The Hindu Business Line : TRAI must broadband Internet services

Revamping the Internet sector is a great opportunity for TRAI and the regulator can achieve this by simplifying the conditions under which the service providers operate.

AT THE command centre of an Internet Service Provider... whither a dynamic Internet marketplace?

The Telecom Regulatory Authority of India (TRAI) is seized of the task of framing a set of recommendations to the Government that will determine the fate and future of how Internet services will be provided by Internet Service Providers. TRAI has the unenviable task of redefining the terms and conditions of the existing licence framework, which will then need to pass muster with the Government, the service providers, international agencies that monitor and track Internet policies around the globe and, of course, the public at large.

Spread of Internet

India was freed of Internet monopoly in late 1998. Globally, Internet boasts of about 1.1 billion users that is expected to hit 1.8 billion by 2010. India has toted up a subscriber base of just over eight million (roughly 50 million users) over the last nine years with a single-digit penetration rate. This with nearly 350 ISP licencees.

The Internet grew phenomenally the world over, based on a determined support system, unlike the regulated telecom ecosystem. It rode the telecom networks, supposedly `bypassed' them and their rigid financial settlement systems and, at the same time, empowered every single individual with a computer to become a key link and a gateway to the burgeoning Internet work. Very simply, the Internet changes the way humans live, interact and do business.

Unlike telecom services that has borne the brunt of `heavy handed', `asymmetric', financially burdensome regulation, Internet was treated with kid glove and hence thrived. Because almost anybody can become an Internet Service Provider at virtually no cost, Internet access has become almost ubiquitous and also led to a growing, innovative content and applications market.

The regulator's performance statistics reveal that only seven ISPs in India control 92 per cent of the subscribers. Among the top five with 86 per cent Internet subscriber market share, only one is a non-telco ISP. So what of the other 300-odd ISPs? Why are they not active, creating a dynamic and vibrant Internet marketplace?

This goes against the free market principles and unfettered competition that the National Telecom Policy professes. This is why the policy on broadband penetration has not succeeded. The reality is the country is way behind targets. Look at the more successful countries; they have a large number of thriving mom-and-pop Internet outfits, connecting whoever, whenever, wherever.

Need of the hour

The TRAI consultation paper cites some of the most successful Internet economies, but the set of questions it poses raises the fear that the regulator thinks that replicating telecom-like regulations onto Internet is the need of the hour. It would do well to remember that TRAI itself, in March 1997, struck down the original ISP Policy and Licence Conditions issued by the Department of Telecommunications, when it agreed that they were not in consonance with accepted principles of the Internet.

To many the TRAI's questions on the need to have so many ISP licencees/providers are quite inexplicable. Is it considering legitimising the weeding out of a large number of competing players and creating an oligopoly of a few large operators? Then, it wonders if ISPs should not be asked to get telco (UASL) licences and pay the high licence fee to provide Internet services. Simply because it thinks that certain applications, such as Internet telephony (VOIP) provided by the ISP, is a dire threat to the telcos. (Remember the partitioning off of the VPN services from the ISPs, because this offering competed with the connectivity services of the telcos.)

Even if we are reading too much into the TRAI's paper, my submission is, we have not seen any telecom company failing anywhere because of an ISP/ITSP. On the contrary, telcos make money leasing out network resources to the ISPs.

Imposing regulatory burdens on ISPs is a dangerous portent. Instead of removing the causes of market failure, needed are measures to boost free and fair competition. It should not end up protecting a limited number of players, forcefully weeding out weaker players, restricting the entry of new players. If that happens the nation can either kiss the ambition of being an Internet/broadband economy goodbye or wait inordinately for miracles to happen. Forget developing innovative content and applications that fuels Internet usage, or even let a market develop for hosting and such services.

TRAI must remember that it propagates and supports reduction in the financial obligations in terms of licence fee/revenue share, entry fee and rationalised spectrum charges for telecom services, but in trying to protect the sector from Internet that it thinks is a threat, it may be recommending ways to restrict content and applications (scope of services).

TRAI cannot pat itself on the back and take credit for boosting the telecom market through lowering the barriers, but expect to create a competitive Internet market, by doing just the opposite, that is, raise barriers and restrictions for ISPs.

Surely, revamping the Internet sector is a great opportunity. This can be achieved by simplifying the conditions under which the ISPs operate. Some options could be to:

One, remove the licensing system and allow ISPs to register much like call centres and BPOs, or if doing away with licensing is too much to expect then have only two classes of licencees. Class I could be of those not averse to paying a decent fee/revenue share for exclusivity in Metros and A and B cities.

Class II serving the `C' category cities and rural areas without a licence fee burden. The Class II licencees could actually see creation of Internet hubs in small towns and push the fibre to where it does not reach today — the last 14 miles (20 km) of each village.

Give a free hand

Two, remove all service scope restrictions such as on Internet telephony. Give a free hand for any IP-based application, content service. There will always be a battle for turf. It is a healthy market practice. Policy-makers and regulators have no business playing favourites.

Today, there are people working on Inter-Planetary Internet systems. India should be part of such larger initiatives.

Hopefully, TRAI will also recommend measures that allow telecom companies and ISPs to forge partnerships for last-mile cost sharing, introducing flat rate dial-up Internet access, and have origination and termination agreements over unrestricted Internet telephony (now customers do not get the service as neither the Telco nor the ISPs offer it).

India is part of the free world and its Internet regulation must reflect that. After all, Internet is about free and open access to all.

(The author, a Founder of Internet Service Providers Association of India, is its Director-General. The views and recommendations are personal.)

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