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Software Solutions > Articles > Internet Telephony in India: The Controversy Continues >

Internet Telephony in India: The Controversy Continues

By Madanmohan Rao madanr@techsparks.com

January 14, 1998

VSNL has certainly done a commendable job in introducing Indian users to the Net, and contributing to an overall increase in awareness about the possibilities of efficient and global communication via e-mail and the Web.

But has its performance been flawless? Has the growth of the Indian Internet user base been on par with growth patterns around the world? More recently, has VSNL taken the right strategic decisions with respect to emerging digital services like Internet telephony?

"VSNL brought the Internet to India in August 1995 - but we did not deliver the Internet to India. We underestimated demand, and did not plan accordingly. We goofed," admitted B.K. Syngal, managing director of VSNL, at NASSCOM's Cybercity convention in Bangalore last September.

Has VSNL again "goofed" with respect to its decision to penalise Indian users who avail of Internet telephony products via their VSNL accounts?

Let us begin with the impact of Internet-based voice services on traditional telecommunications companies (telcos), and the reactions of telcos around the world to the emerging opportunities and threats of Internet telephony services.

A report titled "Challenges to the Network" recently published by the International Telecommunications Union argues that "the Internet may be about to challenge the very foundations of the telecom industry, both economic and technical."

Vint Cerf, senior VP of Internet architecture at global telco giant MCI, widely regarded as the  "father of the Internet," predicts that by 2010, more than half of all voice traffic will be carried over packet-switched data networks. He foresees international telcos evolving an integrated infrastructure that contains both elements of the public switched telephone network and the Internet.

Consulting agencies like Arthur D. Little and Phillips Tarifica have warned that leading telcos will lose millions of dollars in international revenues after 2000 because of the growth of low cost voice calls over the Internet.

As a consequence of the convergence between the computer and telecommunications sectors, non-telco Internet-focused companies like Microsoft and Netscape will form growing alliances with service providers offering Internet telephony, and cream off valuable telco revenues.

Telcos, government agencies and infotech companies around the world are acting in one of three ways - taking no action at the moment, or defensively cracking down on Internet telephony services in their domains, or accepting the inevitable and making their own forays into Internet telephony services and pricing.

For instance, Japanese ISP Rimnet and AT&T Jens (a unit of AT&T) plan to launch Internet telephony services in Japan. Internet telephony products like InfoTalk have been unveiled in Singapore by a company called Innomedia; publishing group Singapore Press Holdings is expanding its Web services to include Net telephony. U.S.-based online service Prodigy is expanding into China, Africa, and Mexico - with plans of including voice over the Net services.

Over a year ago, former Australian prime minister Paul Keating inaugurated the launch of OzEmail Phone, a commercial Internet telephony product in Australia.

Seeing the inevitable convergence of traditional and Internet telephony channels, France's Alcatel Telecom and Cisco Systems have agreed to form an unprecedented partnership to develop equipment using current and new technologies to integrate the Internet with phone networks.

The European Commission has ruled that Internet phone calls should be open to full competition even in countries that have not yet liberalised their voice telephone market. Germany's Deutsche Telekom plans to introduce Internet telephony services this year, one of the first big telecoms companies to openly embrace the technology.

On the other hand, the Czech Republic does not permit Internet telephony. Hungary says the Internet should not be connected with voice channels or the public switched network. Iceland says only its telco authority can legally offer voice services.

Should Indian telco policy makers be reacting in such a knee-jerk fashion - or taking the lead in developing their own innovative Internet telephony services and alliances?

It clearly seems inevitable that new services are going to evolve which eat into traditional telco revenues - but if telcos themselves do not actively participate in the development and deployment of such services, then other entrants will take away their share of the pie.

There seems to be an eerie parallel to the early days of the PC era, when companies like IBM had to make the agonising decision to develop PC divisions which would eat into their traditional mainframe revenues. But if one division of IBM did not take away business from the other, then some outside company would.

Indian-educated Ramanan Shanmugam, now a senior Internet product manager at U.S. telco giant Sprint, jokingly remarks that "if you don't eat your babies, someone else will."


Clearly, then, there seems to have been an inevitable progression in competing market shares as telephone calls first began to cut into the revenues for postal companies, fax services cut into telephony revenues, e-mail ate into both postal and telephony revenues, and now Internet telephony eats into traditional telephony.

Here in India, as the Internet policy environment is being debated, officials of the Department of Telecommunications have expressed fear that upcoming private ISPs will - deliberately or unwittingly - route voice traffic over their networks.

Telecom Commission chairman A.V. Gokak, a member of the Bimal Jalan Committee, is reported to have said: "We will need to study the trade-off between retaining government monopoly over international voice services and freeing data services over international circuits. If the benefits to society are large enough, we may free data (and Internet) traffic."

Indian Internet users will clearly benefit from Internet telephony. Shouldn't the policy decision be made in their favour?

As importantly, shouldn't our national telco do us all proud by not taking up an ostrich-in-the-sand approach and instead making bold investments in Internet telephony products in conjunction with Indian IT companies, as well as developing strategic international alliances in this regard?

The European Commission has ruled that Internet phone calls should be open to full competition even in countries that have not yet liberalised their voice telephone market. Germany's Deutsche Telekom plans to introduce Internet telephony services this year, one of the first big telecoms companies to openly embrace the technology.

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