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Telcos overshadow local net providers
By siliconindia
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Friday, 14 December 2007, 02:29 IST
Ahmedabad: The decision of Telecom Regulatory Authority of India's (Trai) to stop issuing new licences for district-level net providers or category 'C' players has effectively shut the door on smaller Internet service providers (ISPs) interested in setting up shops.
The 'B' category providers who moved to state-level operations, are also feeling the heat as there competitors are biggies in the industry like Reliance, Bharti Airtel , BSNL, VSNL and Sify.
The District-level operators shifted to state-level operations in tier II and III cities with the aim of entering smaller markets, which has not been tapped by national operators.
However, with the big players extending presence beyond the metros and tier I cities, smaller Internet Service Providers (ISPs) are facing up to narrow margins, and are making plans to broaden into other businesses.
"With BSNL starting its broadband service at Rs 250, ISPs in tier II and III cities were hit hard since the larger companies had not targeted those areas much. With their national presence and scale of operations, bigger players can price more aggressively. It is also easier for them to set up infrastructure and manage costs effectively," said Jasjit Sawhney, CEO, Net4India.
To change a state level licence a small small district-level operator has to pay an entry fee of Rs 10 lakh along with annual licence fee, which amounts to six percent of the annual revenue.
A large number of ISP players are against the Trai move to abolish the C category on the grounds that it favours the bigger players. They admit, however, that only a few small town ISPs could compete with big players due to local advantage.
"The big telecom players have already set up shop in Surat, but policies like offering more grace time for payments and interacting with clients on a personalised basis is working to our advantage," said Umesh Naik, CEO of Surat-based Anar Softcomm.
According to Col Perhar, secretary, ISP Association of India, feels that market space for both categories of players is clearly demarcated.
"Larger players are still not ready to enter smaller cities, hence, they prefer that this segment is taken care by smaller ISPs. However, in tier II cities, larger players are providing Internet services by cross subsiding their voice-based business. Thus customers prefer them," explained Perhar.