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Points Of Presence

Editorial Director, Communications ASP

[April 20, 2001]

One Giant Leap For Internet Telephony

In a move that is sure to have a major impact on the Internet telephony market -- not to mention revolutionizing India's telecommunications infrastructure -- the government of India has decided to legalize Internet telephony in April of 2002. Communications Minister Vilas Paswan made the announcement last week, commenting that Internet access is expected to have reached most of India's towns and villages by that time next year.

The April date for legalization will also coincide with the end of state-owned Videsh Sanchar Nigam Ltd.'s (VSNL) monopoly on international long-distance service -- two years ahead of schedule. The government is selling off part of its stake in VSNL, reducing its holdings from 52 percent to 26 percent of the company. Reliance Industries, India's largest private sector company and the parent company of private Reliance Infocom, will bid for a 25 percent stake in VSNL. Revenue from international long-distance service accounts for 90 percent of VSNL's revenues, and the company says it is looking at domestic long-distance, improved Internet access and data services, and possibly cellular services to broaden its offerings.

The delays and complications that have surrounded discussion and passage of India's Communications Convergence Bill made me question whether the country would legalize Internet telephony any time soon (see my previous column on the bill). The bill calls for a converged infrastructure and governing body for data and telecommunications, and would prepare India's networks for carrying packetized voice calls. But last week's announcement confirms what many Internet telephony companies were already prepared for, and the push to build out India's voice over data networks can now begin.

Tom Evslin, chairman of ITXC Corp. (operator of the ITXC.net global IP telephony network), says that on a global basis, India may benefit the most from Internet telephony over the next four years. ITXC has worked with China Telecom and other carriers to build out IP telephony in China, and believes the same growth is possible in India. "India is already a worldwide leader in information technology, but suffers from a telecommunications infrastructure which is inadequate for the country's potential economic growth. The Internet capacity now being built for data will serve an enormous additional benefit as the infrastructure for widely available voice services. These services include using the Internet as an affordable backbone for traditional phone-to-phone calls and new services which combine voice and other forms of data," said Evslin.

The Indian government's Economic Survey forecasts the country's Internet users will increase from two million to 15 million subscribers by the end of 2003. Three to four people are estimated to use each subscription. And ZDNet India reports that India will be the fourth largest market for Internet telephony in the Asia-Pacific region by 2004, behind China, Japan, and South Korea.

Consulting Web site India Bandwidth reported last week that VoIP services may come to India before next April. The site said that another state-owned phone company, Bharat Sanchar Nigam (Bangalore Telecom) will introduce VoIP by the end of this year. The company will provide the service to compete with private information technology venture Reliance Infocom, which will also offer VoIP-based telephone services (although not until 2002) over a massive optical fiber network. Reliance plans to have 60,000 km of broadband networking equipment in place by 2002. The company has a slight advantage in deploying Internet telephony in that it does not have an existing circuit-switched infrastructure in place. Bangalore and VSNL will need to upgrade their existing circuit-switched networks to offer converged services.

The jury is still out on what will become of the Communications Convergence Bill, although Parliament may take action on it as early as July. In the meantime, the bill has been open for public comment and received criticism earlier this year at a seminar organized by the New Media Forum. Some speakers at the event called the bill "draconian and unacceptable," because it gives the government the power to appoint all nine members of the Convergence Commission, the regulatory body that would be formed through the bill. The bill also gives the Commission the power to enforce codes on material to be broadcast, and critics claim the codes could be ambiguous or have the potential to be misused.

However the government ultimately decides to enforce communications laws, the legalization of Internet telephony will have a lasting impact on telecommunications in India. And someday soon, the reach of packet networks in India may very well surpass that of existing circuit-switched networks.

Laura Guevin welcomes your comments at lguevin@tmcnet.com.

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