The Hindu Business Line : A fair race for all

INDIA is a land of paradoxes. A knowledge economy, and a lamentable literacy rate that belies the country's development record, go hand in hand. And despite claims of the country cruising on the information superhighway, the personal computer (PC) possession has been 14.5 million of on end-March 2005, in a nation of a billion people.

Computer penetration is low. India accounts for 0.7 per cent, as against China with 2.7 per cent and Brazil with 7.5 per cent. The large differential between rural (1.94 per cent) and urban tele-density (31.1 per cent) is also cause for concern.

The Broadband Policy unveiled in October 2004 by the Government aims to target 20 million broadband subscribers and 40 million Internet subscribers. (Broadband has been broadly defined as an always-on connection with speed of 256 kbps and above.)

Broadband, which plays a pivotal role in helping enterprises to make full use of information and communication technologies (ICTs), is spreading swiftly in developed countries and in a few Asian developing countries, while most other developing countries continue to have very low access rates.

This is revealingly stated in this year's Information Economy Report, 2005, by the UN Conference on Trade & Development (Unctad). The report says that if small and medium enterprises (SMEs) in developing countries do not have access to broadband, it will be difficult for them to implement ICT-enabled strategies to improve their productivity in areas such as customer acquisition and retention, logistics and inventory control.

The Unctad report has some weighty suggestions for developing countries in this regard. It points out that the cost of Internet access in developing countries is more heavily swayed by lack of competition in domestic Internet and telecommunications markets, and by small market sizes and lack of economies of scale, than by terms for connectivity to global backbone providers or network service providers (NSPs).

Unctad argues that the international component of backbone connectivity represents only a small part of the total costs of the Internet Service Providers (ISPs), while costs determined at the domestic level are much more significant.

The experience of several developing countries shows that if restrictions on the provision of Internet backbone services are lifted, connectivity costs could be cut and infrastructure development accelerated. Restrictions on the provision of international connectivity (such as forcing ISPs to use the international gateway of the incumbent operator) have also been found to represent a heavy burden for ISPs.

According to Unctad, Governments should establish a competitive milieu for ISPs. Particular attention should be paid to ISP domestic interconnection.

New entrants should have guaranteed interconnection with other operators, particularly with the incumbent, quickly and at a reasonable cost. ISPs would benefit from more competitive conditions for the purchase of international leased circuit capacity.

Yet another area of concern is ISP licensing, which, in many developing countries, is subject to very high fees that obstruct the development of Internet markets. ISPs might also benefit from capacity-building efforts to help them better appreciate the full range of international connectivity options open to them.

The report points out that policies to promote Internet take-up by households, businesses and public entities by generating a critical mass of Internet users seem to be "a more promising means of reducing Internet backbone interconnection costs than ex-ante regulatory intervention."

The Minister of Communication and Information Technology, Dr Shakeel Ahmad, said in the Rajya Sabha in a written answer that the National Internet Exchange of India (NIXI) has been set up by the Department of Information Technology (DIT) to ensure that Internet traffic, originating and destined for India, should be routed within India.

In this context, the Unctad report says that when ISPs in developing countries can create national or regional IXPs (Internet Exchange Point), they are able to aggregate traffic and thus give backbone networks a greater spur to interconnect their infrastructure.

Hence, says Unctad, the creation of IXPs should be supported. Here a caveat is in order. Monopolies often oppose the creation of domestic and regional IXPs in developing countries. Where incumbents do not enjoy a legal or de facto monopoly over Internet services, they might succeed in their opposition to the establishment of IXPs by controlling basic telecommunications infrastructure in such a way that independent ISPs do not stand a chance as far as fostering their business goes.

Unctad cites the case of several monopolies in developing countries imposing high prices on leased lines, which is a key component in ensuring ISPs and large business users are able to connect to global and domestic backbones. These prices may represent up to 70 per cent of the total cost of ISPs.

As the Broadband Policy unveiled by the Government of India visualises creation of infrastructure through various access technologies that could contribute to growth and could mutually coexist, the suggestions flowing from this year's Unctad report have come not a day too soon.

As spread of infrastructure is indispensable to healthy competition, the Government should do everything to ensure that Internet backbone connectivity proceeds smoothly and without hassles to existing or new entrants in the fray.

eworld@thehindu.co.in