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January 19, 1998


Happy days for networking equipment vendors

Email this story to a friend. With the ISP policy statement last week making things more concrete, networking component vendors, especially those selling infrastructure equipment are all set to cash in.

Obviously, they will start making money even before the ISPs do. Servers, routers, modems and local area networking equipment would comprise the main components of the network.

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"If one goes by the experience in Southeast Asia, there should be around 200 ISPs in a city like Delhi,'' agrees Paul Whetstone, who is in charge of Southwest Asia for Ascend Communications. "This," he points out, "would open up a large market of the infrastructure equipment."

Most networking majors are finalising strategies to get a big slice of the market. 3COM, Digital, Ascend and Cisco have already started their marketing exercise, while Shiva is also believed to be eyeing the market.

3COM has already supplied components for the Videsh Sanchar Nigam Limited network. "But the real market will open up when the private operators start setting up their system,'' said Sanjeev Aggarwal, CEO, 3COM India operations.

As far as remote access servers are concerned, 3COM boasts of a 60 per cent market share worldwide. 'Total control', as its remote access concentrator is called, is very popular among ISPs. Supporting both digital and analogue lines, it is claimed to provide flexibility to the ISPs.

Ascend has also emerged strong in 'remote access servers' in Southeast Asian market. "We are investigating business plans with the Department of Telecom, Mahanagar Telephone Nigam Limited and private ISPs,'' says Whetstone.

Cisco is the leading player in routers. Digital is strong in servers.

Cost of setting up a network depends on the number of subscribers an ISP is targeting and the features, which an ISP will provide. For an ordinary dial-up service, cost per port is anywhere between Rs 20,000 and Rs 30,000.

Therefore for a 10,000-subscriber base, the cost of network will be about Rs 20 million with the assumption that one port serves 10 subscribers.

Entry point for an ISP being low, number of entrepreneurs could be quite high. Further, waiver of license fee has sent good signals and with a lot of ISPs, the subscriber base could be expected to grow really large.

Currently there are only 60,000 subscribers in the country with a population of about 1 billion. But a mere waiver of licence fee does not make a successful business plan. An important factor which will contribute to the success of Internet services is the port charges to be charged by the Videsh Sanchar Nigam Limited from the ISPs.

VSNL has proposed that the ISPs be charged Rs 7 million per annum for a 2 MBPS link and Rs 800,000 for a 64 KBPS link. A 1 MBPS link can support about 20 ports of capacity equal to ordinary telephone lines. At a ratio of 15 subscribers from one port, a 2 MBPS link can support about 300 subscribers.

The industry feels that these charges are very high. "Such high charges will not make the business viable," complaints a potential Internet service provider. According to Sanjeev Aggarwal, CEO, 3 COM India operations, "These charges are very high compared to international standards. To encourage the services, the government should lower the port charges to be paid by the service providers, which will in turn lower the tariff which the companies will charge from the subscribers."

This could somewhat dampen the prospects of having a large base of ISPs, as only big players can be expected to remain in the sector as only they can sustain losses for such a long time.

Moreover, it may attract only those companies, which are already, operating basic, cellular and VSAT services. Internet may be taken as value addition to already existing services. But then the idea is not to increase the usage time for these operators and in generation of additional revenue for the operators, but to expand the Internet subscriber base.

This will happen only if the scheme attracts a lot of ISPs.

Another major factor, which could be a hurdle in the growth of the Internet in the country, is that the policy does not permit the ISPs to provide Internet connection through a cable TV network.

All over the world, cable TV operators are responsible for the growth of the network. In India, there are over 50 million subscribers of cable TV, according to a rough estimate. It will be easy for the cable operators to distribute the services through the cable TV network.

But the good aspect is that except for these two hurdles, the prospective ISPs seem quite content with whatever guidelines are known till now.

For instance, the policy statement has made clear that no insistence on applicant companies having prior experience in information technology or telecom services would be required. This has earned kudos. Interestingly, a foreign partner with experience in operating the services is mandatory in the case of cellular and basic telephony.

The territories have been divided into three categories. Category 'A' includes all telecom circles and four metro telephone districts. An applicant will thus have to obtain a separate license for each circle.

A licensee of a category 'A' territory will have to furnish a performance bank guarantee of Rs 2.5 million per licence. The category 'B' service area includes secondary switching areas of DoT. There are several SSAs in each telecom circle. The SSAs of metro telephone districts have, however, been excluded from this category.

A licensee of category 'B' territory will have to submit a PBG of Rs 1 million per licence.

The category 'C' service area includes cities and localities covered by a local exchange system of DoT. An ISP operating in a category 'C' area will have to submit a PBG of Rs 500,000 per licence.

The existing and potential VSAT service providers can obtain a single ISP licence covering the entire country, as they will provide Internet services to big corporate houses. They will, however, provide Internet service to their VSAT customers only. The existing VSAT service providers are required to submit a PBG of Rs 25 million for obtaining an all-India Internet service licence.

The core group has, however, poured cold water on the aspirations of email service providers to make a head start in the business of Internet service, which they claim, forms a part of their existing business.

The group has recommended that the email licensees shall obtain separate ISP licence for each service area. They shall implement the service independent of their existing email networks.

The group observes that "moreover, the email licensed service is based on a different protocol and the email nodes are connected with 64 KBPS data leased lines and may not be upgradable to provide Internet service at all.''

The government has also permitted the private operators to use excess capacity for transmission available with the Indian Railways and the Power Grid Corporation, in addition to the facilities available with the VSNL.

This is expected to provide ISPs with the much needed backbone infrastructure.

Barring a few glitches here and there, the guidelines seems to be going down well with the ISPs and could provide huge market potential for the equipment vendors as well.

Earlier: Finally final: After an interminable wait, the ISP policy is official

- Compiled from the Indian media

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