Macro Analysis on ISP Industry

A Project Report On

Macro Analysis of Internet Service Provider In partial fulfillment of the requirements for the subject Strategic Management MBA Semester- III (Marketing Elective-2009-11) Submitted To: Prof. Preeti Salvi Submitted By: Name

Roll No:

Ami Bhavsar

M-12

Varun Dave

M-17

Viraj Shah

M-1

NehaVyas

M-09

Jatan Shah

M-10

S.V Institute of Management Gujarat Technological University

INDEX Chapter

Content

No.

Page No.

ACKNOWLEDGMENT

I

PREFACE

II

EXECUTIVE SUMMARY

III

1

Research Methodology

1

2

Introduction

2

2.1

Types of Access

3

2.2

Trends in the ISP market

6

2.3

The Physical Structure of an ISP

9

2.4

What Services do ISPs Offer?

10

PEST Analysis

20

3.1

Political

22

3.2

Economic

23

3.3

Sociological

24

3.4

Technical

25

Five Force Analysis

26

4.1

Rivalry within Industry

27

4.2

Threat of Substitute Products

29

4.3

Threat of New Entrants

30

4.4

Bargaining Power of Suppliers

30

4.5

Bargaining Power of Buyers

30

5

Driving Forces of ISP

33

6

Key Success Factors

35

6.1

The technical edge

35

6.2

Financial sustaining power

35

6.3

High marketing and promotional budgets

36

3

4

6.4

Strategic alliances with ancillary service providers

36

6.5

Lobbying power with central and state Governments

36

7

Strategic Group Mapping

38

8

OT Analysis

40

BSNL SWOT Analysis

45

9

Major issues confronting industry

51

10

Conclusion

54

11

Appendix

56

8.1

11.1 Statistics

56

11.2 Guidelines for ISPs

57

Table of Figure

Chapter No.

Name of Figure

Page No.

Chapter 2

Introduction

2.1

ISP Specialization

8

2.2

Structure of an ISP

9

2.3

Group company wise Market Share

18

2.4

ISPs having all India licence

19

Chapter 3

PEST Analysis

3.1

ISP PEST Analysis

Chapter 4

Five Force Analysis

4.1

Porter’s 5 Forces Model for the ISP Industry

Chapter 7

Strategic Map Grouping

7.1

Strategic Map Grouping

Chapter 8

OT Analysis

8.1

ISP OT Analysis

40

8.2

Threats to ISPs

42

21

27

39

I

ACKNOWLEDGEMENT We take this opportunity with great pleasure to present before you this project report on Macro Analysis on Internet Service Provider which is a result of co‐operation, hard work and good wishes of many people.

No words can adequately express our sincere thanks to all those who have helped us in making this project a success. Also we acknowledge our deep sense of gratitude towards our guide Prof. Preeti Salvi. We are also grateful to Prof. Bhavin Pandya, Head of the Department, S.V. Institute of Management, Kadi.

Our debt to those who have helped us in one way or the other is heavy indeed. We would like to appreciate contribution of friends who have extended their complete support in completion of this project.

Our thanks also goes to our faculty members, seniors and also SVIM library staff for extended their help; co-operation and support which have greatly ease our work and also for providing us literatures which helped us to complete our assignment work.

Lastly, no words can adequately express our debt of gratitude to our parents for generating in us perennial interest in higher studies. We are thankful to the Almighty for giving us strength, courage and patience to complete this project.

Ami Bhavsar Varun Dave Viraj Shah Neha Vyas Jatan Shah

II

PREFACE “Experience is the best teacher”. The saying has played a guiding role in the infusion of our practical work and learning from it .Person can’t learn by merely reading hundreds of books on it. He/she requires practicing his hand at the helm of it. Similarly management learning remains incomplete without a test of real business life. Thus theoretical knowledge is not enough for management students; practical study holds an important place. Our knowledge remains incomplete without practical aspect like this assignment. “True learning is born out of experience and observation.” Practical experience is one of the best types of learning that one can remember the aspects of administration and management.

In Strategic Management we have chosen Internet Service Provider industry for which we have analyzed importance of doing industry or company analysis as a base for matching strategy to organizational resources, capabilities etc. We have also learnt the different analysis like SWOT, Five forces as well as driving forces, Strategic map grouping key success factors for Internet Service Provider. In short we have evaluated industry’s external environment as well as competitive position.

It is indeed a golden opportunity for us to present this report and indeed a matter of esteem honor itself.

III

Executive Summary An Internet Service Provider (ISP) is an industry that provides individuals and companies access to the Internet and other related services. This report aims to introduce the reader to the idea of Internet service provision, the services offered, the main players in the industry, and its current state and its trends. It details the different types of types of access, and the physical structure of an ISP. It also describes the services offered by ISPs, both basic services and premium services.

There is looks at the ISP market, analyzing the market forces and the influential environment and also looks at the main players in the market, examining each individually, and identifying their characteristics. Four general areas of threats to ISPs are outlined in following portion. It also identifies the main trends in the ISP market and suggests emerging trends.

At last it sums up the main ideas of the report. Internet users access and send information either through individual connections or through organizations such as universities or businesses. Users are either those who use the Internet primarily to receive information, or content creators who use the Internet to distribute information. ISPs connect those end users to Internet backbone networks, which interconnect with other backbone providers.

Mergers and acquisitions have shown to be popular methods of growth, both in geographic terms and in terms of customer base. These have been occurring not just among ISPs, but among many companies entering the market. In spite of the large amount of mergers, the total number of ISPs has stabilized due to the huge number of new entrants.

Telcos, cable companies and others have entered the market, either by mergers and acquisitions, or by creating ISPs themselves. These companies, amongst others, are proving to be an immense threat to existing ISPs. There has been a tremendous emphasis on value-added services and on content. Basic services have become commodities and customers are looking for new services to add value. ISPs securing deals with popular entertainment and information companies will have a great advantage in winning customers.

IV

Additional offerings such as quality of service, bundled services, banking, e-commerce etc. are also becoming attractive to customers. There is a clear change of strategy both within an ISP and between ISPs. Pricing models are changing, as are service offerings. It is predicted that many companies may wish to specialize in one part of the market rather than trying to provide everything involved with service provision.

Chapter 1 Research Methodology Research Objective  Primary Objective : 

To study the Industry Analysis of Internet Service Provider in India.

 Secondary Objective : 

To know the size and growth rate of the industry and to analyze various industry structure.



To study various Key players operating in the industry and their various strategies.



To Perform PEST, FIVE FORCE, and OT Analysis on Internet service Providers.



To identify various Driving forces and Key Success Factors effecting ISP Industry.



To study various major issues confronting ISP Industry.

 Research Design : 

Causal Research

 Research Type 

Basic Research

 Data Collection 

Internet

1

Chapter 2 Introduction An Internet Service Provider (ISP) is an industry that provides individuals and companies access to the Internet and other related services. This report aims to introduce the reader to the idea of Internet service provision, the services offered, the main players in the industry, and its current state and its trends. It details the different types of types of access, and the physical structure of an ISP. It also describes the services offered by ISPs, both basic services and premium services.

There is looks at the ISP market, analyzing the market forces and the influential environment and also looks at the main players in the market, examining each individually, and identifying their characteristics. Four general areas of threats to ISPs are outlined in following portion. It also identifies the main trends in the ISP market and suggests emerging trends.

At last it sums up the main ideas of the report. Internet users access and send information either through individual connections or throughorganizations such as universities or businesses. Users are either those who use the Internet primarily to receive information, or content creators who use the Internet to distribute information. ISPs connect those end users to Internet backbone networks, which interconnect with other backbone providers.

The users receive Internet Protocol Suite (IPS), theInternet equivalent of dial tone, which routes traffic between ISPs. ISPs fall into three broad groups: backbone providers, national providers and local providers. Backbone providers are nationwide or multinational organizations that control Internet routing. They often own significant pieces of the backbone itself.

National providers buy capacity and routing services from backbone providers and run Points of Presence (POPs, locations of access points to the Internet) across the country (or the world). National providers are often described as resellers since they are simply reselling bandwidth that they have purchased from the backbone provider. Local providers operate in the same way as the national group, but on a smaller scale. Usually they work within a smaller geographic area.

2

Accessing the Internet by means of an ISP To access the Internet, generally a user must periodically pay an ISP and pay any applicable setup fee to connect to that ISP. Most ISPs charge a flat monthly fee, and some impose a per-hour charge above a certain monthly threshold. The vast majority of users (mainly domestic users, who make up approximately 98% of all accounts) reach their ISP today through their telephone network, using a dial-up connection. Many businesses lease lines or use ISDN connections.

2.1 Types of Access:

2.1.1 Analogue Dial-Up From a commercial perspective, dial-up access has a lower potential margin than dedicated access. This is because dial-up cost of service is high, while the revenue per customer is low. Service cost is high because modems and terminal servers (also know as access servers) are expensive and dial-up billing can be complicated. Dial-up equipment can account for over 10% of an ISP‘s total costs1. Per usage billing is expensive, but it encourages users to make more efficient use of the resources. Flat-rate billing is cheap and easy. Customers also seem to favor flat-rate billing, even if it means paying more than they would under the per-usage scheme. It is easier to budget when you know exactly how much you will spend, plus customers seem to enjoy the idea of ‗all you can eat‘. In spite of the advantages of flat-rate billing, typical user behavior is to log on and then stay online for long periods of time, even if they are not using the internet. This leads to a great inefficiency profits in the analogue case. And a degraded service, as users may becontending for resources (e.g. modems bandwidth).

2.1.2 ISDN Digital Dial-Up ISDN (Integrated Services Digital Network) dial-up has two main uses: as a fast pipe for individual users, and as a low-budget LAN Internet connection. When used by an individual user, it is just like analogue dial-up but the transmission is faster as it is over a digital line. When used for LAN connection, it is just like a leased line connection, except that the line is not Refer ‗Internet Telephony: Costs, Pricing and Policy‘, McKnight and Leida,MIT Internet Telephony Consortium, 1998 for more details 1

3

dedicated – it is only brought up when there is data to be transmitted or received. As far as the ISP is concerned, equipment costs are reasonably low for ISDN, but transport costs are relatively high compared to analogue. However, profits are significant, as compared with marginal profits in the analogue case.

2.1.3 Dedicated Access An ISP typically has a number of ports on a router through which it offers dedicated access. The goal is to connect as many customers to these ports as possible. Although set-up costs can be high for dedicated access (price being proportional to the distance from the ISP to the customer) profits are high, generally bringing in over a quarter of an ISP‘s revenues, even though they may only account for 1% of actual account numbers. Other traditional transmission methods are also finding their place in the world of Internet access. Cable companies have already started offering Internet access over theirnetworks.

Hybrid Fiber Coax (HFC) is used to provide this service. HFC uses cable modems. It employs analogue fiber to a node that will serve a few hundred houses, and coaxial cable to the premises. Because mobility has been an issue ofsuch importance in recent years, the combination of mobile and Internet services will be of great importance to customers.

At present, the technology required for high-speed wireless access is unavailable. Wireless Internet access will grow rapidly once the technology is available at a reasonable price2. Many new last mile (i.e. from the telephone exchange or ISP to the customer) technologies are emerging and it is likely that they will have a significant impact on Internet provision. If using the telephone network to access an ISP, whether dial-up or dedicated, there is usually room for complaint in terms of speed and reliability. This is for a simple reason - the telephone network was designed to carry voice traffic and not high-speed data traffic. Therefore, many new technologies are being developed for local loop data delivery.

2

Refer ‗Combining Mobile and Internet Services‘, Griffiths, N., Dataquest, June 1998

4

2.1.4 Digital Subscriber Line DSL is the family of Digital Subscriber Line (DSL) technologies that has been developed to provide high-speed links over twisted-pair copper telephone lines. Because long copper loops distort signalquality, repeaters and amplifiers are installed on copper pairs at prescribed intervals to restore signal quality. What DSL technologies do is use sophisticated modulation schemes to pack data ontocopper wires, and do so without repeaters or amplifiers. DSL leverages the telephone companies‘ investment in twisted-pair copper to nearly every home or business by providing the ability to send voice and large amounts of data over existing lines. ADSL (Asymmetric DSL) is the form of DSL with the most potential for Internet provision. It is intended for the last mile into a customer‘s premises.ADSL technology consists of a pair of modems on either end of a twisted-pair copper line, which provides symmetric transmission of data up to 8Mbps downstream and 800kbps upstream.

2.1.5 WebTV WebTV allows use of the Internet through a television set. A set-top box is installed and a special WebTV ISP must be subscribed to. It is controlled by a handheld control or by a wireless keyboard. Although the TV is used as the output device, the information arrives through a telephone line and modem.

2.1.6 Digital Power line Digital power line technology involves the utilization of the electricity distribution network as a means of providing both power and telecommunications services to the home. An implementation of power line communications has been developed in which an electricity distribution network may be conditioned such that it can simultaneously carry two or more electrical signals. The advantage of this method is that it uses an existing infrastructure that is a system connected to almost every home and business.

2.1.7Fibertothe Curb Fiberto the Curb (FTTC) refers to the installation and use of optical fiber directly to the curbs near homes or anybusiness environment.This method uses digital fiber to a node serving 16-32 homes. The short link tothe customer is through any number of transmission technologies 5

twisted pair,coaxial cable, optical fiber, microcellular microwave etc., depending on thebandwidth of the services required.

2.1.8 Satellite Satellite

Internet

access

is

likely

to

be

usedfor

customers

in

geographically

isolatedregions.Provision of two-way higher bandwidth capability over satellite is not common inresidential markets because of the highcost, but hybrid solutions have recentlybeen developed to deliver a highbandwidth capability via satellite with areturn path to a service provider usingconventional PSTN technology. Thismethod is being used to provide interactive television services and may beused in the future to provide fast InternetAccess3.

2.1.9 Radio Local Loop In the UK, radio spectrum in the 10GHz region has been allocated for the deliveryof high bandwidth services. Internetaccess by radio local loop would have itsadvantages and disadvantages. It isflexible in the building of its accessinfrastructure, but it has practical problemsof reach and interference, and costs ofterminal equipment can be high.

2.2 Trends in the ISP market As the industry is maturing, differentiationand financial performance are becomingincreasingly important. This is driving five major trends in the market: Consolidation: mergers andacquisitions Introduction of enhanced/value addedservices Company to company interconnectionand peering agreements Differentiation based on content Web hosting  Consolidation The trend of consolidation has beenevident over the last 18 months, withmany partnerships arising between ISPs,and between ISPs and other companieswishing to enter the market.Large Refer ‗Access to Bandwidth: Bringing Higher Bandwidth Services to the Customer‟ http://www.oftel.gov.uk/competition/l lu1298.htmfor more details 3

6

companies have been merging with other large companies, and have beenacquiring mediumsized and smallcompanies.

This is a quick way toincrease geographic scope and subscriberbase, and hence to increase both the financial value and customer value of thecompany. To most of the largercompanies, small rural ISPs are not seenas worth acquiring

Content providers and large ISPs are partnering and merging in order toenter each other's market as quickly as possible. They are entering the marketquickly by acquiring ISPs and makingpartnerships with them.  Move to Usage-Based Pricing The original pricing model which cameabout in the US was flat rate pricing – asubscriber paid a flat fee and was entitledto unlimited usage. Because local calls tend to be charge-free, many subscribershave taken advantage of this.

They will stay online for long periods of time, evenif they are not using the Internet, and thushold up resources that other users arecontending for. Some ISPs have begun totime these users out after 15 minutes of inactivity, but this is still causing muchinefficiency.  Specialization and Service Positioning The term ISP is used very loosely. Anycompany supplying access or services fallsunder the description ‗ISP‘.The present strategy of offering access,content, services etc. has a lack ofstrategic focus, and therefore may lead one to believe that companies focused on just one aspect of Internet service provision,working together, may be able to providean end product of high quality to the user.

