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