The Hindu Business Line : Wouldn't hurt to offer help!

Internet Service Providers have been lobbying for PC-to-telephone voice transmission within India for it could boost Internet penetration. A look at how ISPs can be helped without hurting others in the field.

INTERNET telephony, which was legalised close to two years ago, appears to be finally gathering steam.

As per the latest available statistics, the 43 Internet service providers (ISPs) who are offering this service have logged in 20.1 million minutes of talk-time during the quarter ending December 2003. This is a growth of 41.55 per cent growth over the 14.2 million minutes in the preceding quarter, clearly indicating that the price drop in ISD tariffs is not enough. There is still scope for more price drops as the telecom operators would like to woo back the customers who have switched over to the ISPs.

At present, a one-minute call to the US, most of Europe and South-East Asia costs an average of Rs 4 over the Web. Bharat Sanchar Nigam Ltd (BSNL), the largest landline service provider, charges Rs 7.20 to the UK, Rs 9.60 to the US and Europe, and Rs 12 to the South-East Asian countries. Similarly the largest GSM cellular operator, Bharti, and biggest CDMA mobile service provider, Reliance Infocomm, charge Rs 15.99 per minute for calls to these regions.

Any price drop by the telecom operators on this front will certainly warm the hearts of subscribers who want to talk more frequently with friends and family abroad, without the problems associated with transfer of voice over the Internet.

Further, what should be even more heartening is the fact that the Telecom Regulatory Authority of India (TRAI) is evaluating the feasibility of allowing ISPs to offer Internet telephony services for national long-distance calls. If it is allowed, STD calls will also become much cheaper, as long as the subscriber is willing to tolerate the poor voice quality over the Net.

ISPs can currently offer Internet telephony services for transmitting voice only from PC to PC both within the country and outside. PC-to-telephone voice transmission is allowed only for calls outside the country. If national long-distance calls can be transmitted over the Internet, it will cost the same as that of a local call. A rate that is much lower than the STD tariffs that are currently being offered by the telecom operators.

While customers will certainly welcome this move, it will not be easy for the TRAI to take a decision on this. For the simple reason that it would distort the level playing field amongst various telecom operators that exists at present.

The private telecom operators have already indicated their opposition, stating that it would distort the level playing field that has been brought about as a result of the universal access service licence regime (UASL). They contend that this proposal should not be accepted since they have paid huge entry fees to offer national long-distance services while the ISPs have only paid a token one-rupee entry fee.

Also, Internet telephony is a service wherein there are no settlement rates or mechanisms. It works on a concept of `sender keeps all' and its bypass of traditional settlement systems is its greatest cost advantage. Therefore, Internet telephony works out cheaper than public switched networks. Those operators who have paid high entry fees and revenue share to offer the same services would be affected and it will disincentivise infrastructure growth.

The ISPs, on the other hand, have been lobbying with the TRAI to allow domestic PC-telephone connectivity as they have noted that it would increase Internet penetration across the country. A vast majority of the ISPs are making losses and many are steadily shutting shop.

A look at the statistics on Internet penetration should provide a better understanding of their plight.

Around 189 Internet Service Providers were operational during the quarter ending December 2003. Bharat Sanchar Nigam Ltd (BSNL) has retained its top position and reported a subscriber base of 10.04 lakhs while Mahanagar Telephone Nigam Ltd (MTNL) follows it with a subscriber base of 6.91 lakhs.

Sify Ltd is next with a subscriber base of 6.86 lakhs, Videsh Sanchar Nigam Ltd (VSNL) has retained its fourth position and reported a subscriber base of 6.29 lakhs and Tata Internet Services has reported a subscriber base of 1.78 lakhs.

The overall reported subscriber base has touched 41.38 lakhs, indicating that there is still a long way to go for deeper Internet penetration across the country.

More interestingly, in the statistics that has been collated by the TRAI, 125 ISPs have a subscriber base of below 1,000 of which 20 have single digit subscribers!

Clearly most ISPs are not making money and are in desperate need of alternate revenue streams like STD Internet telephony.

Telecom operators have stated that IP telephony, by itself, will not achieve Internet penetration as envisaged, since it will only be a cheaper replacement of long-distance voice business. In most markets where Internet telephony is popular, the domestic telecommunications industry is competitive and mature with high tele-densities and sustained average revenue per user. That is hardly the case in India.

"Internet telephony is just another revenue stream for ISPs, which is still not slated to overtake the current Internet business or its potential, and, therefore, is hardly a revenue stream that is going to subsidise Internet penetration, let alone grow it. Unrestricted Internet telephony will only create an arbitrage opportunity in the telecom space, which will leverage on an unbalanced growth model in the telecom sector", the operators have stated in a letter to the TRAI.

If you look at it from telecom operators' perspective, their opposition makes sense in the given circumstances. However, the plight of ISPs too needs to be taken into account and their demand considered favourably, given the fact that the customer will get a choice of cheaper STD calls. For isn't the opening up of the telecom sector everything to do with the customer's welfare?

One way to go about it is to charge the ISPs an annual revenue-sharing licence fee, on the same lines as is being charged from national long-distance operators. The fees that are being charged could be a little higher because NLD operators had paid huge entry fees to offer STD services. Not only will this bring about a level playing field, but it will also provide one more revenue stream to bleeding ISPs. But more importantly, the customer will be the ultimate beneficiary.

grambabu@thehindu.co.in

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