The Department of Telecommunications (DoT)’s new policy guidelines for internet service providers (ISPs) has met with strong opposition from operators.They feel they have been shortchanged and their interests have not been considered.
The new policy will replace the previous one announced in 1998, which had eased licensing norms. The policy seeks to abolish Category C ISPs with localised district-level operations, and makes it mandatory for idle licences to be surrendered. In addition, it brings down the foreign direct investment limit in internet services to 74 per cent from 100 per cent, and includes a 6 per cent revenue share clause.
DoT has also introduced a higher entry fee of Rs 2 million for Category A (national level) licences and Rs 1 million for Category B (state level) licences, replacing the earlier flat fee of Rs 1 million.
The new policy permits all ISPs to offer internet telephony services, unlike the earlier policy, which had made it mandatory to obtain a special licence for the service. However, the new policy continues with the existing norm that bars ISPs from terminating internet telephony calls on landlines or mobiles within India.
ISPs are also required to follow stringent security norms similar to those for the rest of the telecom sector. The chief officer in charge of technical network operations and the chief security officer need to be resident Indian citizens. All top-level foreign executives require clearance from the home ministry. Other security norms regarding monitoring facilities, remote access and provision of information to security agencies will also be applicable to ISPs. In addition, ISPs will be held accountable for any objectionable content on their network.
The norms governing the usage of satellite gateways by ISPs have also changed. Earlier, even though ISPs had to apply for approval, they could use any satellite and its capacity. But the new policy empowers DoT to fix the satellite capacity to be used by an ISP.
One of the benefits provided to ISPs is that they can now offer internet protocol TV (IPTV) services, provided their net worth is over Rs 1 billion.
As expected, the ISP camp is up in arms. Says Rajesh Chharia, president, Internet Service Providers Association of India (ISPAI): “We have issues with several clauses of the policy which we feel will threaten the existence of small and medium ISPs and will result in the slow uptake of broadband, particularly in the rural areas.
ISPAI is naturally against the removal of Category C players on the grounds that it will harm consumer interests in niche areas not catered to by the bigger players.Explains Chharia: “Category C licences encouraged small players to start and grow their businesses. The policy to discontinue them will hurt entrepreneurs who have risked considerable resources to create and nurture businesses in the face of aggressive competition, as well as their consumers.
ISPAI has also opposed the imposition of a licence fee on ISPs for internet telephony. “If the government is concerned about the slow penetration of broadband in India, why are they putting the burden on ISPs? If creating a level playing field with other telecom operators is the issue, ISPs should be allowed to interconnect with fixed line and mobile operators. This would at least give us additional revenue, and then we can pay the licence fee,” says Chharia. “Denying the right to terminate calls on fixed and mobile phones promotes market abuse by incumbent access providers. The government also stands to lose significant revenue since the companies providing illegal services do not pay licence fees,” he adds.
Regarding IPTV, the ISP camp argues that while the government is “giving the ISPs IPTV with one hand, it is reclaiming it with the other”. They claim that the condition regarding net worth automatically excludes all Category B and C players, as well as a few Category A players. According to ISPAI, only about five out of the over 250 ISPs will qualify for IPTV services under this criterion.ISPAI has decided to soon approach A. Raja, minister for IT and communications, in order to resolve these issues.There are analysts who feel that the new policy may be somewhat unjustified.Telecom analyst Mahesh Uppal says: “The policy seems to be based on the assumption that smaller players are perhaps the primary culprits of the grey call market. However, there is little evidence of this assumption being correct.Virtually no major country in the world attempts to license ISPs or levy fees on them. Instead of removing controls, we have fallen prey to a bureaucratic urge to regulate a medium and a service that is virtually impossible to control. By all accounts, the service thrives when entrepreneurs are given a free hand to serve or develop the market.”
Abhishek Kapur, manager, advisory services, KPMG, offers a different perspective.He says: “While it is clear that the policy does impact small players, it also helps in aligning the ISP licence requirements with other licences. Further, the policy provides greater clarity in the scope of services. With 98 per cent of the subscribers owned by the top 20 ISPs, this policy will not have a major impact on subscribers. India has tried the route of soft regulations in the internet services space for the last 10 years, but has not achieved the targets set for 2007, a year promoted as that of broadband. The new policy may be an attempt by the government and/or the authorities to drive internet growth using telecom regulation as a reference point.”
