Spreading the Net Further

TRAI takes a stock of the Internet services in India and explores the ways to speed-up the penetration keeping with International trends. 

Internet progress so far

Internet services were launched in India on 15th August 1995 by Videsh Sanchar Nigam Limited (VSNL). During the first three years internet growth was slow. By the end of 1998, the government felt the need for spreading internet rapidly and thus it opened up a sector for the provisioning of internet services by Private Operators. The license conditions were liberal and the internet service providers could set their own tariffs. 

The supportive government policy and entry of unlimited private players, opened competition and lowered the Internet tariffs which led to phenomenal rush for internet subscription. The subscriber base grew more than 200% per year, from 0.28 millions in March 1998 to 3.04 millions by March 2001. On the whole, the internet subscribers have increased from 0.01 millions in Aug' 95 to 8.07 millions in Sept'06. However, from April 2001 onwards, the growth rate started declining and reduced to just 7% at the end of March 2003. 

Internet telephony is a new concept in the field of internet.Users can connect regular telephone instruments over a Broadband Internet connection by using adaptor provided by the foreign companies. These calls would cost very low but this service is still not legal. Internet offers variety of features like Skype, iChat etc. In addition to this it allows making free calls anywhere in the world and downloading of Softwares for free from the company's website. 

The next generation networks (NGN) is another topic of discussion. The possibility of separation of network layer from service and application layer has fascinated launch of new services and contents with great ease. The integration of networks will reduce the Capex and Opex and at the same time facilitate service providers to compete not only on quality or price of the services but also on the variety of services suitable to subscribers. 

Furthermore, since IPv4 seems to be lagging behind in catering to the challenges of requirement of larger IP address space, better quality of service etc, thus IPv6 is being introduced. It is the next generation Internet Protocol and has the capacity to expand the available address space on the Internet enormously. 

Present regulations and their shortcomings

In 1998, government opened up the provision of internet services by private operators. ISP License is one of the most liberal Licenses, wherein no License fee was levied on the ISPs till 31st October 2003. Thereafter, a token license fee of Re. 1 per annum was payable w.e.f. 1st November 2003. Also, there is no limit on the number of players. ISP's were free to set their own tariffs along with their own International Gateways. 

DoT issues three types of licenses for Internet Services - Category 'A' for All India Operations; Category 'B' for metros and big circles, and Category 'C' for medium and small cities (SDCAs). ISPs were required to pay performance bank guarantee as per their service area of operation i.e. 2 Crore for Category 'A' Service Area, Rs. 20 lakh for each Category 'B' Service Area and Rs. 3 lakh for each Category 'C' Service Area. 

Internet Service Providers were allowed to offer Internet telephony services with effect from April 1, 2002. Only existing ISPs were permitted to offer internet telephony services after signing the amended ISP license. Though there were restrictions imposed on the type of the technology, devices which can be used. Initially there were no financial implications on the ISPs for providing Internet telephony services. However, w.e.f. 1st January 2006, DoT imposed a revenue share on ISPs offering Internet telephony services @ 6% of Adjusted Gross Revenue earned from Internet telephony. 

In February 2006, DoT permitted Unified Access Service Providers (UASPs) and Cellular Mobile Service Providers (CMSPs) to provide unrestricted Internet telephony (i.e. National and International without any restriction) and Internet access. However, none of these service providers have reported commencement of the Internet telephony services. 

Despite the fact that there are nearly 8.00 million Internet subscribers, 98% of these subscribers are catered by top 20 ISPs while remaining 115 ISPs cater to only 2% subscribers. Similarly, DoT has issued 128 ISP licenses for provision of Internet telephony, out of which just 32 have reported the commencement of their services. 

ISP license (with Internet telephony) permits the use of only H.323 and SIP devices for making Internet telephony calls that too to the similar devices. For making a call to telephones abroad, only PC is allowed in the present ISP license which is financially out of the means for the masses. Using a PC for Internet telephony requires higher skills like knowledge of English, typing etc which is not possessed by everybody. 

vv Presently only Universal access service licensee (UASL) and Cellular Mobile telephone service (CMTS) licensees are allowed to make available unrestricted end-to-end Internet telephony services over PSTN network. However, none of these have reported the start of the service. 

Another shortcoming is that providers of various illegal Internet telephony services are not licensed in India. For this reason no revenue is being generated from them resulting in revenue loss for the government. 

FOREIGN DIRECT INVESTMENT

Presently the ISP LICENSEE shall be responsible to ensure that the total foreign equity in the LICENSEE Company does not, at any time, exceed 74% of the total equity, whenever it is likely to set up or has set up International gateways. And those ISPs who are not inclined to setup International gateways are allowed foreign equity up to 100%. A cable operator who also  wants to provide Internet due to synergy of operation and obtains ISP license is permitted to have foreign equity upto 49% only. Similarly, maximum foreign equity in case of UASL and CMTS is presently 49%, however it can be upto 74% after obtaining the approval of FIPB. 

