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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