If this were to occur to some extent, ISPs would fall into two broad categories: network-focused and content-focused.

7

Fig.2.1 ISP Specialization Network-focused companies would focuson connectivity for businesses and otherISPs. They would be able to offerbusiness packages with service-levelagreements.

For the consumer, these ISPs wouldintegrate technologies to offer premiummultimedia access to the Internet.Content-focused companies, in their purestform, would have no network at all. Theywould manage customer accounts andoperate services, while the connectivityservices would be provided by a network focusedISP.Premium information would be provided to business customers, and premiumentertainment to consumers.

It is believed that, with such strategicfocus, these companies, working together,would offer a better service, both in termsof content and network quality, than acompany trying to cater for everyone.

8

2.3 The Physical Structure of an ISP Fig 2.2 shows a brief schematic showing thebasic physical structure of an ISP.The ISP server is the computer program(and computer) that serves requested Webpages or files.The DNS server contains information toresolve Internet names and addresses.

Fig. 2.2 Structure of an ISP 4

The news server receives and processes Usenet news, and although this is just one function, it can take up an entire computer system on its own. It is not recommended that any other functions run on thismachine. The subscriber-service server is provided to authorize service, maintain billing records, and keep other administrative details. The terminal server is a device that allows connection of modems to the internal network, and thus out to the Internet. The Data Services Unit (DSU) takes data from the router and translates it into the format required by the leased line that runs to the carrier POP. The router looks at packets in an internal network, finds the ones 4

Refer 'ISPs: From Protocols to the Market', McPhillips, E., University of Strathclyde, September 1998 for more details

9

that are destined for the Internet, and sends them out. This is a simple function, but has to be extremely high-speed. For traffic outwith the internal network, the router is used to send it to the carrier‘s closest POP. This is usually done over a T-1 line (1.544Mbps, used in the US), or a DS1 line (2.048Mbps, used in Europe). A leased line is usually provided by atelephone company to connect with the carrier at their POP. Enterprises such as universities and largebusinesses often have a T-1 (or DS-1) direct private-line connection to the carrier pop.

The carrier then concentrates the traffic from many ISPs and enterprises and forwards that traffic over a set of higher speed links (usually 45Mbps, but now as high as 155Mbps) to the closest NetworkAccess Point (NAP) for connection to the Internet.

2.4 What Services do ISPs Offer? Basic ISP services include E-mail, World Wide Web access and Bulletin Board Systems. Over the past couple of years, Internet services have gathered much greater value and scope, resulting in manypremium services, which may be priced accordingly. Below are detailed the principal Internetservices provided.

2.4.1 E-mail E-mail is the electronic sending, storage and retrieval of messages. Messages are addressed and sent to the computer where the destination e-mail account resides, and is stored there. An e-mail message consists of three parts:  The header gives information about the message (who sent it, when, who it was addressed to, carbon copies, how it got there, etc.)  The body is the actual message itself.  The signature is the part where the sender personalizes the message and gives further information aboutthem.

Because most PCs are not left on 24 hours a day, connected to the Internet, with their own host names etc, most e-mail accounts are usually on a host somewhere else. The e-mail reader contacts this host (using Post Office Protocol, or POP) to handle the email when the user logs in. 10

Once the email is on the user‘s PC, then all the email activities are local (folders, lists, etc.) POP is a client-server application designedto transport e-mail messages between a network server and a PC based client computer.

The WWW is, like Telnet and FTP, a tool for accessing the information available on the Internet. It is composed of a collection of web pages residing on computers, called web servers. A web page author creates a document and encodes links (called hypertext links) into the document. By following these links, the reader can move from the original document to another document, which might be locatedon that same computer or on another web server anywhere in the world. Web software is designed around distributed client-server architecture. A web client (called a web browser if it is intended for interactive use) is a program which can send requests for documents to any web server. A web server is a programthat, upon receipt of a request, sends the document requested (or an error message if appropriate) back to the requesting client. Because the task of document storage is left to the server and the task of documentpresentation is left to the client, each program can concentrate on those duties and progress independently of each other.

2.4.2 Bulletin Boards Bulletin Board Systems (BBS) are on-line services which allow users to read and post messages, usually organized around a single topic. The best example of an Internet BBS is Usenet, the world‘s largest newsgroup. It contains more than 40,000 different topic groups (January 1999). There are various ways you can read or take part in discussions on the Internet. One way is to subscribe to list servers. Another is to join a newsgroup. The main difference between the two is that you sign up for a list server and the messages go to your e-mail box, while you must visit a newsgroup and read the messages. Newsgroup messages are posted publicly, available for anyone to read and respond to. Programs exist to allow a user and another person to be on-line at the same time, trading real-time messages to simulate a conversation. It is also possible to chat with many more than one person at once. The most popular chat program is Internet Relay Chat (IRC). On IRC, several people can simultaneously participate in a discussion over a particular channel, or even multiple channels. There is no restriction on the number of people that can participate, or on the number of channels that can be formed over an IRC. With the growing 11

familiarity with the Internet, and the explosion in the number of ISPs in the market, both access and primary services are becoming commoditized. Although it is human nature to be fascinated with a new service or product when first presented with it, it is equally natural to grow accustomed and demand more. As consumers become familiar with what is currently available and with what are possible, their service expectations will grow. Customers are no longer willing to pay a premium for basic access and services, so ISPs have to offer more. They will compete to deliver more technically sophisticated and cost effective services to meet the ever-increasing needs of educated customers. In a short time, the market has gone from one being fought over access, to one in which more must be offered, in the way of new value-added services and benefits, technological or other.

2.4.3 Voice and Fax Services Because of the idea of ‗pay local, speak global‘, voice over the Internet (or Voice over IP, VoIP) has been a point of great interest over the last couple of years. Internet telephony users can speak with someone anywhere in the world, often for the price of a local telephone call. It has been the centre of much attention and optimism because it has the potential to significantly reduce the cost of longdistancetelephone communication. At present it is rather cumbersome to make a telephone call over the Internet, as computers were not designed to support it. The other main disadvantage is that quality, although improving is not as good as that of the PSTN (Public Switched Telephone Network).

The PSTN is a circuit-switched network that has been optimized for real-time or synchronous voice communication with a guaranteed QoS (Quality of Service). It guarantees the QoS by dedicating a full duplex 64kbps circuit between the parties of a telephone conversation. Since the bandwidth remains constant whether or not the involved parties are speaking, the cost of a call on the PSTN is based ondistance and time. The Internet is based on packet-switched technology, so no dedicated circuit is set up. Because of this, the quality of VoIP is degraded somewhat compared to PSTN telephony. In spite of this disadvantage, many callers are more than willing to tolerate a slight reduction in quality inexchange for inexpensive calls. As traffic prioritization schemes improve, it is hopeful that VoIP will improve to such a level as to be indistinguishable from traditional telephony. Because of the interest channeled towards VoIP, the provision of this 12

service by ISPs will be essential in order to attract many customers. The threat of this service to Telco‘s (telephone companies) has seen the entry of many of them, often by ISP acquisition, into the service provision market.. The use of FaxoIP (Fax over IP) is already well underway. Although fax is generally closely associated with the telephone network, it does not require realtime transmission. Because of this, there is no reason why FaxoIP should not be used. It is the simple transmission of data (which need not have a dedicated channel) over the Internet, and can be much cost efficient compared with traditional fax.

2.4.4 Integrated Voice/E-mail/Messaging A number of mobile telecommunications companies have already begun to offer some sort of integrated system, allowing customers to check their e-mail over their mobile phones. These services may also allow the sending of messages from the Internet to a mobile phone directly. The Short Message Service (SMS) allows users to send short e-mails or to notify the recipient to log into their e-mail account in order to receive an urgent e-mail or file. Many companies, including Vodafone, Deutsche Telekom, and T-Mobil (partnered with T-Online) will automatically notify their customers when they have received an e-mail, usually giving date, sender and subject, provided they have the right software installed on their PC.Deutsche Telekom have an extension of the above, by way of their NOVICE system, which uses voicesynthesis software to convert the e-mail messages into speech, and customers can have their messages read over the phone to them. Other companies provide services whereby information such as football results or stock market quotes can be obtained on mobile terminals via SMS. The demands of the mobile user are readily listened to, as the mobile telephony market is already so large, and is probablythe fastest growing market in the world. The integration of mobile and Internet services is likely to grow rapidly, particularly when affordable wireless broadband technologies are available. It is presently possible to use a mobile phone to access the World Wide Web, but is painfully slow and extremely expensive. Cisco Systems and Motorola recently announced a joint project to deliver a reasonable wireless Internet service, investing up to $1 billion over the next 4-5 years 5 . This was announced the same day (8 February 1999) as Motorola, Nextel Communications, Unwired Planet and Netscape Communications gave details 5

Refer ‗Motorola, Cisco in Pact‘ http://abcnews.go.com/sections/business/DailyNews/cisco990208.htmlfor more

details

13

of their plans to offer a wireless telephone package combining voice, data and Internet services6

2.4.5 Web Hosting The idea of web hosting can be broken down into two areas: web page hosting, and the actual hosting of networks attached to the Internet.

Web page hosting, where an ISP will offer server space to a customer, is not a new idea. Some ISPs have been offering small amounts of web space, either at a price or for free, for a few years. However, it now appears that all ISPs will offer a reasonable amount of space (usually about 10Mb) in any initialpackage offered to a customer. Residential users may wish to set up their own homepages for recreational or educational purposes. For businesses, the availability can be very much more important. While many businesses may require Internet services merely for email and browsing capabilities, most businessesnow want a web presence, which involves a number of company web pages. Although some establishments (in particular universities and large businesses) choose to set up their own servers, it is more economical for residential users and small businesses to acquire or lease space on an ISP‘s server.

The other area of web hosting is more complex, and adds much value for the customer. An intranet is a network (usually belonging to a business) that is connected to the Internet in such a way that its users can use the Internet, but other users on the Internet cannot access the network. This security is usually accomplished by a technique known as firewalling. The main advantage of an intranet using the Internet is that a company with many sites can use the Internet to connect these sites, rather than leasing lines expensively from the telephone company to ensure privacy. An extension of the idea of an intranet isan extranet. If a company wishes to allow a customer onto its network, an extension can be made to the intranet to enable this. The customer‘s computer is then allowed access to the intranet, and that extension is known as an extranet. A Virtual Private Network (VPN) is a private network that makes use of the Internet, maintaining privacy through the use of a tunneling protocol and security procedures. Companies today are

6

„Nextel, Netscape Go Wireless‟ http://abcnews.go.com/sections/business/DailyNews/nextel_netscape990208.html for more details

14

looking at using a virtual private network for both intranets and extranets7. Because leased lines tend to be very expensive, particularly in Europe, there is huge benefit to the company in using the Internet to connect their sites. From the ISP‘s perspective, intranets, extranets and VPNs are reasonably easy to set up, and can reap significant profits.

2.4.6 Web Page Design and Consultancy Many business customers choose to outsource the design and maintenance of their web pages, at least until they believe it is reasonable to employ someone fulltime to do the job. Many ISPs will, at subscription, offer to maintain a company website for a price. This does not just involve hosting the web pages, but designing, coding and updating them as is necessary. It is reasonably easy to create a simple webpage, but many businesses do not want to allocate that job to a member of staff, lest it interfere with their other work. In the early stages, the work involved does not merit an entirely new member of staff, so it is left to the ISP to create a page with necessary company information, news and whatever else the company deems important. The ISP is then responsible for updates to these pages whenever the clientrequires this. The amount an ISP charges for this service is dependent on how complex the pagesare to be. A simple static page of text and images, requiring infrequent update, will cost relatively little. However, a complex page with Java applets, other dynamic content, forms and complex layout will bereasonably costly to the customer. It is when such pages become necessary that businesses tend to consider employing someone in-house to do the job.

2.4.7 Bundled/packaged services Bundled services can be enticing to the customer who does not wish to go to the trouble of dealing with a separate company for each service or utility they require. ‗One-stop shopping‘ has the potential to be an important area of the future, giving the customer the ease of having one provider for many services. Bundled e-commerce might involve a package deal comprising web access, Internet services, banking and home shopping along with other services. Although this may not appeal to all, the idea of one bill for many services is often seen as a huge convenience. Similarly, bundled utilities can be of great convenience. CableTel already offers cable TV, telephone and Internet access for a bundled price, and only one bill is necessary. Because of 7

Refer 7] „What Is?‟ http://whatis.com/for more details

15

reduced overheads and administration costs, this type of dealcan also be more economic, for instance, CableTel can offer the above bundle for the same price as BT line rental. Although these deals are attractive, they are usually restricted to certain ISPs – those with the resources to provide them. Telcos that have acquired, merged with, or become ISPs can offer Internet access and services, but for the time being small ISPs cannot offer bundle services unless they set up certain contracts with telcos. When digital power line technologies are available, power companies will be able to offer power, telephone and TV services, and there is no reason to believe that they will not enter the ISP market to offer a total bundled service.

2.4.8 Quality of Service and Reliability For many Internet users, particularly business users, the quality of service given by the ISP is of particular importance. When using real-time applications such as VoIP and video, it is important that delays are minimized so as not to degrade service. Although the Internet often causes unpredictable delays, new protocols can minimize the delays encountered and ISPs are in a position to be able to guarantee a certain Quality of Service (QoS). The current version of IP, IP version 4, does not allow for the prioritization oftraffic. The newer version, version 6, has a class field to distinguish traffic types. Although version 6 has been standardized, it has not yet been deployed. Used with IP version 6 will be a higher layer protocol known as RSVP (Resource Reservation Protocol). A host uses RSVP to request a certain QoS from the network, on behalf of a data stream. For those customers requiring real time services, QoS is to be of great importance. There are some concerns regarding the use of reservation protocols, the first being the capacity required for the protocols. In many instances, the capacity required will cause overload of switches and be detrimental to carriage. There is also the idea that many customers are requiring capacity reservation over the same pipe, and thus contending for capacity. If the required reserved capacity exceeds the actual capacity, Service-Level Agreements (SLAs, the concept that service providers give their customers a contract for guaranteed level of network traffic delivery) cannot be kept.

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Who are the Key Players? In an industry that involves so manyplayers of all sizes, for the purposes ofanalysis it is difficult to define exactlywho the key players are.In a huge generalization, traditional ISPshave been broken down into two keygroups: large and small ISPs. Althoughmany factors (revenue, geographical scope, partnerships, customer base,and growth) may influence the perceived sizeof an ISP, it has been decided to definesize merely on the basis of customer base,with a bias towards number of businesscustomers.

Although revenue can be an indicator ofsize, an ISP with few, but lucrative,business customers may generate morerevenue than a company with significantlymore, but residential, customers.Generally the larger ISPs have a widegeographic scope, but specialistcompanies may have only one POP ineach country, and so the mostgeographically diverse ISP may notactually have a great customer base.

An ISP may be in a number ofpartnerships in order to increasegeographical scope, but may not be such abig company itself.The growth of an ISP can be indicative ofthe potential of the company to succeed,but it is not really an indicator of its size.Therefore, in the following discussion, thesize of an ISP is defined in terms ofcustomer base. Because of the profitassociated with business customers, a biashas been given towards businesscustomers in determining the size of anISP.