Taking a look towards the international scenario it is found that in Singapore there is an automatic licensing framework and no approval from SBA i.e. Singapore Broadcasting Authority is necessary. In Malaysia ISP services fall under the Application Service Provider (ASP) Class License category. Interested applicants are only required to register under a Class License category to provide Internet access service. Hong Kong's Internet Access Services is a type of International Value-Added Network Services and is provided under the Public Non-Exclusive Telecommunications Service (PNETS) License. Whereas the European Commission strongly promotes Industry Self-Regulation for internet and VoIP services. However, Individual national regulators under EC are free to follow own set of regulation. The prime concern of EC is that VoIP operators clearly inform subscribers about the limitations of the services. 

On the contrary, in US there is no requirement of license or authorization. Instead, e-mail, data and Internet services are treated as “information services,” and ISPs there are allowed to function in a free and competitive market, subject only, with few limited exceptions, to general business laws. 

Why Internet penetration is low?

The unaccompanied ISPs can only provide plain Internet services like dialup Internet, Internet lease line or broadband. Approximately 60% of the total Internet subscribers still use dial up Internet access. The minutes of the user pattern of most of the Internet dialup are low as the bulk users of Internet services are migrating to Broadband services as its charges are comparatively low. Since ISPs generally do not have last mile access and the cost of laying such networks is high thus it is not viable to small ISPs. In most of the cases the ISP's are providing internet services through the local cable operators. 

The technological changes like the emergence of new value added services like IPTV, IP-VPN over the Internet have also impacted the business model of ISPs. The large number of ISPs with inadequate scope of service under ISP license is also affecting the feasibility of ISP business. 

Future efforts planned

Since the issue of misuse of licenses has been flagged by DoT, thus the complicated business model builds up the need for in-depth discussion on need and role of such large number of ISP licensees who have limited subscriber base and practically no contribution to Internet growth or to increase competition. The Government has been requested to allot 200 Mhz of spectrum in 3.2 to 3.4 Ghz band to facilitate wireless operation of 12 ISPs in a circle. One slot has been reserved to be allocated to smaller ISPs on city basis with intention to boost broadband dissemination in small cities and rural areas. 

Suggestions to increase broadband penetration

The TRAI regulator feels that the following must be done in order to widen Internet penetration: 

1) An in depth study on the achievements of such large number of ISPs in present environment is required especially considering limited accessibility of spectrum, high Capex requirements to build the networks, low rate of returns for providing dialup Internet service which will further decline with the increase of broadband connections. 

2) Alternative low priced and user-friendly devices for use of Internet telephony should be explored. 

3) In order to bring Internet telephony in the main stream consumer awareness must be created about illegal services, as they are the actual victims of such services. 

4) Another remedy to control grey market can be to block such websites and impose restriction on sale of the adaptors to use illegal Internet telephony. 

5) The present scenario demands regulatory interventions to increase competition and ensure availability of popular Internet telephony legally. If the restriction on Internet telephony is removed then it is probable that the subscribers will use legally available services. The provision of unrestricted Internet telephony requires that ISPs must be permitted to have interconnection with PSTN networks. 

In order to encourage competition and launch innovative applications a common license must be provided for all value added services like Internet telephony, IP TV, IP VPN. This would also persuade the ISPs to migrate to UASL. As the necessity of school education is felt by the government likewise computer literacy must also be promoted through various programmes. People must be made aware about the use of computers followed by Internet by organizing workshops where the public is made alert towards the uses and advantages of Internet. There must be full control on everything illegal in usage of Internet and steps must be taken in order to make accessibility of Internet cheaper, easier and wider. 

The industry seniors feel that it is high time that the converging industries of Entertainment, Internet and telecommunication are handled by one NODAL agency and roles of IT Ministry and I&B Ministry be reworked. There is a need of recognizing large Cable Television Infrastructure at par with the telecomm infrastructure so that proper development and growth can take place. 70 million households connected by Cable TV infrastructure form a massive market for the growth of new media technologies like IPTV, Mobile TV, On-Demand Services, e-commerce etc. a Service Provider should be permitted to use all infrastructure including Copper, Co-ax, wireless, satellite or cellular to reach to the consumer. Only than the existing consumers of telephony, Cable TV, cellphones, DTH and PCs can be reached both in the Urban and rural markets in an effective way to spur a fast growth of digitization as desired.

Source: http://cablequest.org/articles/broadband/item/1278-spreading-the-net-further.htmlSource: http://cablequest.org/articles/broadband/item/1278-spreading-the-net-further.html
S