IT Taskforce
Basic Background  Report
9th June 1998



7.1 Ending VSNL Monopoly

i) The industry's major recommendation is that direct global connectivity should be allowed to private sector ISPs, who should be free to choose either between VSNL's gateway or any other international gateway of their choice as has been recommended by the Jalan Committee. There will be two benefits to the common subscriber of India. Access to global highway will allow them to avoid VSNL's very high tariff structure and in turn will enable them to offer the common man, the end user, Inernet service at competitive prices. At the same time, a highly reliable and efficient service matching international standards will automatically result.

Because of very strong bandwidth limitations, the possibility of VSNL offering services which can compare with global players in the area of network management and diagnostics etc. by their own admission is inadequate.

The VSNL was granted monopoly in providing international telecommunications in the context of the Euro Issue in 1994. The then Chairman of the Telecom Commission,addressing the issue clarified that " Government have decided that VSNL will have a monopoly for 10 years in basic Services (Voice Telephony) starting from 1 April,1994".

It is desirable however to remove VSNL monopoly over international gateways, as this will introduce an element of competition in the provision of international connectivity. Such competition will not only contribute to better services but also help in lowering the cost of communications.

We have already committed to the WTO (NGBT and ITA) to review the monopoly of DOT over interstate telecoms in 1999 and of VSNL on international telecoms in 2004. It will be most harmful to the country to continue the monopoly of either any longer.

Singapore and Honk Kong also were to have monopoly till the year 2004 but have decided to end this, four years in advance of their commitment.

ii) The End Monopoly for INTERNET Service provision (ISP) had already been approved as a matter of policy according to the Jalan Committee report. This , however, is not being allowed to be implemented because of restrictive attitudes. Since Government has already agreed that there need not be any licence fees and that there can be any number of ISPs, no licensing should be required. Instead, companies may be asked to register with DoT and the TRAI.

iii) As INTERNET is not owned by any country or company, it is an international public property - on this argument, the INTERNET enterprises (ISPs) should be free to set up their own uplinking facilities without going through VSNL or Department of Telecommunications and without the need for any approvals.


7.2 Ending Licence & Licence Fees for ISPs

DoT have reserved the right , as per the licence terms, to impose a licence fee after the 5th year without mentioning on what basis that licence fee would be determined. This is a serious one sided imposition on private investors who are being asked to risk their fortunes on a totally uncertain element and defies the laws of our country, which do not allow one sided contracts to be entered into between parties. Industry recommends that there should not be any licence fee at all, since DoT, through the operation of private ISPs will earn additional revenues due to massive increase in subscriber base and similar increase in the use of telephone lines. This is the practise being followed by most other countries as well. With 40% of India's population falling below the poverty line, it is not understood why DOT have chosen to levy on common subscribers of India, a burden which will arise because ISPs will be forced to pass on the licence fee ultimately, as a cost to the subscriber.

7.3 Cost Minimisation for INTERNET Access

i) The total cost today consists of hardware and software costs, ISP charges, electricity charges and the DOT/MTNL telephone charges. The hardware and software costs as capital expenses and the other costs as recurring expenses are the costs in respect of which sustained and organised efforts have to be made to reduce. With the reductions announced and to be announced by ISP, MTNL must respond in the interest of its future revenue growth potential. The least it can do is to remove the time-related call tariff. If it carefully analyses its future use pattern projections, then it is easy to see how an increased customer-base would benefit the revenues which, otherwise would not accrue if the INTERNET users have to restrict use due to time based tariffs. The hardware and software makers may, perhaps, have to adopt a different but conscious policy of reducing the cost of their products.

ii) Optimum use must be made of the existing investments in networks. Restrictions like not allowing voice telephony in INTERNET should be removed forthwith.

The INTERNET policy which has already been announced by the Government must be further expanded to cover and permit all new technologies like INTERNET telephony. The idea is to make INTERNET service providing a profitable activity to attract investment.

iii) Allowing INTERNET through cable TV by necessary changes in the proposed broadcast bill.

7.4 Inter Networking & Backbone Support to ISPs

i) ISPs should have the freedom to build their own backbone and local access. This is important because in India there is no dedicated backbone network for INTERNET and data services - Allowing ISPs either singly or together to have have their own dedicated backbone will make the INTERNET service affordable and flexible to the ordinary man and offer a host of value added highly reliable services.

ii) Inter-connectivity through VSAT between private ISP providers should be permitted. There should not be any restriction on the service providers on the type of network to be used. They should have the freedom to use the type of network that is cost-effective and reliable for carrying out their services. In any case, use of VSATs for interconnecting ISPs should be allowed in clear terms without any riders attached as VSAT networks are highly reliable and cost-effective (insensitive to distances)

7.5 India as a Telecom/INTERNET Hub of the Region

If India has to take a lead in IT, then there is an immediate need to create a regional telecom hub in India. Singapore is already trying to take a lead through SINGAPORE ONE. Such an effort will not bring more revenues to Government, but substantially bring more INTERNET / E-commerce traffic and also help connectivity, which is essential for future growth of software driven IT industry.


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