Private Companies Receive Licenses In Liberalised Indian ISP Market

Two private companies, Ortel Communications and Surevin Consultants, have become the first private ISPs to receive licenses for Internet
access in the Indian market.

Government-owned telecom provider MTNL has
also received licenses for the Delhi and Mumbai Internet markets, and
the government monopoly ISP for commercial services has announced
aggressive new plans for the Internet market.

“I think India shall boast of more than 6-8 national level ISPs, over
30-40 regional ISPs (operating in more than one city), and over 200
local ISPs as early as August ’99,” said Manish Sharma, CEO of
Mumbai-based Web solutions company DBS Internet Services.

The ISP policy, mired in litigations and controversy for over a year,
was unveiled late last week by the minister of state for communications
Kabindra Purakayastha. ISP licenses will be issued for 15 years and
there will be no licence fee or any limit on the number of licenses

Several large Indian industrial groups such as the Modis, Nandas, Rais
and Mittals are reportedly undertaking ISP feasibility studies. The
Bharti group, HCL, Crompton Greaves, the Escorts group, Bharti-British
Telecom, and a host of other companies are in the ISP business pipeline.

Demand for PCs is now expected to increase significantly as it did in
the West once the Internet caught on; India currently has an installed
base of about only two million PCs, and about 500,000 Internet users.

“The largest challenge will be in terms of lack of expertise in handling
ISP operations. Most of those jumping in to the ISP business have no
clue about the dynamics of the game and the exponential demand it
produces in relatively short periods,” Sharma observed.

Other analysts were of the opinion that the long-overdue policy still
had some shortcomings in terms of bank guarantee stipulations and
prohibition of Internet telephony.

“For an ISP, a bank guarantee works out pretty expensive too–they
won’t call it that, but it pretty much amounts to a license fee,” said Arun Mehta, a datacom consultant in New Delhi. “The spirit of the national infotech taskforce recommendations have been lost

He said it was also a “shame” that the government had decided to ban
Internet telephony.

“I expect we’ll need to mount a full legal challenge
here,” said Mehta, who has in the past lobbied for progressive
legislation for bulletin board systems in India.

He advised Indian ISPs to examine cable and wireless options for
delivering service, and form lobbying groups.

He also said the government monopoly may be shaken, but it is still

“The monopoly ISP for commercial services, Videsh Sanchar
Nigam Ltd. (VSNL), has a couple of years experience in offering Internet
services in India, and has a large installed base of customers. It won’t
be easy to lure them away,” he said.

VSNL itself has been upgrading infrastructure, cutting access rates, and
planning toll-free access services as well as e-mail to pager gateways.

“About Rs.10 crore (US$2.36 million) will be invested in the next one
or two months to reorganise our Internet services,” said Amitabh Kumar, VSNLs director of

The Indian ministry has stipulated that ISPs wishing to set up their own
international gateways would need to obtain security clearance from an
inter-ministerial committee, but the norms for security clearance have
not yet been worked out.

Despite these uncertainties, many Indian companies are announcing forays
into the ISP business. Bangalore-based networking solutions company
Microland is teaming up with cable television operators IN TV and Siti
Cable to develop cable-TV Internet services.

Nortel, which has acquired Micom and Bay Networks, is expected to offer
complete hardware solutions to Microland for this purpose, according to
Anand Sudarshan, vice president of Microland.

“India has a huge
potential for providing Internet connectivity through the existing cable
TV network,” he said.

“We are very happy, since more users in India means more traffic for our
sites,” said Rajesh Jain, managing director of
IndiaWorld Communications, one of the first
content aggregators and Web publishers in India. “As the size of the Indian audience rises, so will domestic
Internet ad spend. The policy augurs well for a competitive marketplace.”

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