At present, ISPs of practically every sizeranging from a few hundred customers upto many millions of customers exist.However, medium-sized ISPs are beingacquired by larger companies, or aremerging to become larger. There is ageneral move in the ISP market towardsbig or niche, suggesting that within a fewyears, we will have a market that has asmall number of large companies and alarge number of small companies, cateringfor specialized markets. For the above reasons, and for simplicity,the traditional ISP market has been brokendown into two categories: large and small.A small ISP could be considered as onewith less than, say, 10,000 customers, anda large ISP, one with more than 300,000customers. As mentioned, it appears thatintermediate companies will disappear. The major key plyers for internet service providers are BSNL,Reliance, Vodafone, Airtel, Idea, Tata, MTNL etc. 17

Group company wise market share are shown as below:

Fig. 2.3Group company wise market share

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Following fig. 2.4 shows list of ISPs having all India licence

Fig 2.4 ISPs having all India licence

Conclusion: ISP is basically internet service provider industry that provides individuals and companies access to the Internet and other related services. ISP provides their services in numerous ways. i.e.

Analogue Dial-Up ISDN Digital Dial-Up Dedicated Access Digital Subscriber Line WebTV Digital Power line Fiber Satellite In India Internet access is mainly being taken through ISDN & DSL by various internet service providers.

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Chapter 3 PEST Analysis The External Environment – APEST Analysis P – Political This can be formal or informal. Formalrefers to government and regulation. Informal refers to areas outside of government where political activity occurs (such as the media). E – Economic This refers to the nature and direction of the economy in which a business operates. It can be basic up/downswings in thegeneral level of economic activity, or changes related to structural change within relevant sectors. S – Sociological This can refer to demographics, lifestyles, social values, culture and the like. T – Technological This relates to research, development and operations. The emergence of a new technology can dramatically impact upon an industry.

ISP PEST Analysis

There are many areas in which the regulator may have an effect. Presently, ISPs are not responsible for content on their networks up to a certain point. If a customer stores offensive material on their web site, the ISP has noobligation to know of its existence or to remove it. If another user complains about this material, then the ISP can remove it without the compliance of the owner, or it is seen as a publisher of the material, and then becomes responsible.

Because there is no censorship of the Internet, and many users are concerned, it is possible that in the future ISPs willwork in conjunction with the regulator to try to eliminate some content. Presently free access is given to schools,universities, libraries and hospitals. It is the choice of the government which establishments to grant free access to.If any of the above are denied access in the future, a whole new target group will open up to ISPs. Similarly, if another group is

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granted free access, many ISPs may lose important clients. The idea of universal service is one that has not really been discussed in relation to the Internet. Because the Internet is growing at such a fast rate, it is likely that it will soon be seen as so important thatInternet to flourish without being stunted. Low regulation of ISPs has meant low barriers to entry, and hence intenseA PEST (Political, Economic, competition in the market.Sociological and Technological) analysis is a scan of the outside environment to try to spot changes that might impact upon business. These changes might be seen as opportunities or threats.

Political

Economic

Low regulation now

GDP

Responsibility for content

Structural change since telecoms

Access to schools, libraries, hospitals

Deregulation

Universal service

Recession: Fewer computers bought? Less spent by consumers and providers?

Sociological

Technological

Language barrier

Rapidly changing technologies & services

Reluctance to accept new/foreign technology

Fuelled by the internet:

Demography: age (changing), ethnic mix

Transport, switching, backbone, local loop

Geography: urban/rural

Disruptive technologies Reliance on technology

Fig. 3.1 ISP PEST Analysis

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P – Political This can be formal or informal.Formal refers to government and regulation. Informal refers to areas outside of government where political activity occurs (such as the media). E – Economic This refers to the nature and direction ofthe economy in which a business operates.It can be basic up/downswings in thegeneral level of economic activity, orchanges related to structural change withinrelevant sectors. S – Sociological This can refer to demographics, lifestyles,social values, culture and the like. T – Technological This relates to research, development andoperations. The emergence of a newtechnology can dramatically impact uponan industry.

3.1 Political: the regulation of theInternet and associated businesses hasalways been low. This has allowed for the Internet to flourish without being stunted.Low regulation of ISPs has meant lowbarriers to entry, and hence intensecompetition in the market.There are many areas in which theregulator may have an effect.Presently, ISPs are not responsible forcontent on their networks up to a certainpoint. If a customer stores offensivematerial on their web site, the ISP has noobligation to know of its existence or toremove it. If another user complains aboutthis material, then the ISP can remove itwithout the compliance of the owner, or itis seen as a publisher of the material, andthen becomes responsible.Because there is no censorship of theInternet, and many users are concerned, itis possible that in the future ISPs willwork in conjunction with the regulator totry to eliminate some content.Presently free access is given to schools,universities, libraries and hospitals. It isthe choice of the government whichestablishments to grant free access to. Ifany of the above are denied access in thefuture, a whole new target group will openup to ISPs. Similarly, if another group isgranted free access, many ISPs may loseimportant clients.

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The idea of universal service is one thathas not really been discussed in relation tothe Internet. Because the Internet isgrowing at such a fast rate, it is likely thatit will soon be seen as so important thatevery citizen should be granted cheap andeasy access, as they are to the telephonenetwork.

Due to the breakdown of the NAPs, ISPs areentering into private agreements regardingthe carriage of traffic from otherproviders.Small ISPs tend to serve rural areas. Thisis because large companies seem to seethese areas as ‗not worth bothering with‘,even though a high proportion of smallcompanies are making profits. Becausesmall companies do not own their ownnetworks, they have to lease capacity fromothers, and pay premium rates for this.The power of large companies may besuch that high charges to use theirnetworks will have a severe effect onsmaller companies, and oust them fromthe market. If this begins to happen, it is likely that there will be some interventionfrom theregulator. The regulator will notbe concerned about the well-being ofsmall ISPs, rather the ability of users inrural areas to connect to the Internet. Ifsmall companies are put out of business,then the only opportunity for the rural userwould be to connect longdistance, whichwould be too expensive – not considered auniversal service.

Because there has been so little regulationof the Internet, it cannot accurately bepredicted how regulation will impact whenit arrives. There are areas where manycompanies have lobbied for regulation.

3.2 Economic: In any market, the GDPcan be an indicator of the potential uptakeof a product or service. However, a highGDP has not necessarily meant highInternet penetration.

Since telecommunications liberalization (1996 in the US, 1998 in most of Europe),there has been structural economic changewithin the sector. There are many newentrants in all involved markets, andincumbents have begun to lose out to newentrants that have been granted use of theincumbents‘ networks.

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Upswings and downswings in the level ofeconomic activity may or may not have aneffect on the ISP market.

3.3 Sociological: A language barriermay be a deterrent to many from theInternet. Although other languages arenow making their place on the Internet,there is still a strong bias towards English,as the Internet has its origins in the US.

As other languages become commonplaceon the Internet, the ISP market will growin many countries.The reluctance to accept new and foreigntechnologies has stunted Internet growthin some countries with high GDP. Forexample, Japan is a very wealthy countrywith an excellent telecommunicationsinfrastructure,

but

Internet

penetrationthere

has

been

slow.

The

Japanese,although at the forefront of technologicaldevelopment, are not very accepting offoreign technologies, and this couldexplain why there is no strong desire toconnect to the Internet. Similarly, theFrench tend to avoid foreign inventions,and penetration there has been low. Thiscan also be attributed to the fact that theFrench have their own internetinformation system, Minitel. Before the Internet can be seen as a worthyalternative, it will have to provide muchmore than Minitel does.

The community of Internet users, in thecourse of a few years, has turned from oneof computer scientists and academics toone comprised of a diverse mixture ofcultures, ages and occupations. Access isfreely available in most developedcountries, and ease of use has becomesuch that anyone owning a computer and atelephone can connect to the Internet withrelative ease. Demography and geographydo not play the role they used to indetermining who uses the Internet, andwho would be a likely target for an ISP.

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3.4 Technological: Internet technologiesare developing and improving at anenormous rate. In a feedback loop ofsorts, new technologies are fuelling newservices, which in turn are fuelling newtechnologies.

Each part of the Internet (backbone pipes,routers, local loop) is becoming faster,temporarily satisfying customer demand.Although many new technologies havebeen hailed as the ‗killer application‘(Asynchronous Transfer Mode (ATM),videoconferencing, VoIP), these have notshown the uptake expected of them.The phenomenon of the Internet could nothave been predicted, and so it would befolly for an ISP to assume that a newtechnology capable of totally restructuringthe industry may not appear. Such atechnology would be regarded asdisruptive. Disruptive technologies can beseen as those that initially present apackage of performance attributes that, atthe outset, are not valued by existingcustomers. Although the product areamay be established, the disruptivetechnologies‘ value proposition is usuallyvery different from that which waspreviously available. When launched,they will be targeted towards a whole new(and non-existing) customer base, one thatis happy to pay a lower price and iswilling to settle for lower quality.

Conclusion: If we consider the political environment for any new entrant, it is very difficult to get the spectrum now onwards as there is a speculation of scam in 2G spectrum allocation. In economical environment as per the budgetary guidelines the taxes & duties are decreasing on the chips & semiconductors which make computers & laptops cheaper day by day which demonstrate an easy going way for the ISP industry as computer is an essential need for the internet connection.

As far as sociological environment in concern, language barriermay be a deterrent to many from theInternet. Although other languages arenow making their place on the Internet,there is still a strong bias towards English,as the Internet has its origins in the US. Internet technologiesare developing and improving at anenormous rate. In a feedback loop ofsorts, new technologies are fuelling newservices, which in turn are fuelling newtechnologies.

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Chapter 4 Five Force Analysis The ISP Market – the Near and External Environments

The nature of competition in an industry is a huge determinant of strategy, especially businesslevel strategy. The profit potential of an industry is determined by competitive interactions. Where these interactions are intense, the profit earned is lessened by the activities of competing. Where they are mild, profit tends to be high. Michael Porter of the Harvard Business School has identified five basic forces, which together describe the state of competition in an industry8:

1. The intensity of rivalry among competitors 2. The extent to which substitute products present a threat 3. The threat of new entrants to the market 4. The bargaining power of the industry‘s suppliers 5. The bargaining power of the industry‘s buyers. In the ISP market, all these forces exist, some more intensely than others.

Refer „How Competitive Forces Shape Strategy‟, Porter, M., HarvardBusiness Review, Volume 57, Issue2, 1979 [9] „@Home, Excite for more details 8

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Following fig. 4.1 shows these forces diagrammatically.

Fig. 4.1 Porter‘s 5 Forces Model for the ISP Industry

4.1 Rivalry within the Industry

The centre area represents the rivalry in the industry. On the left are the main traditional players in the industry, with an indication that there is a large amount of consolidation occurring between these companies. On the right are the areas in which the market is being fought. As in any industry, there is competition based on price. If one company can do something as well as another, and for a cheaper price, then the former will have an advantage and thus be successful in competition. In the basic access/basic services arena, many companies are offering the same deal – access and basic services, and so those that are doing it more cheaply than others will attract customers. Otherwise, ISPs will have to offer something special to differentiate them from others. As discussed already, guaranteed quality of service is of great importance where real-time traffic is concerned. The availability of service-level agreements will soon be ubiquitous, and 27

acquisition of customers will be fought over price of QoS rather than availability. The speed of access, although improving with each new technology, is still far from being satisfactory. Internet can be seen as a series of bottlenecks, with delays occurring at each junction. Services, as described previously, are the main area in which the market is beingfought now. Basic services have become commodities and customers want more fortheir money. ‗Value-add‘ is the key customers will not pay for it. Emerging in all industries in the recentpast has been the need and desire for good customer service. Because customers may want to be online at any time, there is a distinct need for a 24 hour/7 day customer Communications by America Online(November 1998) and the recent merger of @Home Network and Excite Inc. (January 1999)9 are indicative of the fact that ISPs are moving into the content market. At the same time, content providers andportals are looking to join the ISP market, and partnerships and acquisitions are the easiest way for them to join each other‘smarket. Lycos, which has been in talks with potentialsuitorssuchasNBC, Bertelsmann, Microsoft and Time Warner, will most likely be acquired in the near future. Although nearly as popular as Yahoo! (in terms of usage), its market capitalization is just $ 5.5 billion compared to $33 billion for Yahoo!For business customers, security is a big issue. A business connecting to the Internet does not want its integrity to be compromised, and so will shop around until it finds an ISP that can as-good-as guarantee security. No matter how securea connection appears to be, there is alwaysphoneservice.

Many ISPs offer some chance of an unauthorized user substantial online help, which may be of use,andconvenient, to customers. However, if a connection cannot be made, online support is of no use. There has also been an emphasis on customer support in the last year, when many computer-illiterate users joined the making his way over the connection. The only way to ensure absolute security is not to connect to the Internet atall. Although the market is much segmented, there are an enormous number of companies providing Internet services. An explosion Internet As computer familiarity in the number of ISPs over the last few decreases, the requirement for customer support increases greatly. Prior to last year, most ISPs focused largely on providing access-oriented services and have left content-related services to the online providers. The problem ISPs have with content is that their network engineering skills have little relevance Refer „@Home, Excite Announce $6.7 Billion Merger‟ http://www.internetnews.com/ispnews/1999/01/1901-merger.htmlfor more details 9

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when it comes to building content. However, it has been established that content is to be one of the main differentiators in the ISP market. Those years has meant intense rivalry within the industry. Because there is such an enormous growth in the customer base, the market is still far from saturation. This is an attraction to still more companies wishing to enter the market.

4.2 Threat of Substitute Products There is a tremendous attraction for companies other than ISPs to offer Internet access and services, especially if they know they can enter the market at a high level.They are also aware of the threats of not being a part of this industry, and are entering at atremendous rate, either by acquisition, merging, or simply becoming ISPs. They can provide similar services, and sometimes at a reduced rate. They can offer bundled services which are most convenient to some customers.

Non-technical companies have seen the opportunity to develop a web presence beyond just web pages. Companies such as Tesco have entered the ISP market, but not necessarily to make money from provision. As with Freeserver, Tesco enjoys the ease of information gathering regarding their customers. There is also the opportunity to develop an online storefront. Tesco has also recently begun to offer a free service to its clubcard holders10. Supermarkets tend to have a name people know and respect. They have customer awareness and experience dealing with a large customer base.There also tends to be a great customer loyalty towards supermarkets, which is why they are moving towards banking, and now Internet service provision. A portal is a gateway to the World Wide Web that is, or proposes to be, a major starting site for users when they get connected to the Web. Portal companies have started to show an interest in service provision. Because there is to be a great differentiation based on content, portals are setting up partnerships with ISPs, or becoming service providers as well as content providers. Yahoo! has launched a free access service in an attempt to win market share. It has also acquired GeoCities, a provider of free web sites, for $4.6 billion (January 1999)11.

The above entrants are capable of providing the same services as ISPs, usually at a discounted 10 11

Refer TescoNethttp://www.tesco.net/index.htmfor more details Refer „Yahoo! to Buy GeoCities ‟http://www.geoworld.com/ResearchT riangle/6551/ for more details

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price or for free. Although

they may not have the experience of established ISPs, they still

pose a significant threat, particularly as access and basic services become commoditized.

4.3 Threat of New Entrants Due to the nature of the ISP market, the threat of new entrants is reasonably strong. There are low barriers to entry - all that is needed to become an ISP is a small amount of capital and some technical know-how. Much of the ISP‘s activity canbe outsourced, which can reduce initial costs. Regulation in this area is low, meaning that anyone wanting to enter the marketcan do so easily. Due to the concept of interconnection, companies need not own any sort of network – they can use other networks at a price. There have been, and continue to be many new entrants to the market. In the last 18 months, the number of ISPs has leveled off. However, there have been a tremendous number of mergers and acquisitions within that time, suggesting that for every merger or acquisition there has been a new entrant. Although many of these new companies will fail to survive in the long run, those that find a niche market and provide a satisfactory service will always have a sufficient customer base to continue.

