The basic statistics of the industry are like this: over 560 licenses issued till date, nearly 200 licenses surrendered, and nearly 200 ISPs officially operational and providing services. The Internet subscriber base is estimated to be 3.5 million. And an estimated 95 percent of these are on dial-up.

At present, for the vast majority of ISPs, the cost of providing the service is higher than the price they are able to charge from the customer. The industry complains that VSNL and MTNL increased their dial-up subscriber base by offering retail prices below those offered by many ISPs. This is because of the high domestic and international wholesale bandwidth prices they charge the ISPs, while undercutting them in the retail market. The key trend that has been witnessed during the post 2001 (boom time) era is a fall in the growth rates. It is down to less than 7–8 percent. Also, a few big names have dropped out of the business. A heartening feedback is that some small ISP operators are doing better than earlier and are not as cash crunched as some of the bigger players.

An emerging trend is the growing distinction of pure-play ISPs from the integrated players in terms of their capabilities and abilities to address the market in specific ways. Some tough competition is building up out there, which is forcing pure-play ISPs to look for alternatives. However, these alternatives are not yet yielding results because of a lack of empathy on the policy and regulatory fronts, according to ISPs. The feeling among ISPs is that the industry is at crossroads and needs a big, boosting doze of corrective courses of action, which can come only from a high-level policy initiative. Moreover, the recent changes in telecom tariffs, by way of pulse changes, have also made dial-up access more expensive than before when one considers the cost of the telephone per hour plus the ISP charges. Telecom charges have gone up from around Rs 25 per hour to about Rs 35 per hour, although there is some relief for nighttime surfing.

Market Trends
The Internet services market grew 14 percent during FY 2002-03, to generate a total revenue of Rs 1,285 crore. The growth was mainly on part of the fast growing corporate market for high-speed Internet access. This market comprises Internet leased lines, ISDN and off late a growing number of VPNs. This market was worth Rs 740 crore, of which VPN was about Rs 150 crore. In contrast, Internet dial-up market saw a stagnant year, ending the fiscal with Rs 195 crore revenues. Broadband access comprising DSL cable, Metro Ethernet and fixed wireless generated a revenue of Rs 350 crore.

DSL and cable have not caught up, though of late BSNL/MTNL have woken up to its potential. Private telcos have also started building DSL infrastructure. True DSL lines are only now beginning in the country with an agreement for co-locating DSLAM equipment in Tata Teleservices’ exchanges by Dishnet DSL. In fact, Dishnet DSL alone can be said to have promoted DSL. It is the leading ISP in this category in the country with a total subscriber base of 26,000.

Some ISPs have been working towards promoting cable Internet in the country, but certain cable industry issues, along with scarce investments, thwarted their efforts. The total number of cable subscribers in the country is estimated to be 15,100. Cable-to-homes is yet to catch up, but it is popular among cyber cafes. ISDN and leased lines can only be provided by the state-run telcos. The ISDN subscriber base is estimated to be 42,000 and that of leased lines 19,500. Internet telephony is catching up.

While VSNL is the largest provider of Internet services in the country, Sify figures as one of the popular players in the dial-up and enterprise connectivity category. Dishnet DSL is popular in the DSL space. Sify’s access revenues, which cover dial-up, broadband as well as cyber cafe revenues, stood at Rs 67.44 crore for FY 2002–03. Dishnet had 243,000 dial-up subscribers and 100 VPN subscribers, and a total bandwidth capacity of 701 Mbps.

The average bandwidth tariffs per annum were Rs 125,000 for 64 kbps; Rs 170,000 for 128 kbps; Rs 280,000 for 256 kbps; Rs 499,000 for 512 kbps; Rs 960,000 for 1,024 kbps; and Rs 1,549,000 for 2,048 kbps.

The Bottlenecks
The first and foremost—and also the gravest—bottleneck is the lack of clarity on the regulatory treatment of ISPs. Industry people believe that it affects the industry’s capability to negotiate any free and fair interconnect arrangements. In particular, it puts the pure-play ISPs on a very sticky wicket, in comparison to other ISPs who also own other telco businesses.

Two, pure-play ISPs don’t have any special access to telecom networks for introduction of new types and classes of services. The clearance procedures for facilities like international gateways are long drawn and discouraging in nature, say industry representatives. Spectrum usage for growth of effective wireless-based services is still not possible due to cumbersome processes and prevailing fee structures. Besides, the growth of business is also impacted by certain environmental factors like low PC penetration, high cost of telephone access, negative perception of quality-of-service levels, and so on.

Three, revenue sharing by BSOs has still not happened, which is the practice world over. The cost of leased lines (local loops and inter-city) in India is still among the highest in the world and requires immediate rationalization. Moreover, it is felt that the unbundling of the local loop is essential if customers are to be offered some choices and broadband has to become a reality. Even though as per TRAI’s directive, the incumbents have invited tenders for co-locating equipment at their exchanges, they have specifically forbidden ISPs from participating.

There are, however, some rare bright initiatives like the setting up of Internet exchanges, which will improve the much-needed operational efficiencies, as well as provide for better QoS. Partnerships between ISPs and private telcos are shaping up a bit better, in terms of working together to use technologies like DSL and service them on the basis of revenue sharing.

Bandwidth
A good deal of bandwidth is available in India today. FLAG, SEA-ME-WE 3, and i2i (Bharti Singtel) are the under-sea cables that connect India to the world. Of these, i2i has terabyte capacity. Add to this, the satellite gateway capacities that major service providers like VSNL, Estel, STPI, Bharti, Data Access, Net4India and Sify have with them and one gets a really huge number. International bandwidth in terms of quantity is not scarce. However, the prices are still far higher than in most of the other countries.

Ch Srinivas Rao