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Low-cost Internet phone revolution beckons for India

Low-cost Internet phone revolution beckons for India
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First Published: Fri, Aug 22 2008. 11 06 AM IST
Updated: Fri, Aug 22 2008. 11 06 AM IST
New Delhi: Battle lines are being drawn after India’s telecoms regulator called for full-blown telephone services via the Internet, paving the way for another fall in the nation’s already cheap call rates.
India’s Internet service providers (ISPs) are delighted at the prospect of a new revenue stream but fixed line and mobile players are objecting that they paid high market entry fees, whereas ISPs will not have to stump up any money.
Under the plan proposed this week by the Telecom Regulatory Authority of India, people could call from their personal computers with Internet connections to a landline or a mobile phone and vice versa.
The move could ring in another big drop in calling prices in the world’s fastest-growing phone market, where consumers already enjoy some of the lowest telephone costs, the regulator said.
The proposal is aimed at putting India’s telecom sector “in tune with global trends” in which such “Internet-based services are very popular” and boosting paltry broadband penetration, the regulator added.
The government is keen to boost broadband use, especially in poverty-hit rural areas, where the Internet is seen as key to development.
But Cellular Operators Association of India chief T.V. Ramachandran said the regulator’s proposal was not fair to existing telephone companies.
“There should be a level playing field ... it’s unfair to allow unrestricted Internet telephony to ISPs at no additional cost,” he said.
The telecommunications department just recently issued pan-India licences to several telecom players, charging each an entry fee of 16.5 billion rupees (37.7 million dollars).
India’s largest phone company, state-run Bharat Sanchar Nigam Ltd., said the entry of ISPs would hurt revenues.
Under the regulator’s plan, international call rates via the Internet could drop to one-two rupees (two-five cents) a minute from the average seven, while national long-distance rates could fall to less than half a rupee.
Local calls could be virtually free.
But experts say it would take a long time for broadband subscribers to pose a threat to fixed-line and mobile licence holders, given India’s low Internet penetration.
India has just 4.38 million broadband subscribers, while there are 287 million mobile users and 38.9 million landline subscribers.
Internet telephony could become “the killer application” to boost broadband penetration, which has “lagged far behind the very successful mobile telephony,” said Internet Service Providers Association of India head Rajesh Chharia.
Analysts are betting the government will go ahead with the idea.
“The government has been pushing reforms in telecoms, I think they’ll give it the green light,” said an expert at an international consultancy, who did not wish to be named.
The regulator said telecom companies have no reason to fear. ISPs rely on lines leased from telecom companies to carry their signals so they have to sign deals with existing licence holders.
The regulator calls it a win-win situation as 85 percent of an ISP’s revenue is earmarked for resources mainly from telecom licence holders.
“In other words, an increase in the ISPs’ business will also result in a boom for existing telcos. Given this scenario, the government would do well to accept (the regulator’s) recommendations,” said Business Standard editorial.
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First Published: Fri, Aug 22 2008. 11 06 AM IST
More Topics: Internet Phone | India | Call Rtaes | Telecom | Trai |