4.4 Bargaining Power of Suppliers The suppliers to ISPs are those that own the networks. Backbone providers generally own what is the absolute backbone of the Internet, and control routing and switching of traffic. Telcos own the local loop copper pairs, which most customers use to connect to their ISP,the lines that ISPs lease to connect to the Internet, and much of the Internet backbone. Large ISPs are often the suppliers of capacity to smaller companies. Because it is impossible for every ISP to build their own entire network, it isnecessary that companies use the existing networks.They have to do this, which gives the suppliers some power. However, because there are many suppliers offering the same service, this competition has led to their power being lessened.

4.5 Bargaining Power of Buyers Although an individual consumer has little or no say about how much an ISP charges, due to the rivalry within the market, ISPs generally have to offer their services at reasonable prices. They will lose their customer base if they charge more for a service someone else provides more cheaply. Switching costs are low. 30

Businesses have a little more bargaining power, particularly if they are a significant client of the ISP. However, if a business is happy with its ISP it is unlikely to change, and because there is essentially no ability to backward integrate; the customers tend to have little bargaining power. Conclusion: Rivalry within the industry

In the basic access services arena, many companies are offering the same deal, and so those that are doing it more cheaply than others will attract customers.Otherwise, ISPs will have to offer something special to differentiate them from others. i.e. Introduction of WiFi service by Spidigo by connecting whole Ahmedabad City under WiFi zone.

Threat of Substitute Products There is a tremendous attraction for companies other than ISPs to offer Internet access and services.They can provide similar services, and sometimes at a reduced rate. They can offer bundled services which are most convenient to some customers. i.e. Telecom industries giants provides internet services which are not part of ISPs ex. Idea, Vodafone, Tata DoCoMo

Threat of New Entrants Due to the nature of the ISP market, the threat of new entrants is reasonably strong. There are low barriers to entry - all that is needed to become an ISP is a small amount of capital and some technical know-how.

Bargaining Power of Suppliers The suppliers to ISPs are those that own the networks. Backbone providers generally own what is the absolute backbone of the Internet, and control routing and switching of traffic.

Bargaining Power of Buyers Although an individual consumer has little or no say about how much an ISP charges, due to the rivalry within the market, ISPs generally have to offer their services at reasonable prices. They

31

will lose their customer base if they charge more for a service someone else provides more cheaply.

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Chapter 5 Driving forces for ISP The various driving forces for the internet service provider industry are as following:

1. Growing use of the internet and emerging new internet technology applications. The internet and the adoption of internet technology application represent a driving force of historical and revolutionary proportion. Companies can use internet to reach beyond their borders to find the best suppliers and further to collaborate closely with them to achieve efficiency gains and cost savings. Companies across the world are using a host of internet technology application to revamp internal operations and squeeze out cost savings. The challenges here are to assess precisely how the internet and internet technology application are altering a particular industry‘s landscape and to factor these impacts in to the strategymaking equation.

2. Increasing globalization of the industry. Competition begins to shift from primarily a regional or national focus to an

international

or global focus when industry members begin seeking out customers in foreign markets or when production activities begin to migrate to countries where costs are lowest. Globalization of competition really starts to take hold when one or more ambitious companies precipitate a race for world wide market leadership by launching initiatives to expand into more and more country markets. The forces of globalization are sometimes such a strong driver that companies find it highly advantageous if no necessary to spread their operating reach into more and more country markets. 3. Changes in the long term industry growth rate. Shifts in industry growth up or down are a driving force for industry change, affecting the balance between industry supply and buyers demand, entry and exit and the character and strength of competition.

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4. Changes in who buys the product and how they use it. Shifts in buyer demographics and new ways of using the product can alter the state of competition by opening the way to market an industry‘s product through a different mix of dealers and retail outlets; prompting producers to broaden or narrow their product line. The growing percentage of households with PCs and internet access is opening opportunities for banks to expand their electronic bill-payment services and for retailers to move more of their customer service online. 5. Technological change and manufacturing process innovation. Advances in technology can dramatically alter industry‘s landscape, making it possible to produce new and better products at lower cost and opening up whole new industry frontiers. Technological development can also produce competitively significant changes in capital requirements, minimum efficient plant sizes, distribution channels and logistics, and experience or learning-curve effects. 6. Marketing innovation. When firms are successful in introducing new ways to market their products, they can spark a burst of buyer interest, widen industry demand, increase product differentiation and lower unit cost. 7. Changes in cost and efficiency. Widening or shrinking differences in the cost among key competitors tend to dramatically alter the state of competition. Shrinking cost differences in producing multifeatured mobile phone is turning the mobile phone market into a commodity business and causing more buyers to base their purchase decisions on price. 8. Regulatory influences and government policy changes. Government regulatory actions can often force significant changes in industry and strategic approaches. Deregulations have proved to be a potent pro-competitive force in the telecommunication and electric utility industries.

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Chapter 6 Key Success Factors The key factors for success of a Private ISP will be a technical edge, financial capability to sustain losses over at least two years, high marketing and promotional budgets, strategic alliances with ancillary service providers, and lobbying power with the central and state governments. These can be further examined further:

6.1 The technical edge: The track record of ISPs in India, VSNL and the others before it, has been badly marred by poor service quality. Many Internet users would happily switch to a new private ISP if given a guarantee of reliability. "95% Uptime" and "Quality of Service" (available bandwidth) guarantees, while commonplace in the developed countries are non-existent in India so far. Serious Internet users, especially those who depend upon it for business eagerly await such guarantees. Once credibility is established, pricing can even be higher than competitors‘. This technical edge can only be established and maintained by proactive, aggressive network design by experienced consultants, coupled with a 24 hour Network Operations Centre manned by welltrained experts in all aspects of ISP operation. Further, consultants must be available on 24-hour standby retainers. Close association with the ERNet and NCR-IP ISPs has shown that customers are extremely sensitive on issues of service outage and unavailability of latest technologies.

6.2 Financial sustaining power: The private airline industry in India makes a suitable parallel to what is likely to happen with Private ISPs. Many private airlines started up, but with high levels of competition and price wars, coupled with changing government regulations, several could not continue sustaining losses. The recent closing down of several of the new private airlines has made the market much more lucrative for those airlines which survived, so profit margins have shot up, and huge returns on investments are expected in the next few years. The same will happen with Private ISPs, since the scrapping of license fees for Private ISPs will allow many Private ISPs to set up services. Those that survive stand to gain excellent financial returns in 3 to 4 years. 35

6.3 High marketing and promotional budgets: The opening up of ISP services without a license fee by the DoT will result in many service providers in each region, and therefore inevitable cannibalization of each other‘s market share by these providers. The only way to gain an edge in market share is by developing a larger audience base through regular Internet technology awareness seminars and workshops, coupled with aggressive marketing, promotional campaigns and schemes. Every potential customer converted by a competitor would potentially recommend that competitor to other customers too. This is especially true in this industry as the newness of the field makes any user with even a month‘s experience a relative expert for the novices.

6.4 Strategic alliances with ancillary service providers: Potential customers will look for additional services besides Internet access, such as technical consulting, training, assistance in seeking information from the Internet, Web site design services, Internet advertising consultants, and newsletters about Internet resources. It is nonviable for the ISP to maintain full time staff for all these services that would be required from time to time. However, these services will be a source of additional significant revenue, for the ISP and third party service providers it is allied with. Within a year or so of operations, revenue from this sector would be 25% or more of total revenue.

6.5 Lobbying power with central and state Governments: Again drawing a parallel with the private airline industry in India, this would be an important factor for any realistic ISP business plan. Going by track records, the ground rules for the industry will be changed repeatedly through unilateral policy announcements by various related Government departments. Like in the airlines, those start-ups who are able to get prior knowledge of upcoming changes in policy, and have the power to influence these changes, will have better chance of survival as well as the possibility of eliminating competition. This is a reality in Indian Telecom that cannot be ignored.

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Conclusion: The key factors for success of a Private ISP will be a technical edge, financial capability to sustain losses over at least two years, high marketing and promotional budgets, strategic alliances with ancillary service providers, and lobbying power with the central and state governments.

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Chapter 7 Strategic Group Mapping Strategic groups are sets of firms within an industry that share the same or highly similar competitive attributes. Strategic group maps provide a useful way to identify and assess strategic groups using selected competitive attributes. Form most managers, significant value is resident in creating and analyzing strategic groups as an element of their strategy formulation activities.

 Main Thoughts: An insightful way to conduct industry specific analysis is through the identification and analysis of strategic groups. Strategic groups are sets of firms within an industry that share the same or highly similar competitive attributes. These attributes include but are not limited to: pricing practices, level of technology investment and leadership, product scope and scale capabilities, go-to-market strategy and product quality. By identifying strategic groups, analysts and managers are better able to understand the different types of strategies that multiple firms are adopting within the same industry. 

Strategic Group Maps A useful way to analyze strategic groups is through the creation of strategic group maps. Strategic group maps present the various competitive positions that similar firms occupy within an industry. Strategic group maps are not difficult to create; however, there are a few simple guidelines managers want to use when developing them.



Identify Key Competitive Attributes As mentioned previously, many firms share similar competitive attributes such as pricing practices and product scope. The first step in developing a strategic group map is to identify key competitive attributes that logically differentiate firms in a competitive set. This is not always known in advance of creating the map so it is important to be ready to create multiple maps using different variables.

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

Create Map Based Upon Two Key Attribute Variables For the variables selected, assign each variable to the X and Y axis, respectively. Also, select a logical gradation value for each axis so that differences will be readily observable. When complete, plot each firm‘s location on the map for the industry being analyzed. As each firm is plotted use a third variable—such as revenue—to represent the actual plot size of each firm. Using a variable like revenue helps the reader understand the relative performance of each firm in terms of the third variable.

 Identify Strategic Groups Once all of the firms have been plotted, enclose each group of firms that emerges in a shape that reflects the positioning on the strategic group. At this point, assess whether or not the differences between each group are meaningful or whether other variables must be selected from which another set of strategic groups can be drawn.

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Chapter 8 OT Analysis An OT (Opportunities and Threats) analysis isused to identify where a company shouldplace them in an industry, wherethey can improve, and what they shouldlook out for from their competitors.

Each of the four ISP groups to bediscussed (large, small, telco and Cable Company) have their distinct

strengths,weaknesses,

opportunities

and

threats.Some

factors,

such

as

technologicalchange (e.g. the introduction of advancedlocal access mechanisms) will act asgeneric opportunities or threats to all ISPs.Many others apply to one or more of themain groups.

8.1 ISP OT Analysis

Opportunities Relationships with telcos Mergers with content providers Buyout Acquire smaller enterprises Development of web applications

Threats Entries of telcos/ cable companies Some Market Squeeze Saturation of the market

Fig. 8.1 ISP OT Analysis 40

Opportunities: There are massiveopportunities in this industry for allcompanies.For large ISPs, relationships with telcosare becoming manifold. Telcos want to enter the market, and ISPs do not want torun the risk of losing out to the telcos, somany partnerships arise.

Mergers with content providers are alsooccurring. This is the easiest way for bothtypes of company to make their way intothe other‘s market.Those who set up an ISP before the ‗gold rush‘may wish to be bought out. Example, An acquisition of Infotel (ISP) by Reliance Industries and took part in the bidding process of 3G spectrum allocation & grab the highest number of spectrum nationwide. Therefore, if anISP acquires a number of smallercompanies, its increase in value faroutweighs the price of the companiesalone. As there are many small companiesthat may wish to be bought out, there isopportunity here for those that can buythem.

Because large ISPs have the resources andthe know-how, they may wish to developweb applications as well as new Internettechnologies. Certain applications couldprove to be very attractive, particularly ifthey were provider-exclusive.There are usually opportunities for largecompanies to branch out into otherindustries. Large ISPs may wish toconsider related industries in the generalarea of computing. When moving into arelated area, brand name and customerbase can be invaluable.

Threats: The largest threat to large ISPs isthe entry of other established companies, such as telcos and cable companies intothe market. These companies have goodexperience, may have large resources, andmay have the ability to buy ISPs out. There is to be some market squeeze, whichwill result in only those that are providingsomething special surviving. ISPs canmerge, acquire and partner, but there isstill the threat of losing out in animmensely competitive market. Eventually the market will becomesaturated. This may not happen for someyears, but small ISPs that have found aniche will survive, and large ISPs thathave sufficient power will survive andthere will be no place for others.Large ISPs are in a position now wherethey can grow and 41

make a profit, but thereare still areas in which they can improve,and they are still at a great risk of losingout to new entrants. Broadly speaking, ISPs face threats/challenges in four inter-related areas: customer relations, technology, regulatory framework, and resources

Customer Relations

Technology

Volatile customer satisfaction

Integrating ever changing technologies

Customer churn, customer trust

Delivering new services in real time

Need for differentiated services

Developing and managing rapidly expanding Infrastructure

Resources

Regulatory Framework

Telcos have more resources

Censorship of the Internet

Acquiring capital investment for

Responsibility for content

Infrastructure

Possible charges for services such as VOIP

Hiring experienced employees

Uncertainty

Fig. 8.2 Threats to ISPs

All four areas are of significant importance.

 Customer Relations From a service point of view, good customer relations are necessary. Theretends to be volatile customer satisfaction of ISPs, and no matter what technologyand services are available, customers willnot stay with a provider they aredissatisfied with.

Customer churn is a huge problem, particularly among large ISPs, and can be over 30%. Because it costs so much towin customers, it is very important that anISP holds on to the customers it has. Because customer demands are onlytemporarily gratified by new technologies,there is always a need for new services inorder to keep the customer satisfied.

42

 Technology For obvious reasons, technology is ofsignificance.ISPs have to figure out how to integratethe available technologies and providethem in a satisfactory way. This is an on-going challenge, as technologiescontinue to change.

As new services emerge, ISP must come to terms with delivering these in real time.They must always be aware of thedevelopments and management associatedwith a rapidly expanding infrastructure.  Resources Large ISPs, particularly those which are part of another company such as a telco,have large amounts of capital. Thisgenerally enables them to acquirenecessary resources. Issues such asupgrading technology may be a hugechallenge to small ISPs who, although they may be efficient and profitable,cannot afford to make large investments.

Acquiring capital investment for infrastructure will be a great challenge formany ISPs.The lack of experienced employees mayalso be a problem. In such a new area, itis not surprising that the number of totallyqualified potential employees is low. Thiswill, of course, change.  Regulation The intervention of the regulator will raisenew issues and challenges. Because theInternet is so unregulated, it is hard topredict what effects regulation will have,but it will probably result in some sort ofcollaboration between ISPs and regulatorsregarding content control and other issues. Charging above that of today is also likely to result, associated with value-addedservices such as VoIP.

43

Conclusion: Opportunities Relationships with telcos, Mergers with content providers, Buyout, Acquire, Example, An acquisition of Infotel (ISP) by Reliance Industries and took part in the bidding process of 3G spectrum allocation & grab the highest number of spectrum nationwide. Smaller enterprises, Development of web applications Threats Entries of telcos/ cable companies, Some Market Squeeze, Saturation of the market.  Customer Relations  Technology  Resources  Regulation

44

BSNL SWOT Analysis Bharat Sanchar Nigam Ltd (BSNL), the corporate version of erstwhile DOT, came to existence st

on 1 October 2000. Ever since the formation of BSNL, the Indian telecommunications scenario has been transforming itself into a multi-player, multi-product market with varied market sizes and segments. Within the basic phone service the value chain has split into Basic services, long distance players, and international long distance players.

