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The Internet Core Group of Telecom Industry Associations has charged that the Department of Telecommunications has gone back on its assurance to waive bank guarantees from ISP licence applicants.

The DoT had promised the Prime Minister's Task Force on Information Technology that there would be no bank guarantee required from those intending to become Internet service providers.

T O D A Y

• pre·var·i·ca·tor • ISP strategies • Comet threat • Cellular trouble

The licence conditions announced on Friday call for guarantees from Rs 300,000 onwards up to Rs 20 million for getting the license.

"This militates against the principle the government has set before it in making the license available to anyone," claims P K Sandell, chairperson of the Internet Core Group and president of the Telecom Industries Association.

"On the one hand the government wants young professionals like IIT engineers to be Internet service providers, on the other it makes it difficult for them. Who can offer bank guarantee when the banks now demand either collateral or cash deposit of the guarantee cover," asks Sandell.

He claims this is a classic case where the government takes away with the left hand what it gives with the right.

DoT justifies the bank guarantee demand on the plea that fly-by-night operators could cheat customers if any relaxation is made.

Industry people say that even with bank guarantees such operators could still make good. Market forces should be trusted to weed out such operators, they claim.

The experience of email operators who paid Rs 2.5 million for the licence to operate email services is quoted in this connection.

Industry sources point out that the entire service collapsed because DoT failed to provide the telephone lines necessary for the service even after receiving such a large amount from the licensees.

They say that at the discussions the IT Task Force and the DoT had with the Internet Core Group, it was also agreed that the Internet service providers would be allowed to set up last-mile connectivity or get it from the basic service or cable operators.

However, in the license terms DoT has restricted the last-mile connectivity to only point-to-point operations.

That means where the subscriber takes an entire line specifically for his use only such connectivity would be allowed. Otherwise, the subscriber would have to use the DoT or private basic service operators' line to get the connectivity.

The Internet licenses were delayed for over a year after the Jalan Committee gave its report in 1997, mainly because of opinion between the DoT and the Jalan committee over these two and some other issues.

Repeated intervention by the Prime Minister's Office under two prime ministers did not help and finally the Telecom Regulatory Authority of India, the Task IT Force and the Industry Core Group were involved to finalise the license terms.

The core group is meeting on Monday to review the situation and may again approach the PMO to get the demand for bank guarantees deleted. It would also urge the reintroduction of the clause giving freedom to the ISP to provide the last mile connectivity for the dial-up service also.

Meanwhile, with public-sector MTNL getting the Internet license, there could be for the first time two public-sector companies competing for subscribers.

The other service provider is the incumbent VSNL, which has over 100,000 subscribers. The market will have intense competition, as several licensees would come into it. Many of these operators would provide specialised services to target subscribers willing to pay higher charges.

The basic services charge would probably be at the level of Rs 100 to Rs 150 per month for 500 hours.

In the US where Internet has two thirds of the worldwide subscriptions of 150 million, the monthly charge for basic service is only $20.

The limiting factor may be the cost of PCs but aware of the huge expansion of the market, PC makers would provide widespread leasing services; this would be further assisted by the 60 per cent depreciation on PCs already announced by the government in the very first year.

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