ISPAI’s Suggestions on Growth of Broadband & Revival of ISP Industry

Internet access is central to India’s dreams of being a knowledge economy power. Worldwide experience has shown that access to Internet and data services requires a supportive policy environment. India needs to replicate what successful economies have done.

A liberal regulatory regime that permits free entry and exit, complete freedom to provide any or all internet services has been the hallmark of almost all major countries including US, Canada, Australia and virtually all members of the European Union. A policy regime that encourages entrepreneurship has expanded access, improved affordability, expanded choice and enhanced service quality in all these countries. This has stimulated social as well as economic growth visible in statistics for internet usage, access to virtually free internet telephony and huge growth in e-commerce and other applications touching most people. In contrast, India has systematically extended controls on the provision of internet based services to the detriment of users as well as service providers.

Absence of policy support for internet is hurting India’s strategic objectives. Most government targets for Internet and broadband access remain unmet. With barely 8.5 million Internet subscribers, the target of 18 million internet subscribers by end 2007 seems far. With broadband subscribers at 2.46 million the corresponding target of 9 million seems even further. The health of Internet Service Providers (ISPs) too has raised serious concerns in government. Of the 350 ISP license holders, only approximately 150 are operational raising questions about the reasons for such poor performance in internet services while other services, especially mobile that began about the same time have become so widespread and affordable.

The difference between the successful mobile services and the struggling ISPs lies in the regulatory environment in which they operate. In contrast to the steady easing of controls and lowering of fees imposed on mobile companies, ISPs face more restrictions than they faced at inception. ISPs face considerably tougher licensing terms. The visionary decision to make all ISP licences free have now been changed to include hefty fees (Rs##) for virtual private networks (VPN) and internet telephony. IPTV services are being closed to ISPs. Spectrum charges and procedures are more unfavourable now than before.

It is easier for illegal foreign companies to provide Internet telephony than ISPs who wish to do offer the service. Indian ISPs pay 12.36% Service Tax, and 6% of Annual Gross Revenues (AGR) as licence fees to provide Internet Telephony. They must meet regulatory and security obligations. Standalone ISPs are disallowed from offering un-restricted Internet Telephony and from terminating calls on the Indian Public Switched Telephone Network (PSTN). Interconnection between ISP & ISP Offering Internet Telephony is not allowed. On the other hand foreign ISPs such as Skype, Yahoo, and MSN etc offer services without any fees or obligations or security clearances.

For its obvious role in making telephony much more affordable and in response to many appeals full Internet Telephony was opened last year but only to telecom access providers who have refused to offer the service. ISPs continue face restrictions as well as high licence fees to be able to offer a service that can help the majority of Indian users who must operate within a budget.

Recent changes and proposals hurt ISPs even more. These include the decision to levy retrospective charges for spectrum against stated norms. There is a proposal to do away with C type ISP licences which serve smaller communities or areas on specious security norms when in fact foreign players violate them openly.

Telecom access providers face a conflict of interest in promoting much needed data services that are the mainstay of ISPs This is because their core business of voice telephony larger and more lucrative than internet and data services. Internet telephony, especially, eats into profits from long distance calls unsurprisingly, data and internet services are sparse and internet telephony is largely unavailable.

Refusal to allow access to local loop hurts ISPs and users alike. In most regulatory regimes, ISPs can access the optical fibre or copper installed by telephone incumbents such as BSNL in India. This has not happened in India even though it has in most major countries. The fixed line users- especially those in rural areas and small towns where BSNL is still the sole player- cannot subscribe to any competing ISPs even if they offer services that are cheaper and better. In addition, local loop owners can make internet services of ISPs uncompetitive by charging them retail prices instead of wholesale as is the practice in all major regulatory regimes e.g. European Union.

All wireless broadband operators, not just telephone operators, must be allowed to provide data services since telecom access providers have large investments in 2G wireless technologies which provide limited support for broadband. Mobile players have become bottlenecks for Internet and data services, especially broadband. While this will change with the onset of 3G services, it is important that all other players who can deploy broadband be provided spectrum and other facilitation.

Spectrum policies favour voice against data and internet and hurt ISPs and data users. Needs of wireless data services have not been addressed while pending decisions on Wi-Max and 3G spectrum are delayed. In addition ISPs are required to pay spectrum charges retrospectively contrary to decision conveyed to them earlier. ISPs must also pay a license fee for every additional BTS within the service area. There is no time frame for spectrum allocation / SACFA Clearance. However delays by ISPs can mean that Import license / NOC etc can be held up. In addition, ISPs must pay spectrum charges annually in advance.

Thus, India’s ISPs are serving policy goals against heavy odds. They provide Internet access to millions of small users and modest cybercafés in spite of restrictions and controls. They also provide a wide range of value added services. Yet, against all regulatory best practices and in spite of the massive gaps in Internet access, almost all recent decisions have tended to hurt rather than fortify their businesses. The many problems that plague them continue to remain unresolved in spite of repeated reminders as well as numerous precedents the world over.

ISPAI representing major ISPs therefore believes that urgent policy action is required to remove bottlenecks to growth of Internet in India. India risks serious loss of productivity and competitiveness if internet is neglected or undervalued.

India’s regulatory must recognise that Internet markets are failing because of

·  Restrictions on services allowed to ISPs

·  Abuse of dominance by incumbent operators

To deliver the full potential of the knowledge economy to India’s users, the government must take the following urgent steps:

1.  Return TRAI’s recent recommendations on Internet services for a fresh review.

2.  Remove entry barriers faced by ISPs in providing a full bouquet of data and Internet based services including internet telephony, IPTV and all related services

3.  Allow all services that can be provided using their allocated resources

4.  Ensure fair competition between telecom access providers and ISPs by

5.  Mandate that BSNL sells bandwidth and leased lines to ISPs at non discriminatory wholesale prices

6.  Remove any barriers to ISPs deployment of broadband services- whether wire line or wireless.

7.  Expedite deployment of broadband wireless services including 3G and Wimax.

8.  Provide equitable access to spectrum for all ISPs

ISPAI is of the opinion that above suggestions if implemented in toto will go a long way in spreading the Internet/Broadband in the Country and will help revival of ISP Industry.

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