see frequent advertisement campaigns for
“unlimited access”, not only by MTNL and VSNL, but also by private
operators like Satyam Online. It does appear that the Caltiger model is already
spreading and access will shortly and certainly become free and
“hours” will no longer be a restricting consideration for the Internet
service users.

City-wise
Distribution of Gateways
CityGateways
Delhi15
Chennai10
Calcutta10
Mumbai13
Bangalore8
Hyderabad10
Ahmedabad8
Pune7
Others20

The country uses an international bandwidth of 325 Mbps. For
the ISPs and Internet to flourish in India, it has to increase the capacity by
leaps and bounds. To make that happen, the Government has taken the initiative
of allowing ISPs to connect to any satellite and opt for any band or go for the
optical fibre route. But the ISPs cannot take the optical fibre route as FLAG,
the only private undersea optical fibre link with landing point in India, is
bound by the earlier exclusive agreement with VSNL.

Another encouraging development has been the Government
giving clearance for 101 international gateways to be installed by 26 companies.
A majority of the gateways are Extended C-band but a small number will be
Ku-band in nature.

Although it has been five months since the permission was
granted, till date no ISP has been able to start the gateway operations as they
have to take “no objection” from 13 different agencies, making the
process more complicated. With the need of bandwidth becoming more acute, the
Government should try and make the process easier and faster.

The Budget 2000 was a welcome sign for the ISPs as
infrastructure products used by them were made free from import duty. This
helped in lowering the infrastructure cost for ISPs.

With companies focussing on improving the telecom backbone by
laying fibre optics in different parts of the country, the day is not far away
when speeds of Internet access would be enhanced multiple times and ISPs will
provide the best value-added services like Virtual Private Network (VPNs) and IP
telephony which is the need of the hour. With broadband network in place, the
ISPs will tie up with the broadband people and help people get access through
broadband medium with the use of cable modem for the PC mode and set-top boxes
for the TV mode. Presently, this mode is only a fraction compared to the access
through telephone mode.

The future trends in the Internet services will be of
partnerships, collaborations, and acquisitions. And the one who survives in the
long run will be the real winner.

Determinants of Tomorrow

Top ISPs in India

RankCompanyNo. of Subscribers
(as on 31 March 2000)
1VSNL3,43,000
2Satyam Infoway1,51,000
3DTS96,000
4Dishnet DSL71,000
5Bharti  BT
Internet
69,500
6Caltiger56,500
7MTNL36,000
8Sigma Online34,500

Though Internet has driven the communications industry to a
great extent, it itself needs extra fuel. The lack of sufficient bandwidth is
the major bottleneck. It has often been said that a single company in Singapore
has access to more bandwidth than entire India. NASSCOM has already launched a
campaign to make the Government aware of this shortfall. The international
gateways will definitely be succour but they need to be set up fast.

The Government faltered on the Domestic Long Distance (DLD)
front last fiscal. Opening this sector to private operators will provide more
access nodes to Internet subscribers across the country. It is almost certain
that DLD will happen in the current fiscal and it will have a positive impact on
Internet services.

Utilities like the Railways, Power Grid, etc., who have a Right of Way (RoW)
and have an impressive infrastructure already in place are looking to have a
share of the Internet pie. Their entry into the arena will add a new dimension
to market dynamics.

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