BSNL’s positioning in telecom industry To understand and suggest – how strategic management can help BSNL – the first thing is to understand the Telecom industry environment and the stakeholders involved. Apart from having to cope with the change in structure and culture (government to corporate), BSNL has had to gear itself to meet competition in various segments – basic services, long distance (LD), and International Long Distance (ILD), and Internet Service Provision (ISP), and Mobile services. With the advent of competition the private operators have been impacting the strategic matrix by influencing regulatory bodies, adopting intelligent media strategies, and by targeting the creamy layer of customers. While, political control over the public sector remains a contentious strategic issue in the country; with the formation of a company, the internal strategy of the BSNL board will be of gaining considerable autonomy. Labour unions are powerful internal stakeholders, as are the middle managers/ other staff that have the primary responsibility for customer care. The following stakeholders diagram gives an insight about the changing telecom industry environment for BSNL BSNL’s SWOT ANALYSIS Environment BSNL definitely requires redefining its strategies. What is required is to identify the potential opportunities and threats implied by this changing environment for the BSNL. In changing trends, situations, and events gaining an accurate understanding of BSNL‘s strengths and limitations will help in better strategic management of organization. The SWOT analysis for BSNL is as follows –

45

BSNL – SWOT ANALYSIS

STRENTHS

         

Pan-India reach Experienced telecom service provider Total telecom service provider Huge Resources (financial & technical pool) Huge customer base Most trusted telecom brand Transparency in billing Easy deployment of new services Copper in last mile can be used for easy broadband deployment Huge Optical Fibre network and associated bandwidth

WEAKNESSES

            

OPPORTUNITIES

         

Tremendous market growing at 20 lac customers per month Untapped broadband services Untouched international market Can capitalize on public sector image to grab government‘s ICT initiatives Diversification of business to turn-key projects Leveraging the brand image to source funds Almost un-invaded VSAT market Fuller utilization of slack resources Can make a kill through deep penetration and low cost advantage Broaden market expected from convergence of broadcasting, telecom and entertainment industry

Non-optimization of network capabilities Poor marketing strategy Bureaucratic organizational set up Inflexibility in mindset (DOT period legacies) Limited number of value added services Poor franchisee network Legacy of poor service image Huge and aged manpower Procedural delays Lack of strategic alliances Problems associated with incumbency like outdated technologies, unproductive rural assets, social obligations, political interference, Poor IT penetration within organization Poor knowledge Management

THREATS

       

Competition from private operators Keeping pace with fast technological changes Market maturity in basic telephone segment Manpower churning Multinational eyeing Indian telecom market Private operators demand for sharing last mile Decreasing per line revenues due to competitive pricing Private operators demand to do away with ADC can seriously effect revenues

46

Having analysed the external environment and assessed the internal strengths and weaknesses of BSNL, the key issues can be summarized as follows: 1. Innovative products based on convergent technology in order to acquire dominant market position. BSNL can achieved by – 

Replacement of all the outdated technologies



Redeployment of unutilized capacities should be considered first.



Early deployment of cost effective Wi fi/Wi max Technologies



Migrating to NGN (Soft Switch) on large scales, which will unable seamless integration of upcoming technologies.



Increasing the capital investment in convergent technologies even if it renders certain in use technologies redundant.

2.

BSNL should initiate Customer Orientation Strategy to retain existing customers as well as to attract new customers by – 

Creating a Service-Oriented culture within the organization by linking incentives to customer satisfaction.



Introducing flexible Registration Terms so that new customers are attracted.



Promoting/Introducing user-friendly service systems such as Electronic Clearing system, internet or E-seva for bill payment



Educating the customer about services in detail and respective tariff structure



Introducing service at door-step.

3. Extensive use of IT can not only improve operations but can add to greater customer satisfaction. Despite being a technology intensive organization IT penetration in BSNL is not commensurate. Presently, the use of IT in BSNL is restricted to – 

DQ (Directory Enquiry), IVRS (Interactive Voice Response System)



Accounting and billing systems



Commercial & Fault Repair System package



Telephone Directory on CD ROM and on the Internet.

4. Shorten the purchase-decision cycle; BSNL should redefine procurement processes to which is critical in project implementation to any telecom service provider. BSNL should enter in long

47

term supply contract with world-class players to come out of L-1 mantra of tendering process. This will help BSNL to counter the strategy of its competitors to stall the very procurements of critical items.

5. BSNL-MTNL merger. Strategic alliance to get pan-India footprints through The combined operations will also ensure several other sustainable advantages such as deeper and stronger pockets and greater marketing clout. These synergies would obviously help BSNL by way of volumes to engage in prolonged tariff wars for a whole range of value-added services and give private telecom companies a run- for- their money. The merger of BSNL with MTNL can also give some respite to BSNL by expanding its resource kitty with which it can fulfill its responsibility of providing rural connectivity all across the country. 6. Diversification strategy BSNL should have strategic alliance with content providers, international long distance operators and cable operators as a. Turnkey projects for providing total solutions to corporates /governments should be undertaken as a business proposition by entering into partnerships. 7. Marketing strategy needs to be redefined and should focus around Value Added Services,

building

strong

distribution

chain

and

differential

treatment

to

premium/corporate customers. 8. Human Resource Management BSNL need to overhaul its Human Resource Management strategy and should focus on –  Tie up with top business schools in India for training their managers at various levels.  Redeploying its manpower from bigger cities to smaller ones  Coming out with VRS/CRS for manpower above the age of 50.  Creating value through employee motivation and should develop reward and punishment system  Effective knowledge management within organization  Preventing manpower churning The VRS/CRS scheme is likely to be opposed by the unions and the implementation may be difficult in the politicized environment. However, rightsizing the organization is of paramount importance for the long run interests.

48

9. Restructuring of organizational on business type model BSNL‘s organization structure still remains more or less functional in structure. The with each product/segment considered as a separate business will help in a. Better management b. Improved segmental efficiencies c. Improved organizational communication d. Better performance monitoring e. Develop focus on revenue 10. Revenue Maximization Strategies:

The telecom sector is the most competitive sector post

liberalization. This has resulted in a movement from growth based business model that emphasized growth in numbers or even ARPU to profit-based model where the success is measured by margins. BSNL as part of the transition has to adopt both cost reduction and revenue enhancement measures, which would directly impact profitability. The key concerns for BSNL for effective revenue realization are –  The delay in customer billing after activation  Time lag between calls generated and billed  Scope of fraud  Non-availability of uniform database. 11. Pricing strategy – Tariff fixation is crucial in a competitive scenario where it is required to offer, “value based”, top down convergent services are being provided by the competitors instead of cost based, bottom up pricing. The focus has been on acquiring profitable customers, however, for BSNL, it is equally important to target the old (by number of years of association) customers to ensure retention. Revenue figures indicate that ARPU is higher for that category of subscribers. Loyalty programmes serve as an excellent platform for such strategy. The customers‘ feedback should be incorporated to assess the attractiveness and economic viability of such programmes. A successful loyalty programme becomes the driving force in customer relationship management strategy. 12. Cost Management Strategies: As a result of slow growth in revenues and declining market share, focus is simultaneously required on cost control measures like –  Integrated financial software is essential for the management to be able to monitor costs.  BSNL‘s liability in terms compulsory operational expenses is very compared to industry standards, primarily due to excess manpower. Though a high percentage of employees 49

will retire in three years time , however in order to expedite the process, voluntary retirement schemes have to be introduced.  BSNL is also burdened with legacy technology, which needs to be phased out, and replaced with cost-effective technology alternatives.  There is need to assess the core competencies of BSNL and outsource the non-core activities like bill printing, call enter management etc. by transformational cost control.

Summary BSNL should change its strategy of acting as follower to that of leader. Instead of reacting to other operators move it should start acting proactively. BSNL should adapt greater standardization and flexibility in systems. Only then new service rollouts will be faster, and ideas will be converted into revenue streams. The overall strategy of BSNL can be of concentrating on the mobile and broadband business in near future and to immediately phase out loss making businesses like telegraph, VSAT communication etc. BSNL can leverage on its pan India reach and economies of scale to achieve overall cost leadership. At the same time capital investments can be made in next generation networks where stress should be on Wi-Max, content based data service and VOIP. Emphasis on organizational restructuring coupled with customer orientation and operational efficiency can help BSNL find place in Asian Telecom market.

50

Chapter 9 Major issues confronting industry  Broadband as Key Infrastructure 

Broadband should classified as ―Key Infrastructure‖



Income Tax benefits u/s 80(I) (A) should be allowed to ISPs and other licensees authorized to provide Internet/Broadband.



Cyber café‘/ public kiosks should be exempted from the Service Tax as they are helping in spreading the usage of Internet Broadband in the places where it is difficult to afford PC/Internet.

 Support from USO Fund 

Must be provided to All Operators / Service Providers offering Broadband Services to Rural Areas;



Limiting the same to voice telephony alone mean higher dependence on subsidiaries.



Let broadband network offer a cheap voice service to rural people along with other services/applications.

 Bandwidth Prices 

International bandwidth and domestic leased lines contribute about 60-70% of the cost in the provision of Broadband.



Though prices for Int‘l as well as Domestic leased lines came down substantially, however, it is still high comparing to many countries where broadband penetration is quite high.

 Check on Predatory Polices & Practices 

Time to time ISPAI has been taking up the matter with TRAI about the predatory policies and practices by Incumbent as well as other UASL operators.

51



ISPs should be treated as bulk customers and be given whole sale prices. TRAI should ensure and keep an eye on the same.



Incumbent and other UASL operators should not deny provision of any resources to ISPs just because some resources have been provisioned from other service provider.

 Internet Telephony - Level Playing Field 

ISPs Vs foreign service providers such as Net 2 Phone, Vonage, Dialped, Impetus, Novanet, Euros, Skype, Yahoo etc are providing I..T. to SMEs, Corporate,BPOs, Call Centres without having register in India and without any license.



Whereas ISPs providing similar services have to pay 12.36% Service Tax and 6% AGR.



It is loss of revenue to Govt as well as loss of opportunity for Indian ISPs. It is also serious security threat to the nation as they do not come under any Indian regulatory/ policy framework. It may not be possible to obtain any data such as CDRs from them.

 Restricted Internet Telephony : 

Hurts Consumers and



Government Revenue



Help flourishing Gray Market



Loss of opportunity for legitimate ITSPs

 IPTV :



Is not a technology per se, rather it is a value added services which can be provided on the broadband network.



ISPs are in a position to provide triple play.



Rs. 100 cr. Net worth has kept most of the standalone ISPs out of the business.

52

 Accelerating the speed of e-Governance : 

Govt. should encourage states to accelerate the pace of e-governance process and put more and more public utility information and services on the Internet.

 Content Development 

Broadband infrastructure is meaningless without appropriate content. Govt. (Both Central & State) should provide more content in the local languages.

 Spectrum for Broadband 

Spectrum policy favour Voice against Data



ISPs are being neglected which are the major stake holder in Wi-Max and Wireless Broadband



Auctioning of Spectrum will translate in to increase of prices for Broadband services in the country which is a price sensitive market.



ISPs will be out of the business.



At least 3 frequency bands must be reserved for ISPs which will help increasing penetration in the rural areas.

53

Chapter 10 Conclusion The above has discussed the structure ofthe market, looking at competition,regulation, introducing its main players,and looking at its trends, both those thatare occurring and those that look likely toemerge.

Mergers and acquisitions have shown tobe popular methods of growth, both ingeographic terms and in terms of customerbase. These have been occurring not justamong ISPs, but among many companiesentering the market. In spite of the largeamount of mergers, the total number ofISPs has stabilized due to the huge numberof new entrants.

Telcos, cable companies and others haveentered the market, either by mergers andacquisitions, or by creating ISPs themselves. These companies, amongstothers, are proving to be an immensethreat to existing ISPs.There has been a tremendous emphasis onvalue-added services and on content.

Basic services have become commodities and customers are looking for newservices to add value. ISPs securing dealswith popular entertainment andinformation companies will have a greatadvantage in winning customers.

Additional offerings such as quality of service, bundled services, banking, e-commerceetc. are also becomingattractive to customers.There is a clear change of strategy bothwithin an ISP and between ISPs.

Pricing models are changing, as are service offerings. It is predicted that many companies may wish to specialize in onepart of the market rather than trying toprovide everything involved with serviceprovision.

Between ISPs, agreements regarding carriage of traffic have arisen due to thebreakdown of the NAPs. Theseagreements will convenience somecompanies, but may put others at adisadvantage.

54

All in all, Internet service provision is an extremely complex and dynamic area anddetailed investigation of any part of it is beyond the scope of this report.

55

APPENDIX STATISTICS ISP

Market Share (as on mar '10)

BSNL

56.76

MTNL

14.29

Bharti Airtel Ltd.

8.07

Reliance Commn. Infra. Ltd.

7.56

Hathway Cable & Datacom Pvt. Ltd.

1.94

Growth of Internet Subscribers Including Broadband Year

Subscribers (in lakhs)

Mar-03

36

Growth (%)

Mar-04

45

25

Mar-05

56.5

26

Mar-06

69.4

23

Mar-07

92.71

34

Mar-08

110.09

20

Mar-09

135.4

22

Jun-09

140.5

4

Sept-09

146.3

4

Dec-09

152.4

4.21

Mar-10

161.8

6.17

Internet Subscribers Technology wise Type

As on Mar'10

DSL

48.98%

Cable Modem

4.39%

Leased Line

0.19%

Ethernet LAN

3.74%

Fibre

0.22%

Radio

6.88%

Dialup

35.32%

Others

0.27%

56

Government of India Ministry of Communications & IT Department of Telecommunications Sanchar Bhavan, New Delhi Dated: 24th Aug, 2007

No.820-1/2006-LR

GUIDELINES AND GENERAL INFORMATION FOR GRANT OF LICENCE FOR OPERATING INTERNET SERVICES.

Internet service sector was opened for private participation in 1998 with a view to encourage growth of Internet and increase its penetration. The sector has seen tremendous technological advancement for a period of time and has necessitated taking steps to facilitate technological ingenuity and provision of various services. The Government in the public interest in general, and consumer interest in particular, and for proper conduct of telegraph and telecom services has decided to issue the following new guidelines for grant of licence of Internet services on non-exclusive basis with immediate effect: 1. The applicant must be an Indian company, registered under the Indian Companies Act’1956. 2. The applicant company shall submit the application in duplicate in the prescribed Application form enclosed as (Annex-I), for each Service Area separately. 3. The applicant company can apply for Licence in more than one service area subject to fulfillment of all the conditions of entry. 4. The applicant company shall pay a processing fee along with the application (Two copies) of Rs. 15,000/- in the form of Demand Draft/Pay Order from a Schedule Bank payable at New Delhi issued in the name of Pay and Accounts Officer (HQ),

1

DOT , Sanchar Bhawan, New Delhi and the same shall not be refunded for any reason whatsoever.

5. SERVICE AREA : For the purpose of licence, the country has been divided into separate service areas in two categories as mentioned below: Category A: This covers the territorial jurisdiction of the Union of India except specified areas that may be notified to be excluded from time to time. Category B: Any of the twenty three territorial service areas as per Annex-II. 6. There shall be no limit on number of Licences that can be granted in a particular service area. 7. Foreign Direct Investment (FDI): (i)

FDI ceiling in the Licensee Company shall be 74%.

(ii)

Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. Indirect foreign investment shall mean foreign investment in the company/ companies holding

shares

of

the

licensee

company

and

their

holding

company/companies or legal entity (such as mutual funds, trusts) on proportionate basis. Shares of the licensee company held by Indian public sector banks and Indian public sector financial institutions will be treated

2

as `Indian holding’. In any case, the `Indian’ shareholding will not be less than 26 percent. (iii)

FDI up to 49 percent will continue to be on the automatic route. FDI in the licensee company/Indian promoters/investment companies including their holding companies, shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities.

(iv)

The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement.

(v)

FDI shall be subject to laws of India and not the laws of the foreign country/countries.

