After about four years of monopolistic rule there is competition for Videsh Sanchar Nigam Limited, the public sector overseas communication operator in India. The new policy on Internet service providers, launched in November 1998, has paved the way for the entry of private operators.

The new policy envisages licenses being issued in three categories:

• category A for all-India operation;
• category B restricted to major cities like Mumbai , Delhi, Bangalore, Pune etc; and ,
• category C for semi-urban cities like Bhubaneshwar, Ghaziabad etc.

So far the private ISPs have launched their services in places that already have VSNL or MTNL or DoT services in operation. The license holders in category C cities are yet to be operational. This market can only get hotter, with about 93 license holders and over 200 applicants looking to join the race. The introduction of private ISPs has been good for the subscribers. Competition has automatically brought down prices while the ISPs are vying with one another to offer better services.

The price wars: The initial action has been centered on the priceline. The service providers are currently operating on a liquid price line and it will, probably, take several rounds of price war before prices reach an equilibrium.

MTNL, the second ISP after VSNL, has driven prices and VSNL has begun to follow suit. MTNL also enjoys the advantage of running the telephone line network, thus making it a service provider that can provide end-to-end service. The possibilities of MTNL cross subsidising its services and even offering free dialup services for Internet make it a very strong player, even if it operates only in two metros.

MTNL was the first to initiate the price cuts, pitching its levels about 15 per cent lower than the reduced price that VSNL began to offer after the entry of private ISPs. MTNL lowered the then base price of about Rs. 10,000 to Rs. 8,500 for renewals. VSNL responded by cutting its renewal rates to Rs.8, 000.

However, VSNL has indicated that it will not by itself lead any price cuts but would follow any price cut by any other ISP. The private ISPs have been a step behind in these maneuvers.

The market scene is going to be interesting if the first few months of opening up are an indication.

Looking at the table above, price, rather than service, would seem to be the key factor. But is it? Consider these. Dishnet, a Sterling group company, stands out from the above list (see article on Dishnet). It offers one hour of free access every day for a five-year membership fee of Rs.3, 300 and additional access at Rs.10 per hour. Newer ISPs are taking different stands with regard to pricing. Meanwhile, Dishnet has been carrying out trials with providing Internet access over cable. In more ways than one- price, access mode, service- Dishnet is extending the turf of the ISP battle.

Bharti BT, another licence holder that started its service around early June 1999, is looking at a figure of 75,000 subscribers by the end of the year, without seriously getting into price cuts. Satyam Online, one of the earliest private ISP is focusing on features and service rather than join the price war.

While price is a major factor for the user, the critical points besides price would be ease of connectivity, speed of browsing and downloading, help desk and support, customer relations, roaming capability and other value additions like free webpage, additional software etc. Which probably explains the growing numbers for Satyam. Following its lead many ISPs are offering 'off the shelf connections' through CDs. A worthy feature compared to the days of queing up with drafts and cheques at VSNL!

Interesting times ahead, with more ISPs joining the fray in the next few months.