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The Videsh Sanchar Nigam Limited is the government owned overseas telecommunications monopoly.

Until recently, it also had a monopoly over the commercial ISP business in India. Then came a massive policy change that threw open the Internet access business to private companies.

The change was met beautifully well by VSNL.

In face of imminent competition from the private sector, the monolith moved with the agility of a start-up and almost overnight improved its access capacity and quality to world standards.

Not surprisingly, the quality upgrade also touched up VSNL's poor image. Besides, instead of fighting the private ISPs, VSNL looked on them as customers for wholesaling of bandwidth and international gateways.

In this interview to Sahil Meena, Acting Chairman and Managing Director Amitabh Kumar pauses to mull over the impact of the Internet and its future in India, especially in relation to VSNL.

Excerpts:

How have the ISPs been doing?

At present, VSNL is the dominant ISP in the Indian market along with DoT. Together, we have over 60 nodes.

Over 70 ISPs have been granted licences and among them at least 20 have applied for international connectivity, indicating their intention to set up and operate Internet services soon.

Today, only five companies have started actual operation and these include MTNL, Satyam Infoway, Weikfield Mnemonix and Dishnet.

Many of the others like Bharati-BT and Wipro have applied for Internet connectivity and will start operations in the next two to three months.

What role is VSNL playing here?

VSNL has been providing infrastructure support to all ISPs in India, enabling them to roll out their operations.

Setting up an ISP business requires international connectivity, Internet exchange amongst ISPs in India and interconnectivity among various nodes where the ISP accesses the services.

VSNL is today providing all these services to ISPs in India.

Is the ISP business making profits yet?

I think it is a very good business because the number of users is going to expand beyond 1.5 million by 2000 as per a NASSCOM survey.

That means a five times growth from today's user base of 300,000.

How is the ISP policy going to help the information technology industry?

The ISP business in India will, of course, primarily focus on providing access and this job is likely to be highly segmented.

But the access service is only one part of a much bigger market. There is opportunity in content service and corporate networking, providing complete networking solutions to businesses whether big or small, enabling companies to do e-commerce... There is a bigger market.

How will all this help improve knowledge-based productivity?

In the first stage, most companies that can afford the Internet will get on to it. Even today not more than 20 per cent of Indian companies have Internet access. But anybody wanting to do business globally will have to be on the Internet.

Only then will penetration really start happening in the personal market and that is where low-cost Internet will sell.

Today, the cost of Internet access is still high for a common person because a common person doesn't see anything tangible in it. People don't want to spend money on something that they can't immediately see a benefit in. But realisation is spreading that sending email and personal messages saves money. However, reducing the cost of the PC will really help the ISP segment take off.

What kinds of value added services would the ISPs have to provide?

See, ISPs are already looking at different services. Mostly it is content-based, where you convince user to spend time on the Net and not go to foreign sites, that's where one can save money.

It has started. Satyam has walletwatch.com, Rediff On The Net is providing news and other information. E-commerce is just starting. So, basically I would say it is mostly information or some type of database service. For example, stock exchange sites like capitalmarket.com, where you have a lot of company data. We have hardly 50 good sites in India.

How has the policy to allow private companies to set up ISP business affected your prospects?

VSNL's focus remains to serve the major ISPs in the country. With over 1.5 million users expected to be on the Net by 2000, there is considerable scope for expansion of Internet services in the country and room for a number of players.

Moreover, the ISP business is not about providing access alone. We need to take significant strides in the area of content building, e-commerce and a host of other entertainment applications that go along with the Net.

It is in these areas that many of the ISPs are focussed. VSNL is, and will continue to be an infrastructure and access provider.

VSNL's strength and competencies arise from the fact that it has been providing networking and connectivity services over the last 25 years.

We also have the best workforce and potential networking strength that is very critical in the dynamics of this industry.

Recently VSNL slashed its prices to attract customers. What really is your strategy for competing as an ISP?

Slashing prices is not the key issue, though it will undoubtedly help in connecting a larger number of users to the Net.

VSNL would be focussed on providing value to its customers in terms of features, quality of access and overall support. Ultimately, this would lead to a capability to use the Net reliably and cost-effectively for various applications, including e-commerce, entertainment and corporate applications.

We are not fighting. Basically, we have to be in the line of the market. We are still providing services at competitive prices but not below the cost price.

That is our strategy to be competitive, but not below cost. Those who are entering with low cost will have to suffer in the long run. In fact, we don't treat ISPs as our competitors. We are looking at them as customers.

Ultimately, they are VSNL's customers.

