| The immediate question that strikes one while looking at data that show private internet service providers (ISP) are rapidly losing market share and have accumulated losses of over Rs 2,000 crore, is not why this happened, but why it took so long in coming.
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| For, the way things stand, the die is heavily loaded against the stand-alone ISP operator. Stand-alone operators, by definition, do not have any network of their own, but piggyback on telecom lines owned by others such as MTNL and BSNL.
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| Normally that should not pose any serious problem since all the ISP firms have to do is to pay a part of what they earn to MTNL or BSNL for using their service.
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| But, and this is the irony of the situation, for every Rs 6-10 earned per hour by private ISPs from customers surfing the Net, MTNL and BSNL earn Rs 24-30 as the phone charges for surfing the Net.
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| According to the Internet Service Providers Association, that adds up to a whopping Rs 1,600 crore of annual revenue for the two PSU telecom firms.
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| Normally, you’d expect as has been the case in other such services, that when such huge revenues are generated due to the efforts of the ISPs, they should get at least some part of this.
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| For instance, revenue shares are given to fixed line companies for voice calls that terminate/originate on their network.
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| While the telecom regulator, the Trai, has directed BSNL and MTNL to offer their infrastructure to private ISPs at the same rates that they charge their own customers for using the Internet, this will provide only partial relief.
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| Apart from the fact that private ISPs are not getting a share of the revenue they are generating for MTNL/BSNL (and that’s a very major issue), ISPs complain they are paying a lot more for infrastructure — rates for leased lines they have taken from MTNL/BSNL were last revised in 1999 though other consumers who use these lines to carry voice traffic pay a fraction of this.
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| Lastly, while directing BSNL/MTNL to offer ISPs fair tariffs is a laudable move, the Trai has to ensure these PSUs form separate entities for offering Internet services as that is the only way to ensure there is no cross-subsidy involved.
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| This is vital for various reasons. First, and most obvious, is the issue of competition.
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| The world over, when the monopoly of incumbents is broken up and private players brought in, governments offer special incentives to the newcomers who don’t have the advantages the incumbent has in terms of an existing network and dominance.
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| Forget about giving new players special incentives, in India, they are being given a worse deal.
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| Second, India has just 3.6 million Internet users today, and the pace of growth is glacial. Unless the industry is allowed to grow, India’s Internet revolution isn’t going to take place.
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| Stand-alone private sector ISPs may still die after all this, since consumers may prefer to deal with single companies (like MTNL/BSNL) which will offer them both voice and data services, but this is a choice the market should make once the field is levelled. |
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