If the government accepts the Telecom Regulatory Authority of India’s (Trai) recommendations on allowing internet service providers (ISPs) to offer full-blown telephone services, it won’t be a day too soon. Analysts project that internet telephony will reach around 16 per cent of all telephony subscribers in the US by the end of the decade, and there is no reason why India should be missing out on a revolution that seeks to drive down tariffs for long-distance telephony to even lower levels than where they have reached. More important, as Trai argues in its recommendations, the option of offering unrestricted internet telephony (that is, from phones to phones instead of just the PC-to-PC or PC-to-phones abroad that is allowed at the moment) is something that was allowed for the Unified Access Service providers (that is firms like Bharti, Vodafone, Reliance and BSNL that provide mobile and fixed land services today) way back in January 2006. Yet, the services never really took off, possibly because the UAS licence holders found it more lucrative to offer long-distance services in the conventional manner instead of through the internet.
The issue then boils down to what the Cellular Operators Association of India has asked, ie whether there is a level playing-field. This issue cropped up earlier too, when firms like Reliance began offering their WLL or CDMA-based mobile services five years ago. It was then argued that the WLL/CDMA firms had not paid the same licence fee that the cellular firms had, and the former also got better commercial terms. It is clear that there was no level playing field then, and there isn’t one now, because the ISPs pay no entry fee whereas the UAS providers have paid Rs 1,651 crore each. But there is a difference this time round. For one, the main charm of the UAS licence is the mobility it offers to customers — that’s one reason why there are just 39 million fixed phone lines in the country today, compared to 286 million mobile ones; indeed, while the numbers of the first category are falling, the latter is growing by 8 million new connections every month. In other words, the real worth of the licence is in the spectrum that comes bundled along with it. Indeed, this is the reason why, even though they have no subscribers, some of the new mobile licensees are up for sale at fairly high valuations.
The ISPs who will now get to offer full-blown internet telephony, assuming the government agrees to Trai’s recommendations, will not be getting any spectrum. In any case, it will take a very long time for around 4 million broadband subscribers (who can credibly use internet telephony) to pose anything like a threat to UAS licence holders, who have over 325 million mobile/fixed land line subscribers today. The differences between UAS and ISPs don’t, of course, stop here. ISPs are not allowed to roll out their own networks today and have to rely on leased lines from existing telcos to carry their signals; if they are to connect to users on their mobile/fixed line phones (say, a call from a Sify internet-PC to your mobile phone), they will have to sign interconnect agreements with existing UAS licence holders. According to Trai, around 85 per cent of an ISP’s revenue is used in hiring resources, mainly from UAS licence holders and long-distance networks. 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 Trai’s recommendations.