Big push to get on line, en masse
Financial Times, (Mark Nicholson in New Delhi), June 2, 1999

Nearly one million Indians already use the internet. Studies estimate that by 2001, about five million will be surfing the net

Just over a year ago, before India's Bharatiya Janata Party-led government ended the state monopoly on internet provision, the country had perhaps 130,000 net subscribers. By the end of next year, industry studies suggest, 1.5m Indians will be hooked up to the internet. Within two years, the figure could rise to 5m.

Almost one million Indians make use the the internet already, according to some industry studies, through shared subscriptions. For an increasing number of India's wealthier urban citizens, the internet is already an established part of life, and the influence of the internet in the media, among educated Indians and in the daily dealings of the government, is disproportionately large for a country which still has only two telephones, for every 100 citizens.

Government policies or statements are now routinely issued on the internet - some, like India's revised telecoms policy, have been exclusively posted on the net. All Indian national newspapers have well developed web sites, as do many smaller regional papers. And the content industry is charging ahead, led by companies such as Rediff, which is perhaps India's leading portal, India World and Satyam Infoway, the country's pioneering private ISP - which has signed up 50,000 subscribers alone since its launch in December last year.

One enterprising grocer in New Delhi is even offering home delivery vegetable sales over the internet - among the more modest examples of India's nascent e-commerce industry.

India's internet liberalisation policy is, indeed, among few areas of reform which has garnered near unanimous praise from the private sector. Driven by a strong and cohesive lobby from India's flourishing software Industry, rather than consumer demand, the government's move last Novermber to end the monopoly of VSNL, the state-run international telecoms provider, met virtually all the industry's demands.

The government placed no restrictions on the number of licences for internet service providers, charged only a Rs1 peppercorn fee for the 15-year licences, made no conditions of eligibility on applying companies and allowed 49 per cent foreign equity investment in any new ISP.

Most radically, however, the government allowed, in principle, for all ISPs to offer both direct telecom connections to users and international gateway access - provisions which directly challenged the state providers of basic telecoms services and, in the case of VSNL, its state monopoly on international telecoms connections.

So far, almost 130 private licences have been issued by the department of telecommunications (DOT), the government Ministry and Licencing Authority. Most of these are city-wide or state-based operators, with just three companies currently offering India-wide services: Satyam Infoway, Dishnet and Bharti-BT, a joint venture between the Indian private telecoms operator and British Telecom.

And most operators appear broadly content with both the policy and its implementation so far. However, there is one particular and regularly cited grouse. "In most cases the government's implementation has been the spirit of the policy," says R. Ramaraj, managing director of Satyam Inforway and president of Internet Service Providers' Association of India. "But there are a couple of instances where there are problems. The most glaring is in the guidelines for offering companies an international gateway."

So far, the DOT has failed to provide the guidelines which would set the framework for private companies to offer their own international telecoms access, free of VSNL, upon the capacity of which all ISPs otherwise depend. Half a dozen of the new ISPs have applied for such access, but so far there has been no movement in allowing private gateways.

The delay appears partly bureaucratic, and partly a result of resistance to a move which might severely challenge the lucrative international telephone monopoly enjoyed by VSNL Internet telephony is formally banned under India's Internet policy, but few government officials or industry players have many illusions about the effectiveness of the ban or any ability to police it.

The chief consequence of the delay in offering such gateways is, according to Dewang Mehta, president of the National Association of Software and Service Companies, the industry lobby, to impede the growth of India's currently modest electronic-commerce sector, Nasscom estimates that intra-Indian retail e-commerce was last year worth just Rs. 280m ($6.5m), a modest figure, partly because so few Indians possess credit cards.

Mr. Mehta believes business-to-business e-commerce is perhaps worth Rs. 1.5bn, and suggests retail e-commerce might rise by about 200 per cent during the current year from its small base. Free up international gateway access, however, and he foresees a mini-boom. "If the gateway approval comes, I could easily predict growth of 1,000 per cent," he says.