Normally you'd think any government's main concern would be to increase competition so as to lower costs, and more so if this concerns the country's booming BPO business.
Yet, the government has not only acted in an unfair manner to the country's Internet service providers, it is guilty of increasing costs for the BPO business as well. But first some background before we get to the case itself.
For a BPO business, indeed any business, that is transmitting data back and forth, either nationally or internationally, there are only two ways to do it -- either on leased lines or on the Internet.
While leased lines are definitely safer than the Internet, they're about 40-50 per cent costlier, apart from being inflexible -- if your business location shifts you need another leased line connection as compared to the Internet route, where such changeovers are relatively easy.
Over the past couple of years, the introduction of "virtual private networks" (VPN) on the Internet has resolved the issue of security to a large extent, with an added advantage.
While a leased line offers you only one maximum bandwidth (64 kbps, 2Mbps, whatever), Internet-based VPN-connections allow users to scale up their needs whenever they want -- so, you can be using a 64 kbps line most of the year, but get a 2Mbps connection for the three hours you want in a particular week by paying for it just for those three hours instead of for the full year, as you would in the case of a leased line.
For industries like the BPO ones that spend anywhere between 15 and 20 per cent of their annual costs on telecom networks, this is a critical differentiator between success and failure.
Until a few months ago, ISPs were providing VPN-services to clients around half of whom were software or BPO units, and the business was growing by leaps and bounds. That's when the problem began.
In one case involving the public sector Oriental Insurance Company Limited, which wanted to connect its branches as well as the premises of some customers through a VPN network in September this year, the public sector Bharat Sanchar Nigam Limited was one of the bidders.
For whatever reason, BSNL was technically disqualified and the contract was awarded to Satyam Infoway (Sify).
So, as in the past, Sify applied to BSNL for a "last mile" connection from the Oriental Insurance premises to the main network -- since it is an expensive proposition to lay a physical line from every user's premises, in India as in the rest of the world, companies that have already set up these lines have to allow others to use them as well for payment of a certain fee.
In India, the telecom regulator, TRAI, has even stipulated a maximum time period within which such lines have to be made available.
BSNL, however, refused to provide this "last mile" connection, and even sent out a circular to all its divisions saying "we have taken a stand" that no last mile connections are to be provided to any ISP which does VPN services!
The circular went on to say that no last mile or leased line should be provided to Oriental Insurance or Sify or any other company that planned to set up a VPN network for Oriental, and provided a list of sites where Oriental/Sify had wanted a connection to ensure none got allotted even by mistake.
And then, the piece de resistance, BSNL added: "M/s Satyam Infoway is having license of ISP and under this license they are not permitted to give IP-VPN, MPLS VPN services to their customers."
I say piece de resistance for several reasons. One, the licence of the ISPs says they can do "all types of Internet Access/content services except telephony on Internet" (and even this is now allowed), and TRAI has always considered VPN as part of ISP services -- indeed, there are letters of BSNL itself prior to this date where it acknowledges that VPN services are part of what ISPs are allowed to offer.
What takes the cake, however, is what follows this September circular of BSNL. Last month, the government re-interpreted the licences of ISPs and decided that VPN services were no longer allowed under the original licences -- that is, two months after BSNL says ISPs cannot offer VPN services, the government issues an order to this effect!
The November 10 order, written up to look as if the ISPs were being done a big favour, says the government "today decided to extend the scope of the license conditions of Internet service providers, thereby allowing them to provide managed virtual private network services to corporates and individuals" since, the note went on to say, such services that "provide a platform for utilisation of bandwidth in a very cost effective and efficient manner are emerging services internationally."
The catch? The entry fee for this will be Rs 10 crore (Rs 100 million) for an all-India licence, apart from an annual revenue-share licence fee of 8 per cent -- till then, ISPs paid a licence fee of only one rupee each year.
In other words, the cash-strapped ISPs have been told to go take a walk.
Interestingly, since the government action amounts to a change in the terms of the ISP licence, TRAI said the telecom ministry just had to ask it for its recommendations and cited clause 11(1)(a)(ii) of the TRAI Act, which mandates this -- this followed letters from the TRAI chief arguing that VPN services were part of the ISP licences.
The ministry, however, has chosen to ignore this. What makes the entire exercise even more amusing is that when the same ministry wanted to do Reliance Infocomm a favour -- first to allow it to do roaming on its fixed-phone licence and then to regularise it under the guise of a "unified access service licence" -- it took only two weeks to accept TRAI's recommendations and convert them into law!
Indeed, in the second instance, this two-week period even saw the Cabinet meet twice to clear the proposal.