Tough time ahead for ISP firms

Analysts said the birth of dozens of private ISPs alone would not herald a "digital revolution" the country expects.

The quality of service and how people used the Internet would ultimately decide the survival of the industry, they said.

"I don’t think the privatisation of ISPs alone is going to make a huge amount of difference," said Pradeep Kar, chairman and managing director of Microland, a leading infotech company which has an Internet services division.

"What will make a huge amount of difference is how people will deploy it and make it work," Kar said. "Plain provision ofaccess to the net is neither going to be attractive nor profitable," said K V Sheshashayee, group vice-president of Hinduja Telecom. "ISPs will have to offer content and a host of other services and provide value for money."

Commercial Internet services have been available in India since August 1996 but state-run VSNL has been the sole ISP. Users of the service have criticised VSNL for its poor quality and high tariffs.

Currently VSNL has 150,000 subscribers in 42 Indian cities.

Analysts have predicted this number will rise to 1.5 million by the turn of the century once private ISPs offer quality service and lower costs. Infotech analysts estimate that nearly 300 companies will apply for ISP licences.

"This is typical Indian enthusiasm for anything new," Sheshashayee said. "Everyone runs towards it." "There are many limitations before private ISPs take off," said Amitabh Kumar, acting chairman and managing director, VSNL. "There was similar excitement when licences were issued to private companies forfixed phone services and cellular phone services.

"But the telecom revolution expected from private fixed phone service providers is yet to happen. And cellular phone service providers who expected to make a lot of money can’t even pay their licence fees now."

The crucial factors determining private ISP success would be easy access and ongoing connection to the Internet. Analysts said this would be out of their control as telephone lines used to connect to the private ISPs were still a low-quality state-monopoly, analysts said. "Private ISPs will have to provide innovative service with a lot of rich Indian content," said Sheshashayee.

"If private ISPs think that they are going to make money in the short term, they’re going to lose their shirts. This business (ISP) is an extension of the telecom business and by its definition it will take a long time to make money."

KS Ganesan, head of Microland’s technology division, said India would have two types of ISPs – those which provide only "reach" to the netby offering easy access and others which will also provide "richness" of Internet content.

"The ISP that provides the right balance of both reach and richness will prosper. Ultimately, there may be about 10 ISPs that will survive," Ganesan said.