The Cabinet has cleared a department of telecommunications (DoT) proposal to divest VSNL of its Internet services infrastructure and subscribers.
VSNLs assets and users are to be transferred to DoT, which plans to operate Internet services from 20 sites. It already has Internet servers computers and routers operational in six cities and towns. VSNL operates out of the four metropolitan cities, Bangalore and Hyderabad.
Citing conflict of interests, DoT proposed the idea of taking over VSNLs Internet service about two months ago. DoT was critical of VSNL being an Internet service provider (ISP) and, at the same time, being the gateway provider to private ISPs.
The department felt that it could handle providing Internet services. VSNL has more than 45,000 subscribers to its Gateway Internet Access Service (GIAS), of which hardly 5,000-6,000 are estimated to be on DoT servers.
The Internet policy cleared by the Cabinet last month envisages the entry of private ISPs into the arena. However, the policy has vested the right of the international gateway with VSNL.
B K Syngal, VSNL chairman and managing director, had opposed the move tooth and nail. In a letter to the Telecom Commission chairman, he stressed that being both an ISP and international gateway services provider would not lead to a conflict of interests. Singapore Telecom, Hong Kong Telecom, AT&T and several other international telecom majors are both ISPs and international Internet gateway providers to ISPs, he had pointed out.
VSNL, instead, has proposed that it be allowed to spin off its GIAS into a separate subsidiary. An independent subsidiary, it was felt, would be better equipped to handle competition from private ISPs while providing quality service. This structure would also keep the requisite distance from VSNL, the Internet gateway provider to ISPs.
The ISP business in the country is set to explode in the country in the years to come. Already, there are 16 applications for ISP licences pending before DoT and some 50 other companies including big names like AT&T, Compuserve, Microsoft, BT-MCI which are reportedly interested in setting up Internet services in the country.