8. Security Conditions: (i)

The Chief Officer In charge of technical network operations and the Chief Security Officer should be a resident Indian citizen.

(ii)

Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the Licensor (Department of Telecommunications, Government of India) would be required if such information is to be provided to anybody else.

(iii)

For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled / routed to any place outside India. 3

(iv)

The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected.

(v)

The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens.

(vi)

The majority Directors on the Board of the company shall be Indian citizens.

(vii)

The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee.

(viii) The Company shall not transfer the following to any person/place outside India:(a) Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature) ; and (b) User information (except pertaining to foreign subscribers using Indian Operator’s network while roaming). (ix)

The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement. 4

(x)

On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location of wireless subscriber) at a given point of time.

(xi)

The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Security Agencies (IB).

(xii)

Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time.

(xiii) The licensee company is not allowed to use remote access facility for monitoring of content. (xiv)

Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes.

(xv)

Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor.

(xvi)

The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location. 5

(xvii) The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix)

In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories.

(xx)

For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies.

(xxi)

In case of other service providers, the bandwidth can be provided only to registered Other Service Providers.

9. The one time entry fee of Rs. 20 lakhs for Category-A Internet Service Licence & Rs. 10 lakhs for Category-B Internet Service Licence is to be paid before signing of the licence agreement. 10. An annual licence fee @6% of Adjusted Gross Revenue (AGR) subject to minimum of Rs.50,000/- (Rupees Fifty Thousand Only) and Rs.10,000/- (Rupees Ten Thousand Only) shall be charged for category A & B service areas respectively per annum per licenced service area. The revenues accrued from pure Internet services will be excluded from the definition of AGR for the purpose of computing licence fee. 11. A Financial Bank Guarantee (FBG) of Rs. Ten Lakh for Category ‘A’ Service Area Licence and Rs. One Lakh for Category ‘B’ Service Area Licence, valid for one year, is to be provided before signing of the licence agreement (in prescribed 6

format) (Annex-III). Based on AGR, the amount of FBG shall be reviewed annually by the Licensor. 12. A Performance Bank Guarantee (PBG) of Rs. Two crore for Category ‘A’ and Rs. Twenty Lakh for each Category ‘B’ service area valid for two years from any scheduled bank in the prescribed form (Annex-IV). 13. SCOPE OF SERVICE: Following services can be provided within the scope of Licence for Internet Service : (i)

Internet Access: Internet Access is use of any device/ technology/ methodology to provide access to Internet including IPTV. However, the content for IPTV shall be regulated as per prevailing laws.

(ii)

Internet Telephony: Internet Telephony is a service to process and carry voice signals offered through Public Internet by the use of Personal Computers (PC) or IP based Customer Premises Equipment (CPE) connecting the following : (a) PC to PC; within or outside India (b) PC / a device / Adapter conforming to standard of any international agencies like- ITU or IETF etc. in India to PSTN/PLMN abroad. (c) Any device / Adapter conforming to standards of International agencies like ITU, IETF etc. connected to ISP node with static IP address to similar device / Adapter; within or outside India. (d) Internet Telephony is a different service in its scope, nature and kind from real time voice as offered by other licensed operators like Basic Service Operator (BSO), Cellular Mobile Service Operator (CMSO), Unified Access Service Licence (UASL), National Long Distance 7

Operator(NLDO), International Long Distance Operator (ILDO) and Public Mobile Radio Trunk Service (PMRTS). (iii)

Except whatever is described in condition (ii) above, no other form of Internet Telephony is permitted.

(iv)

Addressing scheme for Internet Telephony shall only conform to IP addressing Scheme of Internet Assigned Numbers Authority (IANA) exclusive of National Numbering Scheme / plan applicable to subscribers of Basic / Cellular Telephone service. Translation of E.164 number / private number to IP address allotted to any device and vice versa, by the licensee to show compliance with IANA numbering scheme is not permitted.

(v)

The Internet Service Licensee is not permitted to have PSTN/PLMN connectivity. Voice communication to and from a telephone connected to PSTN/PLMN and following E.164 numbering is prohibited in India.

(vi)

Unified Messaging Services (UMS) without any additional PBG within the scope of (i) to (ii) above can be provided.

(vii)

The Licensee shall ensure that Bulk Encryption is not deployed by ISPs connecting to Landing Station. Further, Individuals/Groups/Organizations are permitted to use encryption upto 40 bit key length in the symmetric key algorithms or its equivalent in other algorithms without having to obtain permission from the Licensor. However, if encryption equipments higher than this limit are to be deployed, individuals/groups/organizations shall do so with the prior written permission of the Licensor and deposit the decryption key, split into two parts, with the Licensor.

8

(viii) Internet Service to any VSAT subscriber (who could be served by a shared hub commercial service provider or captive private VSAT network) can be provided, if the VSAT is located within the service area of the ISP. For this purpose, a direct interconnection of VSAT or VSAT-hub through leased line obtained from an authorised provider to the ISP’s node/server shall be permitted only for the flow of Internet traffic. The existing licence for Closed Users Group Domestic (CUG) / Domestic Data Network via INSAT Satellite Systems does not grant long distance carrier rights to the licensee. The ISP shall provide to the Licensor a monthly statement of VSAT subscribers served with their locations and details of leased line interconnection with the VSAT hub. The VSAT hub, however, need not be located in the service area of the ISP.

14. The licensee shall provide service within 24 months from the date of signing of the licence agreement.

Commissioning of service will mean providing

commercial service to customers. 15. The company having ISP licence and a net worth of Rs. One Hundered crore or more can only offer IPTV services subject to approval from Licensor.

A

certificate from Company Secretary or Auditor (certifying the net worth of the company) is to be submitted. 16. Appointment of franchisee (directly or indirectly) outside licensed service area is not permitted. 17. For the purpose of providing the SERVICE, the licensee shall install, test and commission his own suitable equipment within the geographical limit of the service area so as to be compatible with the other service providers’ equipment 9

and connect the same to a Gateway owned by a Licensed Internet Gateway Provider / ILDO for routing International Internet Traffic. ISPs are also allowed to set up International Internet Gateway after obtaining security clearance/approval from Authority. ILDOs and International Internet gateway providers providing International Internet bandwidth to ISPs has to install suitable device/devices for blocking of Uniform Resource Locator (URL). 18. Operation of Internet service requires IP address which can have up to 128 bit binary address or higher in future. This address is required for connection on Internet. Typically, it is required for the ports of the routers, other ISP equipments for the lease line connection and for the user end equipments / devices. 19. All subscribers except dial up subscribers have to be within the service area. 20. Direct interconnectivity between two separately licensed ISPs shall be permitted. 21. The licensee may obtain the transmission link on lease from any licensed service provider. If the LICENSEE has in addition, leased or rented other telecommunication resources from any other Telecom Service Provider authorized by the Government of India, purely for the purposes of providing the service and networking its geographically dispersed equipment, such resources will be a matter between the ISP and the service provider(s). The licensee may also establish its own transmission links within its service area for carrying traffic originated and terminated by the subscriber. 22. Resources required for interconnecting the licensee’s network to the network of upstream internet access providers or any other service provider licensed by the Authority including time frame for provision of the same, will be mutually agreed between the parties concerned subject to regulation / directions / orders of TRAI / Licensor. The resources may refer to include but not limited to physical junctions, 10

PCM derived channels, private wires, leased lines, data circuits other network elements. The licensee shall apply for and obtain the network resources from the concerned parties. The tariff of such network is outside the scope of this licence agreement. Licensor will have no obligation for such resources from other parties. 23. The validity of licence is initially for a period of fifteen years unless otherwise terminated. If requested by the licensee, extension may be granted by the LICENSOR on suitable terms and conditions for a period of five years or more at a time. The decision of the LICENSOR shall be final in this regard. 24. Access to internet through authorised Cable Operator shall be permitted to ISPs without additional licensing subject to applicable Cable Laws (The Cable Television Networks (Regulation) Act, 1995) as modified from time to time. 25. ‘Last mile’ linkages shall be freely permitted within local area either by fibre optic or radio communication or underground copper cable for ISPs. In case of radio links, clearance from WPC wing of the DOT shall be required to be obtained by the ISPs. 26. The quality of service shall be as prescribed by TRAI/ Licensor from time to time. 27. Flow of obscene, objectionable, unauthorised or any other content infringing copy-rights, intellectual property right and international & domestic Cyber laws in any form over the ISP’s network is not permitted and the ISP is supposed to take such measures as to prevent it. Any damages/claim arising out of default on the part of the licensee in this respect shall be the sole responsibility of the licensee. 28. The ISP should make available all the billing details of any subscriber on demand by Licensor for upto one year. 29. Monitoring facilities.

11

(a) At each - International Gateway location and / or ISP node with a router/switch having an outbound capacity of 2 Mbps or more: (i)

Every international gateway location and/or the ISP node with a router/switch having a capacity of 2 Mbps or more shall be equipped with a monitoring Centre at the cost of the ISP. Suitable appropriate monitoring system is to be set up by ISPs carrying traffic through their Internet gateways and /or ISP nodes at their own cost, as per the requirement of the security agencies and the cost of maintenance of the monitoring equipment and infrastructure at the monitoring centre located at the premises of the licensee shall be borne by the ISP.

(ii)

Office space of 10 feet x 10 feet with adequate uninterrupted power supply and air-conditioning which will be physically secured and accessible only to the monitoring agencies will have to be provided by the ISP at each location, free of cost.

(iii)

In addition to the equipment, one local exclusive telephone line is to be made available by the ISP at the monitoring centered, the cost to be borne by the ISPs.

(iv)

The cost of maintenance of the equipment and infrastructure mentioned above at monitoring centre located at the premises of the ISP is to be borne by the ISP.

(v)

Each router/switch of the ISP should be connected by the LAN operating at the same speed as the router/switch, the monitoring equipment will be connected to this network.

(vi)

For a national ISP or an ISP having multiple nodes/point of presence, a central monitoring centre to monitor the traffic in all the Routers/switches from a central location would be acceptable. However, in such a case, the ISP has, at the outset, to demonstrate to the Licensor that all routers / switches are accessible from the central monitoring centre. Moreover, the ISPs would have to inform the Licensor of any change that takes place in their topology /configuration, and demonstrate that all routers/switches continue to be accessible from the central monitoring centre. The decision of Licensor will be final on the issue. 12

(b) At location where the ISP node router/switch has an outbound capacity less than 2 Mbps : At locations where the ISP node has router/switch with outbound capacity less than 2 Mbps, the ISPs shall provide (i) a LAN, (ii) office space of 10 feet by 10 feet and (iii) a local exclusive telephone line, all at the cost of the ISP. The monitoring equipment will be provided by the monitoring/ security agencies. 30. LICENSOR shall have the right to take over the SERVICE, equipment and networks of the LICENSEE either in part or in whole of the Service Area as per directions if any, issued in the public interest or national security by the Government in case of emergency or war or low intensity conflict or any other eventuality. Provided any specific orders or direction from the Government issued under such conditions shall be applicable to the LICENSEE and shall be strictly complied with. 31. The Government reserve the right not to grant a Licence without assigning any reason. 32. It will be the responsibility of the licensee to obtain IP address, domain name etc. from the competent authority. 33. The Licensor or personnel authorized by the Licensor reserves the right to carry out surprise inspection. 34. The ISP licensee shall block Internet sites and individual subscribers, as identified by Licensor. 35. The LICENSOR reserves the right to modify at any time the these guidelines and terms and conditions of the LICENCE, if in the opinion of the LICENSOR it is necessary or expedient to do so in public interest or in the interest of the security

13

of the State or for the proper conduct of the telegraphs.

The decision of the

LICENSOR shall be final and binding in this regard. 36. All existing Category ‘C’ ISPs are encouraged to migrate to Category ‘B’ or Category ‘A’ by providing additional FBG and PBG. In case they do not migrate, they will be allowed to continue in Category ‘C’ till the expiry of the existing licence which will not be renewed in Category ‘C’. 37. The entry fee is not applicable to existing ISPs. 38. The surrender of Licence shall be governed as detailed below: (a) All ISPs who have completed the allocated period to roll out Internet services counted from the date of issue of the ISP license and have not yet rolled out their services have option to surrender the license paying 5% of PBG as surrender charge within six months of such notification. (b) All ISPs who have not rolled out services and want to surrender ISP licenses may be permitted to do so within six months form date of such notification by paying 2.5% of PBG as surrender charges provided they have not yet completed allocated period for roll out of services. (c) All ISPs who have already started Internet services and want to

surrender ISP license will be permitted to do so without any surrender charges provided it gives due notice to its subscribers. 39. The Licence shall be governed by the provision of Indian Telegraph Act, 1885, Indian Wireless Telegraphy Act, 1933 and Telecom Regulatory Authority of India Act, 1997 as modified or replaced from time to time. 40. The detailed terms & conditions will be available in the draft Licence Agreement. 41. International Gateway for Internet using Satellite Medium

14

(a) An ISP can set up International Gateway Station using satellite medium for Internet with prior approval of the Licensor by applying in the prescribed form as per Annex-V with a processing fees of Rs. Forty Thousand payable to Pay and Accounts Officer (HQ), DOT, Sanchar Bhavan, New Delhi. (b) The ISP has to apply to the Licensor for bandwidth (transponder capacity in case of satellite access) giving the detailed requirement. (both short term and long term). (c) Gateway will be used only for carrying Internet Traffic. (d) The ISP should provide information about all ISPs that would be connected to the gateway. Any change should be intimated immediately to the Licensor. (e) The details of the topology should be provided including the details of how the monitoring equipment will be fitted. Any change in the topology should be informed to the Licensor immediately. (f) Details of types of services that are proposed to be provided should be given. Any change in the same should be informed to the Licensor immediately. (g) The permission to set up Gateway is subject to other clearances/permissions that are required as per the laws of the land and it will be the responsibility of the licensee/company to obtain these clearances/permissions. (h) Gateway shall be permitted to be set up in security sensitive areas subject to setting up of appropriate monitoring equipments by the security agencies and appropriate charges to be paid by licensee towards monitoring equipments or setting up of monitoring equipment. As on date the security sensitive areas are Punjab, J&K, North Eastern States, border areas of Rajasthan, Andaman & Nicobar Islands and coastal areas of Gujarat and Tamilnadu (excluding Chennai). 15

(i) The Internet nodes on places of security importance would be routed as per directions issued from time to time by Licensor. Interconnection of these nodes to other nodes within the country directly is not permitted. 42. Submarine Cable Landing Station For International Gateway For Internet (i)

An ISP is permitted to set up, maintain and operate submarine cable landing station for international gateway for Internet with the prior approval of the Licensor by applying in a prescribed format at Annex-VI with a processing fee of Rs.Fifty Thousand. The landing Station is the first point at which the submarine cable is terminated/connected in India.

(ii)

The Landing Station for International Gateway for Internet shall be used only for carrying Internet traffic.

(iii)

The Landing Station configuration shall be strictly and exactly as per the details provided in the prescribed application. Any variation to that shall only be with the prior written permission of the Licensor.

(iv)

Any information that is asked by the Licensor from the licensee shall be provided forthwith by it and in any case, not later than 15 days of asking for the same.

(v)

All other applicable clearances/ permissions that are required as per the laws of the land, shall be obtained by the ISP licensee.

(vi)

The ISP shall provide information about all ISPs that would be connected to the Landing Station. Any addition shall be with the prior written permission of the Telecom. Authority.

(vii)

Any change or addition in the network topology of Landing Station shall be done only with the prior written permission of the Licensor.