For connectivity, what kinds of facilities and infrastructure are being provided by VSNL?

VSNL has an international connectivity of over 100 MBPS and has links to MCI, Cable and Wireless, Telecom Italia, KDD, Singapore Telecom and other ISPs. This connectivity is being continuously enhanced as the Indian Internet network grows.

Domestically, we connect over 60 nodes of DoT and other ISPs in the country. In addition, we are providing a digital network, which today no other ISP does.

Why is it that VSNL dial-up and leased lines rates are very high when compared with international rates?

Actually, tariffs on leased lines are not very high. Besides, it is set by the TRAI (Telecom Regulatory Authority of India). In fact, the rates are lower than what we wanted them to be. We can't compare with other countries because in India we have to pay on all international ways. So networking cost is very high.

How do you respond to complaints of poor bandwidth?

No. This is not correct. Actually, VSNL's bandwidth service is the best and you can even set a 56K connection. I don't think this complaint is true. It depends on the telephone line. Ultimately the last link is what determines how fast your connection is.

Are you taking any measure to retain the national information server and relocate it back in India?

No. There is no advantage in this for us, except for the hosting of proxy server that we are doing for Microsoft. Now, anybody who wants to download software doesn't waste capacity on international carrier. Suppose one has to download an Internet Explorer file, which is of 19 MB, that takes a lot of space and time and that if you put in India will save our time. We are trying for a similar arrangement with Netscape.

What is the impact of the ISP policy on VSNL?

I think it has advantages for VSNL because it expands the scope of our service by creating new clients for us like the ISPs in the private sector.

On each 2 MBPS, we get about Rs 4.2 million annually, whether it is an ISP or not, we get our money. That is the main advantage.

What will be the impact of the ISP policy on the end users?

They have to earn the Rs 4.2 million they give us. That means they will try to provide every possible service. They will go by user-paying capacity. If somebody wants to spend only Rs 50 in a week, even that customer has to be catered for. And that can be done only by very small ISPs who can operate in small localities, like the cable operators do now.

This market has not yet been tapped. For example, a child going to school and not having a computer at home still wants to send and receive mail everyday by just paying Rs 2. That market, which is very low-end, is yet to be captured.

Is VSNL or DoT taking any steps towards Internet telephony?

No. It's illegal to run an Internet telephony business in India. But it is true that you can't stop Internet telephony and there is no mechanism to stop it as of today.

Besides slashing prices, what else is VSNL planning to reach out to more customers?

Basically, our strategy is based more on features. VSNL is focusing on a high visibility and availability of its services. This is being done through making users aware of our support Internet agents who can provide door-to-door service.

Also, VSNL is planning to enter into the satellite market.

Could you explain?

We might look at satellite-based Internet soon.

We have the infrastructure in place and are already uplinking 10 television channels such as BiTV, Asianet, Sun TV and Surya TV.

The ISP policy allows ISPs to decide the price the end-user would have to pay for Internet connectivity. Do you think standard universal tariffs would do better for the industry?

No. You can't have standard tariffs. For example, if you have started an Internet shop and you are doing good business, you know you can make your offer at a lower rate.

Only the private sector has the liberty to do this. We can't do it. It should all depend on demand. If you have a locality where the demand is good, one can charge a premium.

On the other hand, you have areas where children are serviced, who can't pay big amounts then you can offer connectivity at lower costs.

Therefore, it is very important to have private operators in the Internet business, because government organisations like us are not that flexible.

How will the decision to allow private companies set up their own Internet gateways affect VSNL? After all, VSNL had a monopoly in this area until now.

I don't think this will have any immediate impact because the rate for international connectivity that we charge is around Rs 4 million. But to set up your own gateway would cost Rs 40 million. I don't think there would be too many ISPs trying to set up their own gateway right now.

Where is VSNL heading for in the coming years?

MCI provides services that are both bandwidth-oriented and retail. We also hope to follow this line. We would like to be a major Internet carrier.

How is the ISP market likely to emerge in next few years?

If you are looking at the projection in numbers, it is 1.5 million. Besides, cost-cutting has started already. Dishnet Limited, is providing Internet access at Rs 5,600 something. Prices will definitely come down but we cannot take quality for granted then.

What kinds of players will survive, technically competent or those with good value added services?

Survival in the industry will depend on being able to exploit niches. These can include application oriented support like providing complete solutions to corporations, building applications around the Internet, including e-commerce and e-trading and providing access and other services in far-flung areas of the country which lag in basic Internet connectivity.

The scenario will be highly competitive in the metros that are easy playgrounds for initial ISP rollouts.

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