TRAI for lowering FDI for ISPs; suggests tough steps

Updated on May 10, 2007 08:03 PM IST
TRAI recommends reduction of the limit of foreign direct investment for internet service providers (ISPs) from 100 per cent to 74 per cent, reports M Rajendran.
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None | ByM Rajendran, New Delhi

The Telecom Regulatory Authority of India (TRAI) has recommended that the limit of foreign direct investment (FDI) for internet service providers (ISPs) be reduced from 100 per cent to 74 per cent. It has found that a number of ISPs are 'non functional' and suggested a liberal exit policy for them.

In a statement TRAI said it was concerned with the activities of unlicensed foreign entities providing cheap Internet telephony to lure Indian subscribers. Since these companies are not covered by the regulations relating to the telecom sector in India, they were a potential security threat, the statement said.

There is also the likelihood of the Indian subscriber being misled by such service providers.

Clearly the ISPs are not happy with TRAI's suggestions. Amitabh Singhal, founder and director general of Internet Service Providers Association of India (ISPAI), said, "There was no need to tinker with the clause relating to FDI at this moment. The FDI policy across the sector stipulates a reduction upto 74 per cent over a five year period."

Although it was not within the purview of the term of reference given by DoT, the Authority has suggested urgent consultation with such companies, to register them in Indian telecom domain and get such websites hosted on the Indian territory.

TRAI on Thursday forwarded its recommendation on Internet Services to Department of Telecommunications (DoT). It would enable DoT to finalise its policy on ISP licensing regime, which has been under review for some time.

"Positive aspect of the recommendations is the support it has given for expansion of networks that is technology at the back end. However, a great opportunity to revamp the whole sector has been missed, because the scope of services that can be provided by ISPs at the customers end has again been restricted. Still no calls can be made from PC or internet device, a demand many customers and we had been seeking from the government," said Singhal.

The regulator has also recommended a liberal exit policy for non-functional ISPs. Only 135 Internet service licensees are functionally active out of the total 389 licensees that exist today. "The existing provisions have not been conducive for non-functional ISPs to surrender as it entails financial losses. A one-time relaxation for a period of 6 months has been recommended by the Authority," according to a TRAI statement.

TRAI has considered key issues like licensing provision of various services under ISP licence, recent technological developments, enabling Internet services in India to scale global standards, financial viability, issues of grey market and competition including level playing field vis-à-vis other telecom service providers.

It has recommended an entry fee of Rs 20 lakh for national level ISPs and Rs 10 lakh for state level ISPs licenses, replacing free entry. TRAI has also recommended a uniform licence fee of six per cent of aggregate gross revenue (AGR) along with minimum annual licence fee of Rs 50000, Rs 10000 and Rs 5000 for national level, state level and district level service providers. The Authority has also recommended reduction in financial bank guarantee amount.

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