Your Business Options

The Internet year changes every three months. And ISPs haveto adopt a business model, which is just right for the right period.

As far as ISP business models are concerned, there is nosingle right way. And debates continue to rage on among ISPs and the wannabes…

Multi-Services ISP Vs Access Provider

In India, most ISPs have chosen an integrated model forInternet access and at the same time operating a portal. There are also thenational ISPs, which are trying to be one-stop shops providing Internet access,running a portal business, and also operating an e-commerce site. The bestexample of this is Satyam Infoway. VSNL, India’s largest and oldest ISP, isalso building its own portal business. This business model has been justifiedwith access prices coming down drastically during the last two years. The portaland e-commerce businesses serve as alternative means of revenue. However,advertisement revenues did not turn out good enough.

All said and done, connectivity is still a rage in India. Andthe companies providing the last-mile connectivity are making money out of theInternet revolution. MTNL and DoT are increasingly experiencing Internet trafficon their trunk lines which, though a technical worry for the telephone services,is a very good source of revenue for them. One of the biggest reasons for theirsubscribers to go in for a second line is Internet access. Providing bandwidthto other ISPs seems to another good way to earn revenues. VSNL has beenexecuting this model quite religiously. Sadly, others could not join this gameuntil recently. Now that any ISP can connect directly to Tier-1 ISPs in the US,the bandwidth resale game is about to catch on. However, one really does notknow how long this opportunity will last because bandwidth prices are crashingacross the world.

If this is the picture, very soon high-speed Internet accessis likely to go the vanilla dial-up way. Then what will come out of the businessmodel of subscriptions? ISPs say they can provide solutions to customers ratherthan just Internet connections. The solutions include enabling VoIP and VPN inthe case of corporates and unified messaging and local video-on-demand for homeusers.

The Free ISP Model

Caltiger.com was the first ISP to provide free Internetaccess in India. An interesting part of the experience in India is that there isno scope for sharing the telephone call generated by the Internet connection.MTNL and DoT will just not have anything to do with such arrangements. Contraryto this scenario, Freeserve, the ISP which changed the Internet access scene inthe UK, has an arrangement with Energis by which the latter pays 3 to 7 percentof call revenues from the overall call charge. It would serve good for futureplayers interested in this model to explore such arrangements with private basicservice providers. The fact that this sort of revenue sharing is not happeningmeans very little or no access charges for the Indian free ISPs. So, they willhave to work out other revenue streams for their free ISP business model.

Next, the ISP’s target could be to acquire a large base ofsubscribers. This has already been achieved by Caltiger.com, which has one ofthe largest registered customer bases. Everytime a subscriber logs in to useCaltiger, a surfing bar appears on which any company can advertise to reach outto the large customer base of the ISP. However, online advertising is not a bigmarket so far in India. Another positioning that the ISP can take is to developa portal reaching out to the large subscriber base. However, portal business iscertainly a tough nut to crack, as just Satyam and Mantraonline among the ISPsseem to be in some position to take a shot at this moolah. And introducing yourportal takes even more effort at this stage, as is being faced by Satyam.

Home or Business?

There are more than a million Internet subscribers in India.The top five ISPs control a majority of the market. One wonders how the othermore than 300 other ISPs will survive. Is it worth running after a huge base ofsubscribers? How many Internet subscribers pick the ISP’s web site as theirhomepage? For an ISP planning to run a portal along with the access business, itis important that his subscribers stick to his web site as well. If this is notdone, it does not make sense to run after such a huge subscriber base.

In most cases, a small percentage of customers contribute thebulk of revenues. This small premium percentage is the community of businessusers in the telephone services of MTNL and DoT. There is no reason why thisshould not be the trend in Internet services as well. If this is so, has an ISPput some thought on seriously concentrating on delivering the right services tothe corporates, rather than chase zeroes to add to the subscriber base? Oursurvey of the operational ISPs in India found out that less than a quarter ofthe ISPs provides business class services. Most Indian ISPs tried cashing on thepent-up dial-up subscription demand left by the absence of a competitor tomonopoly VSNL. It is only now that ISPs have realized that there needs to bemore focus on services targeting the corporates.

The Last Link to the Customer

Which technology will win the race to the customer’spremises? You as an ISP need to take this into account, as your services will bedelivered by this communications medium. Your access business model has to workin consonance with the take-off of technologies in the last-mile access network.In India, the battle royale for the control of the last-mile is wide open. Thereis a limited amount of twisted pair laid and the private players are exploringall sort of access medium for this crucial mile.

One of the hottest technologies being touted to win thisbattle is Cable. It sounds great to hear that there are more than 30 millioncable homes in India waiting to get connected to the Internet through the cable.But there are a few bottlenecks. One, there are not enough computers in homestoday. Two, even if there is mass consumption of computers in India, and takinginto account that businesses also take to the co-axial cable, the cable modem isthree times costlier than a 56 Kbps modem. Three, consolidating the cableoperators in different areas into one single network is not easy and requiresmassive investment.

DSL is the other hot Internet access technology. But inIndia, MTNL and DoT, who are operational ISPs themselves, are not really helpingprivate ISPs to implement DSL on their infrastructure. Hence, ISPs likeDishnetDSL will have to either wait for DoT and MTNL to grant them thepermission or lay their own copper links to the customers’ premises. That is along drawn process that may be viable on case-to-case basis, but not on a largerscale.

Fibre to the customer’s premises is a game for larger ISPsand the larger telcos. But it is a promising investment that might bring rewardsin the future. The scalability of such a link is infinite as far as the mediumis concerned. Hence, laying fibre would mean investing for the Internet servicesof the future. But this, as said earlier, is a deep pocket game.

Wireless is also a preferred medium in most parts of the country. Thoughthere is an issue of latency, satellite access could help in bypassing theentire throughput and reliability issues that are faced by subscribers trying toaccess the Internet through a terrestrial network. Microwave radios are also agood way of connecting to premises in areas DoT/MTNL term as technicallyunfeasible. This medium also helps the subscribers escape the downtimes due tolocal exchange problems. The catch is that most of the solutions beingprovided are one-way. This may make the customers to think twice as hisupload will still be through the unreliable DoT line. What use will be amicrowave radio link if it cannot download because the DoT line is down foruplink traffic. The wireless route has one more constraint. There is a need forSACFA clearance to put up awireless communication link and this task itself may take months.