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January 14, 1999


ISP India 99 begins with enthusiasm

Priya Ganapati in Bombay

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The ISP India 99 conference got off on Wednesday with the inaugural keynote address by Amitabh Kumar, acting chairperson and managing director of the Videsh Sanchar Nigam Limited.

Kumar used the forum to market VSNL as the ISP to ISPs. His presentation answered most of the questions that the about 300 delegates in the Regal Room of the Oberoi Hotel always wanted to know.

Kumar's presentation addressed several issues and policies for ISPs in India. He explained how VSNL started the commercial Internet access business in India in 1995 with a single link of 64 KBPS in four cities. Today, along with the Department of Telecommunications, they have over 60 nodes across the country.

"The Internet business has been close to our heart at VSNL and we are delighted that it is going to expand in India. The Internet has become an animal or being that exists on its own and breathes bandwidth," Kumar gushed in a poetic vein.

VSNL now offers 8 MBPS international connectivity using its gateways at different earth stations to carry Internet traffic.

Kumar assured delegates that VSNL and DoT, together, have a backbone that links all cities in the country. "DoT is also setting up a backbone of its own and it should be in operation in the first or second quarter of this year," he added.

Kumar touched briefly upon some financial issues that would be of concern to the ISPs. These included the bank guarantees that have to be obtained when applying for an ISP licence, the cost of domestic links and the cost of international links and gateways.

"The TRAI (Telecom Regulatory Authority of India) intends to reduce the cost of domestic links dramatically and an announcement can be expected in a month. However, I do agree that the costs of international bandwidth are a matter of concern for many ISPs," he admitted.

In order to provide a level playing field to all ISPs, VSNL plans to hive off its Internet business to a 100 per cent subsidiary called the VSNL Seamless Services Private Limited.

VSNL would then operate only the gateway services and create a peering point by linking the domestic backbone with the international links.

Kumar revealed that VSNL would use fibre connectivity for Internet traffic instead of satellite connectivity. "Use of satellite results in a minimum delay of 500 milliseconds while fibre lines give a delay of only 30 to 40 milliseconds, which is important, because the delay is within the standards set for Net protocols. Satellite connectivity can be used for other applications like proxy servers and multicasting," he explained.

Kumar's advice to the ISPs was "Focus on outdoor plant line quality. Don't get involved with those telephone exchanges with poor synchronisation that results in poor quality of connection for the consumers."

In a session that shattered quite a few popular notions, Ajit Balakrishnan, CEO of Rediff Communication Limited, drove home a few truths gathered from the experiences of ISPs across the world.

Balakrishnan declared that the ISP business in not about providing Internet connections. "It is a service business. Nine out of ten customers need help right from the kind of PC to buy to what software to use. Only half the revenue for ISPs will come from the connections themselves."

He stressed that the ISP business has no economies of scale and a start up ISP with 1,000 customers can compete with a national operator with 20,000 customers.

Balakrishnan listed the components needed to set up an ISP business:

  • 400 square feet of office space
  • Two full time staff with about ten installation lines
  • A capital expenditure of Rs 2.5 million that would serve 1,000 customers
  • Equipment - Routers + terminal services + modems = Rs 1 million.
  • 1* 24 port switch
  • And four servers that would cost Rs 2.5 million.

"In India 80 per cent of the connections would be dial-up lines. And the factors that would help in customer retention are call completion rate, line stability and appropriate pricing," Balakrishnan predicted.

Elaborating the tips that would help an ISP to remain low in cost, he said "Choose technology carefully and preferably open source software. Use hardware from GIDs (genuine Intel dealers) and use caching intelligently."

Tilak Sarkar from Business India Information Technology neatly categorised all the planning to get into the ISP business. "The ISP scene in the country would be divided into three kinds of businesses, what I call the pebbles, the floaters and the leaders," he said.

"The pebbles are the ones who will sink without a trace. They will lose huge amounts of money and have no unique niche for themselves. I expect 90 per cent of the entrants to fall in this field. The floaters are those who will run a tight setup and will barely survive. They will have some interesting business plans and advantages in terms of cost dynamics. And I expect 30 to 40 players in this segment. The leaders are the ones who will have linked operations and will generally be major telecom players. They will have national licenses and I think there will be not more than five to seven players including VSNL," Sarkar elaborated.

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