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June 27, 1997


It takes three to monopolise

Salil Murthy in Bombay

Is the commercial Internet access business in India a government monopoly? The answer would have been an emphatic yes some days ago. Today we are not so sure.

Ironically, the government owned Videsh Sanchar Nigam Limited, the monopoly Internet access provider, has itself farmed out its business to two private companies in the state of Gujarat. They have been franchised by the overseas telecommunication giant to sell Internet connectivity through its gateway.

But can VSNL do this in all opposition to the land's monopolistic Internet policy. The issue becomes more complicated due to the fact that the VSNL seems to be jumping the gun even as a new policy to privatise Internet services is on the anvil.

To make matters worse, a senior executive in the Indian government's Department of Telecommunications told Rediff On The Net that he was not sure whether DoT recognised the Gujarat companies' role. VSNL is responsible to DoT.

DoT is expected to announce the privatisation of Internet access services in India in August. Why then did VSNL hurry through the Gujarat decision? Why did it short-circuit the process and grant Wilnet Communications and Babool Technologies, both Ahmedabad based, franchises to provide Internet access to customers across Gujarat?

These are the questions, the answers to which Rediff On The Net has been seeking for a month. A fax and six calls to VSNL's Director, Operations, Amitabh Kumar, have still not yielded results.

However, an extremely reliable source privy to the thoughts of VSNL's senior management had a story for Rediff On The Net hacks: "The VSNL boys are growing rapidly. They need to expand operations. But did you know that the government's bureaucracy leads to a two-year gestation period before the VSNL can hire people. The Gujarat companies are nothing but a way to put people on the job immediately by circumventing the tedious recruitment process. You can see for yourself, the infrastructure is the VSNL's, so the Gujarat companies are only offering the premises and people to begin work."

Another point to note is that the Gujarat companies will have to sell Internet services at VSNL rates, not more, not less.

Though VSNL has been repeatedly telling the press that they would welcome competition in the Internet business, Chairman and Managing Director B K Syngal, in a recent internal memo, has urged his colleagues to "pull up their socks" as the Internet business is about to be privatised. The memo demands "do you want this?"

The Gujarat experiment does two things for VSNL. Firstly, it ensure that VSNL stays in the ISP game when the private parties move in and secondly they relieve VSNL of the hassles that come with being consumer oriented when you are dealing with the front end of such services.

The source also revealed how a senior VSNL official privately admitted that they would not mind letting go of the front end but would fight tooth and nail to retain the monopoly over the international gateway to the Internet. The gateway privilege is the real basis for VSNL's corner on the ISP business.

Kumar has been quoted as saying that the two companies were allowed to provide access and support in Gujarat after DoT approval.

VSNL was permitted by DoT in August 1995 to provide Internet access to six cities - Bombay, Delhi, Madras, Calcutta, Bangalore, and Pune. It also allowed the appointment of marketing agents in these cities to provide service and customer support.

Industry executives feel that VSNL has acted outside its mandate this time. They claim that the equipment on the premises of the two firms is tantamount to allowing them to set up their own services.

Sixteen companies have already applied to the DoT for an ISP license, which include major IT players like AT&T, Motorola, Sprint RPG, HCL Comnet and Fujitsu ICIM. Have they been out manoeuvred by VSNL's clout?

An executive at one of the largest email services in the country reacts: "What is the need for a policy then? Others should be allowed to set up services in other states too."

A recent initiative by VSNL to tie up with Iridium India Telecom Limited has also come under severe criticism from DoT which launched an investigation into the deal.

The Rs 171 billion Iridium system is a wireless personal communication network, using 66 low-earth-orbit satellites to improve global telecommunications.

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