Indian Internet telephony yet to take off

HYDERABAD: Internet telephony service is yet to make it big in India despite a significant increase in the Internet subscriber base.

Triggered by issues including access to last mile connectivity and unrestricted telephony access, Internet Service Providers (ISPs) are unable to tap the market potential existing in the country.

According to the Internet Service Providers Association of India (ISPAI), there were 5.9 million Internet subscriber base and 3.9 lakh broadband connections, as on June 2005. Revenues from the Internet and Internet Telephony services for the AMJ quarter for FY 2005-06 stood at Rs 550 crore. The industry is expecting revenues to the tune of around Rs 1,300 crore for the current fiscal and has the potential to grow three times more than the present.

Still, all is not well for the industry players. If ISPs lay their own cable to offer the service, it would be expensive, which would result in bad quality of service.

The ISPAI has sought unrestricted telephony access that would allow users to make calls from both mobile and landline numbers. Currently, users have limited choice in India. This is because only PC-to-PC calls are allowed in the country.

When IP telephony debuted in the Indian Internet market in 2002 there was an estimated 120-odd ISPs offering this service. The Department of Telecommunications (DoT) projected the IP telephony market to be Rs 500 crore in 2002.

However there are only 50-odd ISPs now, holding operating licenses. Out of these 50 ISPs, only five to six are actively offering the service.

ISPAI estimates said that 36 million minutes and 43 million minutes were used in the JAS and OND quarters respectively in fiscal 2004-05.

In the JFM quarter 2004-2005, 41.5 million minutes were used and it was further reduced to 38 million in the AMJ quarter in 2005-06. Industry players attribute this decline to the creation of the vigilance team to monitor and control the traffic, which, according to ISPs, raised doubts on whether this service is legal or not.

Kusumba, executive council member, ISPAI said, "Since the vigilance team was set up six months back, and though usage of international calls through Internet access was de-licensed, the government has not given enough statements to ratify that IP telephony is a legal service. Consumers are still in the belief that IP telephony is an illegal service and an ISP has to undertake promotional and awareness activity, which is not his job."

"The proposed Universal Service Obligation (USO) regime, expected to be functional in the next six-eight months, insists that ISPs have to shell out Rs. 107 crore as entry fee for offering Internet telephony. Had the regulator created and provided us enough opportunities, we could have agreed. There are too many bottlenecks and unless our concerns are not sorted out, we will not support this," said a leading ISP.

Kusumba said, "Unbundling of last mile access and unrestricted telephony there by allowing IP telephony service accessible from both mobile and landlines, are primary factors, which the regulator has to consider. Besides, in rural areas, where laying cable is not possible, technology like Wi-Max is the only solution and ISPs should be given the flexibility to offer the service."

According to ISPAI, since 2002, the consolidated revenues generated from various ISPs offering IP telephony service for the last three years stood only at Rs 70 crores.

"Moreover, most of the ISPs are posting losses and if this situation continues - and if government gets on with the USO regime as deemed - eventually we will have to shut shops," summed up another ISP.