ISPs on the run

As telcos gain market share, Internet Service Providers need to look at alternatives.

Over the past two years, the number of Internet Service Provider (ISPs) in the country has decreased from 189 (March 2004) to 153 (March 2006). Telecom operators (telcos) are slowly and gradually capturing the market share of ISPs, not only at the enterprise level but also in the retail sphere. ISPs, however, are fighting their way out by adopting Voice over IP (VoIP).

"In March 2000, there were around 82 ISPs which increased to 189 in March 2004 when the ISP business was at its peak. But as the other big telecom players who entered in the retail segment offering internet service at low costs, several ISPs had to shut shop," says Deepak Maheshwari, secratary of Internet Service Provider Association of India (ISPAI). He further said the VoIP business is growing tremendously and ISPs need some alternative to survive.

However, the scenario of VoIP in India is still at the deployment stage, says E V S Chakravarthy, CEO of Iaqra, an ISP and subsidiary of British Gas. Iqara focuses on the VoIP business apart from offering broadband. "The competition between ISPs and telecom companies for a share of internet services is very good for the end consumer since it results in lower costs. However, we cannot fight with telcos as we do have the consumer numbers that telcos can boast of," he adds.

Hence, the move to VoIP. Internationally the VoIP market is growing at a compound annual growth rate of 278 per cent worldwide. While the size of the IP telephony market in India estimated at around $ 54 million "� and if the market forecast is anything to go by "� voice and data services are expected to grow to $38.8 million by 2011.

"VoIP has started a new revolution in the history of Internet Telephony. It is also believed that future of VoIP is VoIP 2.0, which will focus on services instead of cut-rate pricing," he says. He further adds there is a huge potential in the business of VoIP in India but all big players are waiting for someone to take initiative in offering the lowest rate service. "Four years ago, no one thought that a mobile phone will be available at Rs 501 and yet telecom companies started offered mobiles at low rates. Similarly, only volumes will push up the penetration of VoIP telephony in the country," says Chakravarthy.

According to Arun Jindal, COO of Estel Communications, a Delhi-based ISP who is also foraying in VoIP service, even telcos will shortly enter the VoIP business. "Once again we will have to find another business which may further decrease the number of ISPs. In today's competitive world, standalone ISPs cannot survive," cautions Jindal.