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The national body Internet Service Providers Association of India (ISPAI) has petitioned Competition Commission of India (CCI) on the delay that has dogged the legalisation of Internet Telephony in India, Business Standard reports. Currently, Internet Telephony is not permitted to terminate on a phone line (landlines, mobiles). Despite a recommendation by the Indian regulator TRAI, the government has not made VoIP operational.

A TRAI letter to the Department of Telecom states, “Internet telephony may be permitted to ISPs with permission to provide Internet telephony calls to PSTN/PLMN and vice-versa within country and necessary amendments made in the license provisions.”

Yet the government has held back from the decision, causing ISPAI to allege that it is “favouring mobile operators and preventing fair competition”. Rajesh Chharia, President of ISPAI, told Medianama, “DoT is indulging in favouritsm and does not believe that growth should also include broadband and Internet in the country, not just mobile.”

Too Late?

ISPAI’s direction is that Internet Telephony will be the shot in the arm for India’s Internet growth, which has been sagging with poor usage and infrastructure for years now. Its appeal is that this would be the “killer application” that would increase the spread of broadband into rural areas, something which the government has been talking about for years.

What makes Internet telephony a “killer app” is its cost advantage – ISPs planned to make a PC-to-phone call or a phone-to-phone call cheaper than a conventional phone call – which in India can be taken as a mobile call. With the flurry of pay-per-second tariff announcements by telcos in the past week and the increasing popularity of international roaming cards,  Internet Telephony may no longer have this advantage.

When posed with this question, Chharia said, “You are talking of metros, and not of villages. With the increase in competition which will start once Internet Telephony is opened, we can expect tariffs to drop. Local calls can come to 10 paise or even free; STD calls to 20 paise.”

The Delay

May 12, 2008 –  TRAI comes out with a consultation paper on “Issues related to Internet Telephony”, invites comments from stakeholders.

August 18, 2008 – TRAI frames its recommendations after considering industry inputs and conducting an internal study. The 102-page document is here.

December, 2008 –  Rajeev Chandrasekhar, President, FIICI, highlighted the issues of rural telephony and affordability and requested the government for action on Voice Over Internet Protocol (VOIP) for the sake of low cost connectivity at India Telecom 2008.

March 17, 2009 – DoT sends a letter to TRAI to clarify more issues to ensure a level playing field. Chharia adds, “From August to March, they did not respond. We moved various commissions and finally DoT sent back the recommendation to TRAI asking for further clarifications.”

March 31, 2009 – TRAI replies with a 16-page letter, referring DoT back to recommendations it provided for many of the stated issues in 2005, 2006 and 2007 and clarifying the rest.

Foreign Providers

Right now it might be the telcos that are ISPAI’s primary enemy but the bigger enemy is the gang of foreign operators such as Skype, Net2Phone, Vonage, Impetus, Novanet and Yahoo Voice, which, it fears, are milking away business from domestic ISPs. There are various issues troubling the Indian ISP industry:

  • The majority of SMEs, Corporate, BPOs, Call Centres use foreign services such as Skype and Vonage for Internet telephony, so there is little left for the domestic ISP.
  • Foreign service providers are not registered in India and do not pay any license fees or taxes unlike domestic firms.
  • Users download client software to make and receive calls on their mobile phones through Internet. Since such software are generally hosted outside India, they can not be regulated.

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