16

(viii) Any change or addition in the type of services offered shall be with the prior written permission of the Licensor. (ix)

Landing Station shall be permitted to be set up in security sensitive areas subject to setting up of appropriate monitoring equipments by the security agencies and appropriate charges to be paid by licensee towards monitoring equipments or setting up of monitoring equipment. As on date the security sensitive areas are Punjab, J&K, North Eastern States, border areas of Rajasthan, Andaman & Nicobar Islands and coastal areas of Gujarat and Tamilnadu (excluding Chennai).

(x)

In case of any complaint or dispute with regard to the resource (bandwidth) from the Submarine Cable or from any subscriber regarding service, such complaint or dispute shall be a matter between the licensee and the bandwidth provider/the subscriber. The licensor shall not be party to any such complaint/dispute.

The licensee undertakes to indemnify

licensor in respect of any action against licensor for acts of commission or omission by or on the part of the resource (bandwidth) provider, licensee, its agents and servants. (xi)

The licensee shall ensure that the Landing Station does not interfere with any other existing systems of any telecom service provider.

(xii)

The Landing Station shall be located within 100 km from the sea shore.

(xiii) It should be possible to effectively monitor the traffic at the Landing Station from the national security point of view. The requirements would include, but not limited to: (a) Monitoring from the security angle – On-line and off-line (capture, store and retrieve) monitoring of all classes of traffic (data, video, 17

audio etc.) specified by various attributes viz. destination, recipient, sender, key words etc. (b) Good quality intrusion detection system to ensure that the landing Station (link) does not become a launch pad for attacking sites within India. (xiv)

Agencies authorized by the Government shall be entitled and enabled to monitor all types of traffic passed through the landing Station, including data, FAX, speech, video and Multi-media etc., both in interactive and non-interactive modes.

(xv)

The monitoring should be possible on the basis of key words/key expressions/addresses (IP address or e-mail address) of initiating or terminating subscribers.

(xvi)

It should be possible to scan through entire traffic passing through the gateway and filter the traffic as per the key words/key expressions and addresses defined by the security agencies. The scanning rate should be such that there should not be any packet drops while scanning. Filtered traffic should be stored in the memory/directory provided for the security agencies, which have defined the monitoring requirement. Before storing the monitored information, it should be segregated and stored in the directory in different files. The filtered information must be decoded and stored in such a way that direct hard copy of FAX and data or audio/video tapes of the speech/video recording could be produced. Log of recorded information for each agency must be created in the directory of the agency concerned displaying the details like date and time of recording, number of record etc. 18

(xvii) Each and every of the security agency shall be provided with adequate and dedicated space, memory, directory and storage in the Monitoring system. (xviii) It should be possible for the monitoring agencies to access the monitoring centre computer through PSTN/ISDN line and dedicated lines (Cable pair or Optical link). Adequate number of all types of interfaces should be provided at the monitoring centre to facilitate remote and dedicated access by the security agencies. (xix)

Remote Accessing/Log-in facility for security agencies should be through fully secured unique password. Each agency must have different password. The access password should be re-definable (changeable) by security agency concerned.

(xx)

It should be possible to monitor the same traffic by more than one security agency simultaneously. However, no agency should know the traffic being monitored by other agencies.

(xxi)

Office space of 20 feet x 20 feet with adequate uninterrupted power supply and air-conditioning which will be physically secured and accessible only to the personnel authorized by Telecom. Authority, shall be provided by the licensee at each location, free of cost.

(xxii) The installation of the monitoring system at the Landing Station is to be done by the ISP licensee. After installation of the monitoring system, the ISP licensee should get the same inspected by monitoring/security agencies. The permission to operate/commission the gateway will be given only after this.

19

(xxiii) The total cost of the monitoring system including its commissioning and maintenance including infrastructure at the premises of the licensee shall be borne by the licensee. (xxiv) ISPs should provide the monitoring software, if specially, developed for monitoring traffic at cable landing terminal, to the security agencies free of cost. (xxv) In addition to the equipment, one local exclusive telephone line shall be made available by the licensee at the monitoring centre, at the cost of the licensee. (xxvi) The licensee shall provide all technical details of and access to various equipment, including hardware, software and communications equipment, when demanded by the Telecom. Authority. (xxvii) Towards the administrative cost for performing monitoring function, a contribution of Rs. 20 (Twenty) lakhs per annum per Landing Station will be made by the ISP licensee. (xxviii)Training shall be provided at the cost of licensee to the security personnel on the equipment installed at the Landing Station. (xxix) A terminal of the NMS, with full access rights will be given to the monitoring agencies. (It is presumed that the landing Station would have a state of the art network management system which can monitor/manage the network effectively.) (xxx) The Licensor shall have all rights to monitor the traffic that goes through the Landing Station. The licensee shall ensure that the bandwidth provider (eg: Submarine Cable company) gives the complete monitoring rights to the Licensor. Also the licensee has to get the assurance from the 20

bandwidth provider that it shall co-operate with the Licensor and also provide any information requested by the Licensor including but not limited to the aforesaid issue of monitoring. (xxxi) Any attempted intrusion that comes to the notice of the licensee should be immediately reported to the Licensor. (xxxii) A suitable monitoring equipment/system to cater to the above mentioned user requirements should be given. Complete and detailed network diagram including the monitoring set up should be clearly indicated. The licensee shall be able to demonstrate the efficacy of the monitoring equipment. (K. Haridhasapavalan) Assistant Director General(LR-I) For and on behalf of the President of India

21

Annex-I GOVERNMENT OF INDIA MINISTRY OF COMMUNICATIONS DEPARTMENT OF TELECOM (DS CELL) Sanchar Bhavan, 20 Ashoka Road, New Delhi –110 001. APPLICATION FOR ISP LICENCE The Application form should contain complete information on each and every point. Additional sheets may be added, if required. Incomplete application or application with conditional compliance shall be summarily rejected. 1

--------------------------------------------------

2

Application for the Service Area: (Separate application is to be submitted for each service area) Name of other service area(s) for which application has been submitted separately.(Attach separate sheet, if required).

3.

Name of Applicant Company:

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.

Complete postal address with telephone/FAX Nos. i) Corporate Office:

ii) Registered Office:

1. ----------------------------------------------2. ----------------------------------------------3. ----------------------------------------------4. -----------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.

Address for correspondence with Telephone/FAX Nos.

---------------------------------------------------------------------------------------------------------------

6.

Name of Authorised contact person, his designation and telephone/FAX Nos. Details of Payment of Processing Fee

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7.

8.

Certified copy of Certificate of Registration duly certified by the Registrar of Companies. (Please enclose as Annexure) 22

9.

Promoters/Partners in the Company: (details of equity holding)

S. No.

Name of Promoter/Partner

Equity % age

----------------------------------------

Indian/ Foreign ---------------

-----------

----------------------------------------

---------------

---------

------

----------------------------------------

---------------

---------

------

----------------------------------------

---------------

---------

------

----------------------------------------

---------------

---------

10.

---------

Total Indian Equity (%age) Total Foreign Equity (%age) Details of FIPB Clearance, if applicable

11.

List of Telecom Service License(s) held by the company and its allied /sister concerns, if any, and their present status. (Attach separate sheet, if required)

(i)

----------------------------------------------------------------------------------------

(ii)

----------------------------------------------------------------------------------------

(iii)

----------------------------------------------------------------------------------------

(iv)

----------------------------------------------------------------------------------------

12.

Resolution of Board of Directors/other proof that the person signing the application is authorised signatory. (Enclose as Annexure )

23

Certificates:1. I hereby certify that I have carefully read the guidelines and draft Licence on Internet Service. I fully comply with the terms and conditions therein. 2. I understand that this application, if found incomplete in any respect and/or if found with conditional compliance or not accompanied with the processing fee, shall be summarily rejected. 3. I understand that processing fee is non-refundable irrespective of whether or not the licence is granted to me. 4. I undertake to sign the Licence Agreement, a draft of which has been supplied to me within the prescribed time notified to me, failing which my application shall be rejected and processing fee forfeited. 5. I understand that all matters relating to the application or licence if granted to me will be subject to jurisdiction of courts in Delhi/New Delhi only. *6.

(a) I certify that none of the companies mentioned in Item 11 of the application form are in default of the conditions of licence granted under Section 4 of Indian Telegraph Act, 1885. (b) I certify that the companies mentioned in Item 11 of this application form are in default as on today of the conditions mentioned separately on attached sheet of paper, of licence granted under Section 4 of Indian Telegraph Act, 1885. *- strike (a or b) whichever is not applicable

7. I understand that such companies and their allied or sister concerns who have failed to carry out the contractual obligations with regard to other Telecom Service Licences granted under Section 4 of Indian Telegraph Act, 1885 shall be granted ISP licence on the condition that any decision with regard to said default or breach whenever taken at the discretion of the Central Government will be applicable in all respects to me. 8. I understand that if at any time any averments made or information furnished for obtaining the licence is found incorrect, my application shall be liable to be rejected and any licence granted on the basis of this application shall be liable for termination.

Date Place

Signature and name of the Authorised Signatory (Company’s Seal)

24

Annex-II Details of Category ‘B’ Service Areas Sl. No.

Areas covered

Name of Telecom Circle/ Metro Service Area

01.

West Bengal

02. 03. 04.

Andhra Pradesh Assam Bihar

05.

Gujarat

06.

Haryana

07.

Himachal Pradesh

08.

Jammu & Kashmir

09. 10.

Karnataka Kerala

11.

Madhya Pradesh

12.

Maharashtra

13.

North East

14. 15.

Orissa Punjab

16.

Rajasthan

Entire area falling within the Union Territory of Andaman & Nicobar Islands and area falling within the State of West Bengal and the State of Sikkim excluding the areas covered by Kolkata Metro Service Area. Entire area falling within the State of Andhra Pradesh. Entire area falling within the State of Assam. Entire area falling within the re-organised State of Bihar and newly created State of Jharkhand pursuant to the Bihar Reorganisation Act, 2000 (No.30 of 2000) dated 25th August, 2000. Entire area falling within the State of Gujarat and Union Territory of Daman and Diu, Silvassa (Dadra & Nagar Haveli). Entire area falling within the State of Haryana except the local areas served by Faridabad and Gurgaon Telephone exchanges. Entire area falling within the State of Himachal Pradesh Entire area falling within the State of Jammu & Kashmir including the autonomous council of Ladakh. Entire area falling within the State of Karnataka Entire area falling within the State of Kerala and Union Territory of Lakshadeep and Minicoy. Entire area falling within the re-organised State of Madhya Pradesh as well as the newly created State of Chattisgarh pursuant to the Madhya Pradesh Reorganisation Act, 2000 (No:28 of 2000) dated 25th August, 2000. Entire area falling within the States of Maharashtra and Goa, excluding areas covered by Mumbai Metro Service Area. Entire area falling within the States of Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Manipur and Tripura. Entire area falling within the State of Orissa. Entire area falling within the State of Punjab and Union territory of Chandigarh. Entire area falling within the State of Rajasthan. 25

17.

18.

19.

20.

21. 22. 23.

Tamilnadu

Entire area falling within the State of Tamilnadu and Union Territory of Pondichery excluding the areas covered by Chennai Metro Service Area. Uttar Pradesh-West Entire area covered by Western Uttar Pradesh with the following as its boundary districts towards Eastern Uttar Pradesh : Pilibhit, Bareilly, Badaun, Etah, Mainpuri and Etawah. It will exclude the local telephone area of Ghaziabad and Noida. However, it will also include the newly created State of Uttaranchal pursuant to the Uttar Pradesh Reorganisation Act, 2000 (No.29 of 2000) dated 25th August, 2000. Uttar Pradesh _ Entire area covered by Eastern Uttar Pradesh with East the following as its boundary districts towards Western Uttar Pradesh: Shahjahanpur, Farrukhabad, Kanpur and Jalaun. Chennai Local Areas served by Chennai Telephones, Maraimalai Nagar Export Promotion Zone (MPEZ), Minzur and Mahabalipuram Exchanges Delhi Local Areas served by Delhi, Ghaziabad, Faridabad, Noida, and Gurgaon Telephone Exchanges Kolkata Local Areas served by Calcutta Telephones. Mumbai Local Areas served by Mumbai, New Mumbai and Kalyan Telephone Exchanges

NOTE: 1. Yenum, an area of Union Territory of Pondicherry is served under Andhra Pradesh Telecom Circle in East Godavari LDCA. 2.

The definition of Local areas of exchanges will be as applicable to the existing cellular operators, i.e. at the time of grant of cellular Licences in Metro cities.

3.

The definition of local areas with regard to the above service area as applicable to this Licence is as per definition applicable to Cellular Mobile Service Licences as in the year 1994 & 1995, when those Licences were granted to them. This is in accordance with respective Gazette Notification for such local areas wherever issued and as per the statutory definition under Rule 2 (w) Indian Telephones Rules, 1951, as it stood during the year 1994/1995 where no specific Gazette Notification has been issued.

26

ANNEX-III Performa for Financial Bank Guarantee To

The President of India In consideration of the President of India (hereinafter called ‘the Authority’) having agreed

to

grant

a

Licence

to

M/s

_____________________________________________

of

_____________________________________ (hereinafter called ‘the LICENSEE’) to establish, maintain and operate Internet Service (hereinafter called ‘the SERVICE’) in ________________ Service Area (Name of Service Area) in accordance

with

the

Letter

of

Intent/

Licence

No.______________________________________ dated ___________________ (hereinafter called ‘the Licence’) on the terms and conditions contained in the said Licence, which inter-alia provides for production of a Bank Guarantee to the extent of Rs.__________________ (in words _________________________) under the said Licence by way of security for payment of the said Licence fee as well as such other fees or charges required to be paid by the LICENSEE under the Licence. We _______________ (indicate the name and address and other particulars of the Bank) (hereinafter referred to as ‘the Bank’) at the request of the LICENSEE hereby irrevocably and unconditionally guarantee to the Authority that the LICENSEE shall pay all the dues, including but not limited to, the Licence fee etc. to the Authority.

2. We, the Bank, hereby undertake to pay the Authority an amount not exceeding Rs………(Rupees…………only) against any loss or damage caused to or suffered or would be caused to or suffered by the Authority by reason of any failure of the LICENSEE to extend the validity of the guarantee or give a fresh guarantee in lieu of existing one in terms of the Licence Agreement, pay all the above mentioned fees, dues and charges or any part thereof within the periods stipulated in the Licence. 3.

We, the Bank, hereby further undertake to pay as primary obligor and not

merely as surety to pay such sum not exceeding Rs._________________________ 27

(Rupees _____________________ Only) to the Authority immediately on demand and without demur stating that the amount claimed is due by way of failure of the LICENSEE to pay any fees or charges or any part thereof in terms of the said Licence.

4.

WE, THE BANK, DO HEREBY DECLARE AND AGREE that the decision of

the Authority as to whether LICENSEE has failed to pay the said Licence fees or any other fees or charge or any part thereof payable under the said Licence and as to the amount payable to the Authority by the Bank hereunder shall be final and binding on us.

5.

WE, THE BANK, DO HEREBY DECLARE AND AGREE that the

(a)

Guarantee herein contained shall remain in full force and effect for a period of

One Year from the date hereof and that it shall continue to be enforceable till all the dues of the Authority and by virtue of the said Licence have been fully paid and its claims satisfied or discharged or till Authority satisfies that the terms and conditions of the said Licence have been fully and properly carried out by the said LICENSEE and accordingly discharged this guarantee.

(b)

The Authority shall have the fullest liberty without our consent and without

affecting in any manner our obligations hereunder to vary any of the terms and conditions of the said Licence or to extend time of performance of any obligations by the said LICENSEE from time to time or to postpone for any time or from time to time any of the powers exercisable by the Authority against the said LICENSEE and to forbear or to enforce any of the terms and conditions relating to the said Licence and we shall not be relieved from our liability by reason of any variation or extension being granted to the said LICENSEE or forbearance act or omission on the part of the Authority or any indulgence by the Authority to the said LICENSEE or to give such matter or thing whatsoever which under the law relating to sureties would but for this provision, have effect of so relieving us.

