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May 6, 1999


Party Poopers: ISPs refuse to pass on savings in phone access charge to surfers. Priya Ganapati and
Pravin Nair

Didn't Mommy ask you to share the candy? asked Rediff. And it was answered with a resounding "NO" from the ISPs.

Email this story to a friend. It is like this: The Internet service providers had to pay Rs 15,000 for every telephone line they bought for their clients to dial into.

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Now, just like that, without warning and out of the blue, they only have to pay the regular phone charges.

This is estimated to bring down the cost of their operations by at least 15 per cent. But are they willing to pass on this windfall to their clients? No way!

The Department of Telecommunications is the government owned basic telephony service provider for all of India except the metros of Bombay and New Delhi. In those two high teledensity cities, it is another government owned corporation that rings the phones, the Mahanagar Telephone Nigam Limited.

Both will now stop charging the ISPs the steep Rs 15,000 per line. But the ISPs are going to hog it all and there is no Internet tariff reduction in immediate sight.

Actually, the Internet Services Providers Association of India Secretary Amitabh Singhal is quite apologetic. "The ISPs should pass on the benefits to their customers."

Satyam Infoway General Manager T Ravichandran defends "We have taken a calculated risk and already passed down the benefits to our customers, foreseeing this drop (in phone charges)."

Incidentally, Satyam Infoway was the most vociferous critic of the high phone charges that DoT and MTNL were charging because Satyam is a large nationwide ISP needing several phone lines. Obviously, they were the worst hit.

Dishnet Limited Director, Marketing, Prakash Arya seconds Satyam's Ravichandran. "We have not included these charges (the Rs 15,000 telephone tariff) in our current rates. No further drop (in our Internet tariff) is planned. We were sure the high phone charges were going to be dropped."

Weikfield Mnemonix Director Vikram Godse is a man of few words. He claims "Our customers benefit because we have the lowest rates in India." Period!

The MTNL is a strange bird.

The basic telephony provider is also an ISP. Its telephone arm has to provide lines to its ISP arm. There is no question of it paying Rs 15,000 to itself.

However, if Mr Speedy Gonsalves is jumping to the conclusion that MTNL's ISP business must be immune to the recent developments, let him be warned.

Actually, the decision to not charge Rs 15,000 per line from ISPs works against MTNL in two ways:

  1. It loses out on the Rs 15,000 per line revenue from the ISP clients and
  2. Over and above this revenue loss, it faces the prospect of its competitors gaining a cost advantage.

MTNL Marketing Manager K J Chacko gives Rediff only half the marks.

He agrees with point one that MTNL does stand to lose considerable revenue but does not believe that point two is really making any point.

He argues that MTNL's ISP operation does not really lose any competitive advantage because it is already running at saturation point. "Today when it comes to ISPs in this circle (Bombay area) we have the lowest tariff rates. (Dishnet operates in the Pune circle). Despite VSNL slashing its access rates, our renewal rates are on par with theirs. The only thing is we have not made a big splash in the newspapers because our service is oversubscribed."

Just one point here: VSNL, the Videsh Sanchar Nigam Limited, is the government owned overseas telecom monopoly. Until recently, it also had the monopoly over the commercial ISP business. After liberalisation and the coming of private ISP players, VSNL continues to be in the ISP business.

However, it never had to pay the Rs 15,000 per line to either DoT or MTNL.

To understand this seeming anomaly, we may have to digress a bit into genesis of this Rs 15,000 charge.

It all began when some enterprising bureaucrat at DoT tipped a pile of some ancient files and stumbled over a dusty circular, circa 1995.

Mr Deep Throat from DoT's customer service section whispered to Rediff some months ago that "Previously, DoT was charging Rs 15,000 as access charges for every line terminating on a private network. Email licensees were being charged this amount. The new Internet policy came through only in November, so as per the circular, notices were sent off to the ISPs in January that they too would have to pay the Rs 15,000 per line. The department had, however, made no specific decision to levy this charge on ISPs."

The onus of implementing the circular was then passed on to the field units of DoT and MTNL.

Sprint RPG, Wipro, Satyam Infoway and Wilnet were among the initial few to have received the notices asking them to pay up the steep Rs 15,000 per line with retrospective effect.

Immediately, industry representative, the ISPAI demanded that the government should issue another circular that would clearly state that ISPs do not have to pay access charges for any of their ports because after all the Internet is not a private data network.

ISPAI hoped that with such a circular the issue would be settled forever.

However, at that point of time, DoT officials were not too enthusiastic to slay yet another goose that lays golden eggs.

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