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November 11, 1998


ISP aspirants allow a peek at their hand

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The first of the private Internet service providers are likely to get started in the next two months. But initially, at least, they may restrict operations to a few big cities.

Pricing strategies differ widely though the existing rates of Videsh Sanchar Nigam Limited are emerging as a benchmark for some.

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Satyam Infoway expects to get rolling in around a month. The company already offers email, electronic data interchange and online services on a 12-city backbone.

ETH Dishnet, a Sterling Group company, has actually set a launch date of January 14.

Major telecom companies, including Reliance Telecom and the Bharti-British Telecom venture, are likely to start offering connections in the early part of 1999.

Satyam, by virtue of its existing infrastructure, should become one of the most widespread, at least in the beginning.

Initially, telephone companies are likely to restrict their services to areas in which they already have a basic telephony licence. Reliance, for instance, may offer ISP services in just Gujarat where it runs a basic telephony service. However, the company is planning to apply for a national ISP licence.

Another national network aspirant, Bharti BT Internet, will kick off in Bangalore, Delhi and Bombay. ETH, also hoping to be a national player, expects to touch 15 cities in the first year. Services will, however, be launched initially in Pune and Madras.

Pricing strategies vary since there is no cap or floor set, at least for now. The VSNL rate of Rs 10,000 for 500 hours is likely to emerge as a key rate, points out R Ramaraj, managing director, Satyam Infoway.

"Customers will not want to pay more,'' he says. But he also points out that providing Internet access at VSNL rates while paying the high leased line charges of DoT would be a sure-fire recipe for a loss making enterprise.

One company that is banking on being price-competitive is ETH. Company executive Prakash Arya says that they would charge around Rs 10 per hour for a dial-up connection, at least 50 per cent lower than the VSNL rate. Other players say that they may not compete on price.

But will content be a major differentiator?

ETH is planning for city-specific content with a strong education focus. Satyam already has sites on Carnatic music and other India-specific content. The company is already e-commerce enabled and ready to handle secure credit card transactions but admits that it is going to be some time before volumes make e-commerce something to write about.

Access is going to be key and all companies will initially focus on providing just that, says N Arjun, director, Bharti BT Internet. "It will initially be plain vanilla,'' concurs Ramaraj.

Given that access provision would be key immediately, companies would also look into setting up of gateways and last-mile links a little way down the line.

Currently, most companies may stick to dial-up access since radio clearances are required for radio-based dedicated links.

Creation of backbone would receive priority for national ISPs. DoT may be the default choice since neither the power companies nor the railways have anything in hand yet. But DoT tariffs for leased lines would render the business unprofitable, say potential ISPs.

Companies are looking for the 60-90 per cent rate cuts in leased line charges that have been proposed by the Telecom Regulatory Authority of India.

Companies like Reliance would be in a position of advantage here since they are already building a backbone for their voice network in Gujarat.

Already, 1,000 kilometres is in place. This comprises roughly half the backbone.

With respect to spread, nationwide ISPs are looking at 100,000 subscribers each within the first 12-15 months.

With at least five to six nationwide operators slated to commence operations in the first year, the grand total at the end of that period could be half a million.

Industry revenues are expected to come mainly from subscriber revenues. Advertising would take time, nearly three years, to really become a major revenue generator for the ISPs, says Arjun.

At that point, the advertising driven newspaper model, which subsidises subscribers, is expected to take over.

The distillate
  VSNL pricing is the benchmark;
  Services will begin in only select areas;
  Focus on access would be greater than on content;
  Most will begin with only dial-up access service;
  Priority would be to create the backbone;
  A target of roughly 100,000 subscribers for each ISP has been worked out for the first year;
  Revenues will arise mainly from subscription and not advertisements.

- Compiled from the Indian media

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