28

(c)

Any claim which we have against the LICENSEE shall be subject and

subordinate to the prior payment and performance in full of all the obligations of us hereunder and we will not without prior written consent of the Authority exercise any legal right or remedy of any kind in respect of any such payment or performance so long as the obligations of us hereunder remains owing and outstanding.

(d)

This Guarantee shall be irrevocable and the obligations of us herein shall not

be conditional of any prior notice by us or by the LICENSEE.

6.

We, the BANK, undertake not to revoke this Guarantee during its currency

except with the previous consent of the Authority in writing.

7.

Notwithstanding anything contained above, our liability, under the Guarantee

shall be restricted to Rs…… and our Guarantee shall remain in force until….year from the date hereof. Unless a demand or claim under this Guarantee is made on us in writing within this date i.e. …. all your rights under the Guarantee shall be forfeited and we shall be released and discharged from all liabilities thereunder.

Dated_______________ day ________________

for _____________________

(Name of the Bank) Witness: 1…………………………..

2…………………………..

……………………………

……..……………………

……………………………

……………………………

……………………………

……………………………

……………………………

……………………………

29

ANNEX-IV PERFORMA FOR PERFORMANCE BANK GUARANTEE

To

The President of India In consideration of the President of India (hereinafter referred to as ‘the Authority’)

having

agreed

to

grant

a

Licence

to

_____________________________________________

M/s of

_____________________________________ (hereinafter called ‘the LICENSEE’) to establish, maintain and operate Internet Service (hereinafter called ‘the SERVICE’) as per Letter of Intent/ Licence No. ____________________ dated __________ (hereinafter called ‘the said Licence’) on the terms and conditions contained in the said Licence, which inter-alia provides for production of a Bank Guarantee

to

the

extent

of

Rs.__________________

(in

words

_________________________) for the service by way of security for the due observance and performance of the terms and conditions of the said Licence. We _______________ (indicate the name and address and other particulars of the Bank) (hereinafter referred to as ‘the Bank’) at the request of the LICENSEE hereby irrevocably and unconditionally guarantee to the Authority that the LICENSEE shall render all necessary and efficient services which may be required to be rendered by the LICENSEE in connection with and/or for the performance of the said LICENSEE and further guarantees that the service which shall be provided by the LICENSEE under the said Licence, shall be actually performed in accordance with the terms & conditions of the LICENCE to the satisfaction of the Authority.

2. We, the Bank, hereby undertake to pay the Authority an amount not exceeding Rs……(Rupees……only) against any loss or damage caused to or suffered or would be caused to or suffered by the Authority by reason of any breach by the said LICENSEE of the terms and conditions contained in the said Licence including failure to extend the validity of this guarantee or to give a fresh guarantee in lieu of the existing one. 30

3.

We, the Bank hereby, in pursuance of the terms of the said Licence,

absolutely, irrevocably and unconditionally guarantee as primary obligor and not merely as surety the payment of an amount of Rs._________________________ (Rupees _____________________ Only) to the Authority to secure due and faithful performance by the LICENSEE of all his/their obligations under the said Licence.

4.

We, the Bank hereby also undertake to pay the amounts due and payable

under this guarantee without any demur, merely on a demand from the Authority stating that the amount claimed is due by way of loss or damage caused or would be caused to or suffered by the Authority by reason of breach by the said LICENSEE of any of the terms or conditions contained in the said Licence or by reason of the LICENSEE’s failure to perform any of it’s obligations under the said Licence.”

5.

We, the Bank, hereby agree that the decision of the Authority as to whether

the LICENSEE has failed to or neglected to perform or discharge his duties and obligations under the said license and/or whether the service is free from deficiencies and defects and is in accordance with or not of the terms & conditions of the said Licence and as to the amount payable to the Authority by the Bank hereunder shall be final and binding on the Bank.

6.

WE, THE BANK, DO HEREBY DECLARE AND AGREE that:

(a)

the Guarantee herein contained shall remain in full force and effect for a period of Two Years from the date hereof and that it shall continue to be enforceable till all the dues of the Authority and by virtue of the said Licence have been fully paid and its claims satisfied or discharged or till Authority satisfies that the terms and conditions of the said Licence have been fully and properly carried out by the said LICENSEE and accordingly discharged this guarantee.

(b)

the Authority shall have the fullest liberty without our consent and without affecting in any manner our obligations hereunder to vary any of the terms 31

and conditions of the said Licence or to extend time of performance of any obligations by the said LICENSEE from time to time or to postpone for any time or from time to time any of the powers exercisable by the Authority against the said LICENSEE and to forbear or to enforce any of the terms and conditions relating to the said Licence and we shall not be relieved from our liability by reason of any variation or extension being granted to the said LICENSEE or forbearance act or omission on the part of the Authority or any indulgence by the Authority to the said LICENSEE or to give such matter or thing whatsoever which under the law relating to sureties would but for this provision, have effect of so relieving us.

(c)

any claim which we have against the LICENSEE shall be subject and subordinate to the prior payment and performance in full of all the obligations of us hereunder and we will not without prior written consent of the Authority exercise any legal right or remedy of any kind in respect of any such payment or performance so long as the obligations of us hereunder remains owing and outstanding.

(d)

This Guarantee shall be irrevocable and the obligations of us herein shall not be conditional of any prior notice by us or by the LICENSEE.

7.

We the BANK undertake not to revoke this Guarantee during its currency

except with the previous consent of the Authority in writing.

8.

Notwithstanding anything contained above, our liability, under the Guarantee

shall be restricted to Rs…… and our Guarantee shall remain in force until….year from the date hereof. Unless a demand or claim under this Guarantee is made on us in writing within this date i.e. …. all your rights under the Guarantee shall be forfeited and we shall be released and discharged from all liabilities thereunder.

Dated_______________ day ________________

for

_____________________ (Name of the Bank) 32

Witness: 1………………………….. …………………………… …………………………… …………………………… 2………………………….. …………………………… …………………………… ……………………………

33

Annex-V Application for Setting up of International Gateway for Internet (Note: Please read the Guidelines and General Information carefully before filling up this form. The Application form should contain complete information on each and every point. Additional sheets may be added, if required. Incomplete application or application with conditional compliance may be summarily rejected. Fifteen (15) copies of the application, alongwith Annexures, may be submitted to ADG (LR), 10th Floor, Sanchar Bhavan, New Delhi-110 001.) I GENERAL INFORMATION 1. Name of the Company 2. ISP licence No:

Service Area

3. Complete Postal Address with Telephone / fax nos./e-mail address Corporate Office ........................... Registered Office ........................... 4. Address for correspondence with telephone / fax nos./ e-mail address 5. Name of authorised contact person, designation and telephone / fax nos./e-mail address 6. Resolution of Board of Directors / other proof that the person signing the application is authorised signatory (Enclose copy of resolution) 7. Percentage of foreign equity in the company. (Total Foreign equity participation(s), if any upto the extent of 74%, including NRI equity both repatriable and non-repatriable is allowed. Complete break-up of 100% of the equity must be given). Enclose certified copies of the approval/clearance from Govt. of India for foreign equity. 9. No. of International Gateways proposed to set up: 10.Processing fee: A non-refundable processing of Rs. 40,000 Per Gateway Location in the form of Demand Draft payable to Pay and Accounts 34

Officer (HQ), DOT, New Delhi to be submitted with the application. Details of the processing fee: Demand draft no………………………. Date ………………………. Bank drawn ………………………. Amount ……………………….

II TECHNICAL DETAILS OF INTERNATIONAL GATEWAY FOR INTERNET (Note: If applying for more than one Gateway location, please furnish information required under this Section, separate for each of the Gateway location.) 11. Location Details

:

12. Bandwidth requirement (both short term and long term)

:

13. A copy of the diagram of International Gateway Network, giving all details, including its location

:

Annex I

14. International carrier access scheme

:

Annex II

15. Details of equipments to be used for International Gateway Network, including make, specifications, model, etc. :

Annex III

16. Technical specifications of equipment to be used at customers' premises / other internet service access nodes.

:

Annex IV

17. Carrier and modulation Technique

:

Annex V

18. Router/switch configuration for internet gateway and allocation of ports for various uses :

Annex VI

19. Any other Technical detail of relevance :

Annex VII

20. In case of satellite access, details of Earth Station uplinking facilities and equipment to be used for uplinking :

Annex VIII

35

21. Details of proposed interconnectivity with other gateways in India

:

Annex IX

22. Details of International Connectivity on: International Internet Backbone Service Provider Point of access of International connectivity Annex X 23. Details of topology including how the monitoring equipment will be fitted :Annex XI Any change in the topology should be informed to the Telecom Authority immediately. 24. Types of services that will be provided :

Annex XII

III CERTIFICATES/UNDERTAKING (i) We hereby certify that we have carefully read the guidelines and general information on ‘International Gateway for Internet’. We fully comply with the terms and conditions therein. (ii) We also undertake to sign any Agreement with Government of India in this connection. (iii) We understand that all matters relating to the application or permission/licence if granted to us will be subject to jurisdiction of courts in Delhi / New Delhi only. (iv) We understand that our application for operating Internet gateway in India is subject to security clearance by Government of India. (v) We would willingly provide all technical details of and access to various equipment, including hardware, software and communications equipment, to security agencies as and when demanded by the Telecom Authority. (vi) We understand that if at any time any information furnished by us for obtaining the permission/licence is found incorrect, our application shall be liable to be rejected, processing fee forfeited and permission granted on the basis of this application shall be withdrawn and the ISP licence agreement terminated. (vii) We understand that the permission to set up Gateway is subject to other clearances/permissions that are required as per the laws of the land and it will be the responsibility of the licencee/company to obtain these clearances/permissions. (ix) We understand that the Government (Licensor) reserves the right to make changes in the conditions under which this permission/licence is granted.

Date : Place:

Signature and name of the Authorised Signatory

36

ANNEXURE XIII Additional Details for the Application for ISP Gateway for Internet using Foreign Setellite

I. Satellite Related: (a) - Name of Satellite (preferably ITU notified name) - Satellite Orbit Location - Transmit/Receive Beam Identity and Contour Level relative to Beam Centre (if available) (b) Freq. Band of operation - Uplink - Downlink (c) Transponder usage details - Polarisation - Bandwidth (MHz) / Satellite EIRP consumed - Uplink - Bandwidth (MHz) / Satellite EIRP consumed - Downlink (d) Is the satellite foot-print Coordinated for operation Over the Gateway location (e) Saturated downlink EIRP (f) SFD & Transponder Attentuation Setting (g) G/T of Satellite II. Ground Station Details: (a) Antenna size (b) Uplink EIRP 37

(c) No. of carriers & Data rates of each carrier along with type of modulation and FEC Rate. (d) G/T of the ground station (e) Whether antenna off axis Radiation pattern conforms to ITU-R Rec. S. 580-5 (f) Beam width in degrees - Transmission - Reception (g) CPD of Antenna (h) Maximum gain of Antenna in dB (TX/RX)

III Link Engineering with calculation details for various connectivities: IV Networking Details: (a) Detailed Block Diagram (GIVING MAKE AND MODEL NO.) (b) Gateway routing protocol (c) Facility for security monitoring V General: (a) Teleport address (b) Backbone ISP Connectivity (c ) Confirmation regarding availability of RF Monitoring Point on HPA output (d) Beacon frequencies of the satellite proposed along with satellite down-link EIRP.

38

Annex-VI Application for setting up of Submarine Cable Landing Station for International Gateway for Internet

(Note: Please read the Guidelines and General Information carefully before filling up this form. The Application form should contain complete information on each and every point. Additional sheets may be added, if required. Incomplete application or application with conditional compliance may be summarily rejected. Fifteen (15) copies of the application, alongwith Annexures, may be submitted to ADG (LR), 10th Floor, Sanchar Bhavan, New Delhi-110 001.)

I GENERAL INFORMATION 1. Name of the Company 2. ISP licence No:

Service Area

3. Complete Postal Address with Telephone / fax nos./e-mail address Corporate Office

...........................

Registered Office

...........................

4. Address for correspondence with telephone / fax nos./e-mail address

5. Name of authorised contact person, designation and telephone / fax nos./e-mail address

6. Resolution of Board of Directors / other proof that the person signing the application is authorised signatory (Enclose copy of resolution)

7. Percentage of foreign equity in the company. (Total Foreign equity participation(s), if any upto the extent of 74%, including NRI equity both repatriable and non-repatriable is 39

allowed. Complete break-up of 100% of the equity must be given). Enclose certified copies of the approval/clearance from Govt. of India for foreign equity. 9. No. of Landing Stations proposed to set up: 10. Processing fee: A non-refundable processing of Rs. 50,000 Per Landing Station in the form of Demand Draft payable to Pay and Accounts officer (HQ), DOT, New Delhi to be submitted with the application. Details of the processing fee: Demand draft no………………………. Date ………………………. Bank drawn ………………………. Amount ……………………….

40

II. DETAILS OF SUBMARINE CABLE LANDING STATIONS FOR INTERNATIONAL GATEWAY FOR INTERNET

(Note: If applying for more than one Landing Station, please furnish information required under this Section, separate for each of the Landing Station.)

11.

Location Details

12.

Name of the Submarine (Optical Fibre) Cable

13.

Terminal Landing Stations

14.

Total Fibre Capacity

15.

Landing stations en-route

16.

Fibre pair configuration: No of fibres: Capacity(bitrate)of each fibre Routing of each fibre

17.

Repeater configuration No of repeaters Location of repeaters

18.

Technology No of repeaters Location of repeaters

19.

Terminal equipment: (A list of all terminal station equipment including network diagram to be provided)

20.

Test and Monitoring equipment A list of all test equipment and monitoring Facilities

21.

System manufacturer

41

Details of subsystem contractors: 22.

Ownership: Shareholders in the cablesystem (in descending order) with percent share

23.

Network Ownership: List of all operators having acquired capacity on system(in descending order)

24.

Facility of security monitoring: Licensee to provide full details

25.

Landing station owners (Countrywise)

26.

Details of services that would be provided

27.

Approximate cost of the Landing station

28.

Complete and detailed networking diagram Including monitoring set-up

29.

Details of equipment to be used Including specifications, make, data sheets, model etc.

30.

Details of International Connectivity to International Internet Backbone Service Provider.

31. Any other relevant details.

42

III CERTIFICATES/UNDERTAKING

(i) We hereby certify that we have carefully read the guidelines and general information on ‘Setting up of Submarine Cable Landing Stations for International Gateway for Internet’. We fully comply with the terms and conditions therein. (ii) We also undertake to sign any Agreement with Government of India in this connection. (iii) We understand that all matters relating to the application or permission/licence if granted to us will be subject to jurisdiction of courts in Delhi / New Delhi only. (iv) We understand that our application for operating Landing Station in India is subject to security clearance by Government of India. (v) We would willingly provide all technical details of and access to various equipment, including hardware, software and communications equipment, to monitoring agencies as and when demanded by the Telecom Authority. (vi) We understand that if at any time any information furnished by us for obtaining the permission/licence is found incorrect, our application shall be liable to be rejected, processing fee forfeited and permission granted on the basis of this application shall be withdrawn and the ISP licence agreement terminated. (vii) We understand that the permission to set up Landing Station is subject to other clearances/permissions that are required as per the laws of the land and it will be the responsibility of the licencee/company to obtain these clearances/permissions. (ix) We understand that the Government (Licensor) reserves the right to make changes in the conditions under which this permission/licence is granted.

Date : Place :

Signature and name of the Authorised Signatory

43