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Govt mulls rise in ISP licence fee

Bipin Chandran

In an attempt to stop the non-serious players from entering the ISP sector, the government is considering a proposal to hike the licence fee for the Internet service providers (ISPs) from the nominal Re 1 per annum.

The government is also planning to impose a rollout obligation, similar to that in the telecom sector, to ensure that ISPs do not only concentrate on large lucrative metro markets and ignore the smaller cities and towns.

Presently, ISPs do not have to pay any fee till November 2003 but only a bank guarantee of Rs 300,000-Rs 20 million, depending on the category of the licence (category A is for the entire country, B is for any 20 telecom circles and category C is in secondary switching area -- the smaller cities).

"We are considering a proposal for increasing the current licence fee structure for the ISPs. The main reason is to eliminate the non-serious players," said a senior government official. "The Re 1 fee needs to be raised to much higher levels to make sure that only serious players procure the licence," he added.

In addition, the government is likely to come out with tougher rollout obligations for the ISPs. "Currently, the ISP's do not have any service rollout obligations. We see this as the reason for many of the ISPs not starting services even after obtaining the licences," said sources.

The government has issued a total of 437 ISP licences, with 79 national-level licences, 177 category B licences, and 181 and category C licences. But only 98 licensees have actually started ISP operations of any kind.

The government has earlier warned the ISP licence holders that it would have no option but to cancel the licences if companies do not rollout their services.

To avoid such an action, which would include encashing of the bank guarantees by the government, many licensees decided to make a token presence in some limited cities. According to the present guidelines, a launch of an ISP is enough to avoid action from the government.

Although there are an estimated 1.5 million Internet subscribers in the country yet most companies are yet to break-even and are suffering huge losses. However, with competition getting tougher many players are cutting rates in order to increase the number of customers.

According to industry estimates, the subscriber base is expected to grow by 30 per cent annually in the next few years.

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