The Hindu Business Line : How level is the field?

EVERYONE wants a level playing field for sure, but defining what is `level' is a difficult matter. It all could depend on which side of the field you are playing, for how long you've been playing, and the revenue you could win or lose, or fight to retain. One scene that captures this confusion over what is level is the telecom arena:

Tracing some of the events first, before coming to the larger questions, recently, R Ramaraj, Managing Director and Chief Executive Officer of Chennai-based Internet services company Sify, rushed to Delhi for an urgent meeting with the Communications Minister, Dayanidhi Maran, and the Chairman of the Telecom Commission, Nripendra Misra.

The reason for Ramaraj's sudden visit to Sanchar Bhawan was an ultimatum from the State-owned Bharat Sanchar Nigam Ltd (BSNL) demanding that the Internet services company stop using leased lines taken from the State-owned company to offer Virtual Private Network (VPN) services. Considering that almost 40-50 per cent of an Internet Service Provider's (ISP) revenues come from offering corporate services, such a demand could sound the demise of an already ailing sector.

VPNs are IP-based networks (usually the public Internet) that use encryption. The services connect users securely to their own corporate network (remote access), link branch offices to an enterprise network (intranet) and extend organisations' existing computing infrastructure to include partners, suppliers and customers (extranet).

Now to the issues: Though VPN services have traditionally been offered by the ISPs, the problem started a few months ago after BSNL started delaying and denying leased lines to ISPs on the ground that the latter's licence did not permit them to offer VPN services.

"ISPs do not pay any entry fee or licence fee, and therefore should not be allowed to offer corporate leased line services as it infringes on the turf of long distance operators," says a BSNL official.

The telecom major is supported by the Tata-controlled Videsh Sanchar Nigam Ltd. Pointing out the real reason for the objection, senior VSNL executives say the level playing field is tilted in favour of the ISPs when it comes to offering VPNs.

"Long distance operators have to provide VPN services as part of the NLD (national long distance) services whereby we have to pay a revenue share of 15 per cent annually to the Government. Compared to this, ISPS do not pay any revenue share. This makes the cost of offering a VPN service higher for a long distance operator compared to an ISP. That apart, a long distance operator pays Rs 100 crore as licence fee compared to zero by ISPs."

To make matters worse for the likes of Ramaraj's Sify and HCL Infinet, the demands of BSNL and VSNL are now being supported by the Department of Telecom (DoT) and the Telecom Regulatory Authority of India (TRAI). In a note to the telecom regulator, the DoT said the Internet providers' licence did not permit them to offer VPN services. Interestingly, the telecom regulator, which is now looking into the controversy, had itself admitted that VPN was part of the ISPs licence in one of its earlier recommendations. Also, a document prepared by the Telecom Engineering Centre, the standardisation body under the DoT, mentions that ISPs are allowed to offer virtual private network services.

Says an agitated Amitabh Singhal, Secretary, Internet Service Providers Association (ISPAI), "The stance adopted by the DoT and the incumbents is extremely unfair. It protects the interest of a single company while it compromises the future of all the ISPs who have been offering VPN services for so many years. Why were no objections raised till now by anyone?"

Singhal feels that the telecom regulator too is doing a flipflop. Executives in Sify say the telecom regulator has been giving clearances to tariffs submitted by ISPs to offer VPN services. "All the tariffs being offered by ISPs have the approval of the TRAI. "If VPN services are illegal, then why did the regulator clear the tariffs for the services?" asks a Delhi-based ISP.

TRAI officials, when contacted, said the regulator was looking at all the aspects and a final decision would be taken soon. However, a draft note prepared by the TRAI for internal circulation says the demand raised by BSNL, that the leased line circuits will not be used by Internet operators to offer VPN services, is fair.

The Internet Service Providers' Association is gearing up to challenge the Government in court, if its decision goes against them. Already, a couple of rounds of discussion between ISPs and the DoT have ended up with no change in the department's stance. "We will be left with no choice but to approach the court if the Government decides to ban ISPS from offering VPN services. The other option will only be to shut shop and no one will take that option," says Singhal.

The concerns raised by ISPs are supported by some of their customers as well. K.V. Thomas, Director, Cochin Stock Exchange, says "If ISPS are not allowed to offer VPN services, it will have an adverse impact on a number of corporate houses. The virtual private networks being offered by VSNL and BSNL are much more expensive. For instance, a 30-branch connectivity will cost around Rs 27 lakh annually if you take it from VSNL, while the same costs around Rs 12 lakh if taken from a private ISP."

VSNL executives blame the higher cost of operations for long-distance operators for the difference in tariffs. "Let TRAI allow us also to offer VPN services under our ISP licence. Then we will not have any problem in competing with other ISPs in the fray. The problem here is that on the one hand, TRAI asks us to offer VPN only through our long distance licence, while on the other hand ISPs are continuing to offer the same service without paying any revenue share."

VSNL executives say they are willing to accept a compromise with ISPs if the regulator exempts VSNL from paying licence fee for VPN services to create a level playing field with ISPs. The other option would, of course, be to impose a licence fee on ISPs. But that would be another way to kill the cash-strapped Internet providers.

BSNL is holding its cards close to its chest. "Let TRAI give a clarification on the issue, then we will decide on our future course of action," says a BSNL official.

For the ISPs, all hopes now rest on a favourable outcome of Ramaraj's deliberations with the Minister, because even the collective strength of 45 companies may not be able to fight the might of BSNL and the government machinery in a long-drawn legal battle.

Picture by Ritu Raj Konwar

tkt@thehindu.co.in

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