BT dot.com/e-biz models

It should have been connected to profits. Instead, the Internet Service Provider business-that primary e-Biz model of providing connectivity to the Net-in India is fast turning into a price-warrior's prairie. In jeopardy, naturally, is the simple charge-the-customer-for-access idea that was executed by the original ISP, Videsh Sanchar Nigam Ltd (VSNL). While the entry-costs for a simple service aren't high-with a new ISP venture needing only Rs 35 lakh as capital cost for the hardware and the software, and annual expenses of Rs 1 crore, Rs 41.80 lakh out of which goes to the VSNL for gateway usage-differentiation comes at a higher price.

For, everything else that needs to be added-better billing, registration, and on-line user-database management; or a higher phone line-to-customer ratio; or more robust cabling; or louder marketing-adds to the cost. It needs 50,000 customers, paying Rs 3,000 a year for an ISP just to break even. Says Jasjeet Sawhney, 26, CEO, Net4India: ''An ISP can't hope to make profits on tariff alone. What makes the venture profitable is a host of other services normally associated with an ISP.'' And as each of the 40-and-odd ISPs that have begun doing business in the country-out of the 203 licence-holders-tries to beat the competition and grab more customers, differentiation and innovation, and not plain-vanilla connectivity-plus-support, are proving to be the real weapons.

With its Rs 499-crore acquisition of the indiaworld.co.in portal, Satyam Infoway is moving from being a ISP to an ASP-Application Service Provider-which offers not just connectivity, but also content, commerce, community, and software applications, all of which can generate revenues.

ISPS & WANNABES 4U

ISP Category

Bharti BT Internet           A
BPL Telecom                  A
BPLNET DOT COM         A
C.G. Faxemail                A
CMC                               A
Comsat Max                   A
Dishnet                          A
ERNET                            A
Global E-Commerce Svs A
Harita Finance                A
HCL Comnet Systems    A
IndusInd Distribution      A
Ircon International         A
ISP India                        A
Jumpp India                   A
Maharishi Global Link    A
Manipal Control Data     A
Nano Technologies       A
Orbtel Communications A
Pacific Internet              A
Punjab Wireless Sys     A
Satyam Infoway           A
Sigma Input Output Tech. A
Spectra Net                  A
Sprint RPG                    A
STPI                              A
Sukhkarta Fin Trade     A
SwiftMail Comm.           A
Trident NetCom Sol.      A
Wipro                           A
VSNL                           A
Zee Telefilms               A
Allnet Systems            B
Ankhnet Information    B
ARM                             B
Bharti Telenet              B
Blazenet                      B
Blueweb Infosystem   B
BSES Telecom            B
Chandra Net               B
Chem. & Met. Design B
City Online Services   B
Compuwave Interactive B
Condor Infotech         B
Data Access             B
Data Infosis               B
Datalink Impex           B
Datawqare Internet   B
Dialnet Communications B
Direct Internet              B
E-com Opportunities    B
Eleclipse Network       B
ER&DC Tech. Promotion B
Fascel                          B
Genesis Education      B
Global On Line
Services                     B
Growth Compusoft
Exports                        B
Guj. Narmada
Valley Fert.                  B
Gujarat Informatics       B
Gujarat State
Petroleum                    B
Hathway Cable           B
IN Technet                   B
Indian Quotations
Sys                               B
IndusInd Cable             B
Internet Promoters      B
Jain Infonet                 B
Jindal Information
Tech.                           B
Karvy Consultants      B
Kirloskar Computer
Svs                            B
Magnacorp                B
Manipal Control
Data Elec.                  B
MTNL                         B
Mylai K'gambal
Info. Sys                    B
Nanda Net Com.         B
Nomus Internet
Systems                     B
Paliwal Financial
Svs                            B
Patriot Automation Proj. B
Pioneer On Line Services B
Pukhya Solutions             B
Punjab Communications    B
Rising Sun Infonent         B
Rolta                                B
SAB Infotech                   B
Sagarsoft International    B
Shivam Datatech            B
Solstice Networks             B
Southern Online Services B
Spectra Net                      B
Swastik Netvision Telecom B
Track Polymers                 B
Trikon Electronics             B
Value Healthcare              B
Vertec Communications   B
Videsh Sanchar Nigam    B
Weikfield Mnemonix Info.   B
Wilnet Communications     B
WWW Communications      B
Agrawal Internet Services C
Amoeba Telecom               C
Arun Girija Comm.              C
Asianet Satellite Comm.     C
Assured Web Tech.          C
A-Team Information Tech. C
Auto Treads                      C
Baldev Shipbreakers         C
Bareilly Comm.                    C
Baroda Network                C
Bharti Communications      C
Bhaskar Multi Net               C
Bohra Pratisthan                C
Bytes Internet Services     C
C.S. Prosof Tech Info.        C
Chiman Trade Link              C
CJ Online                            C
Comat Technologies           C
Compucom                         C
Cosmos Link Network        C
Czar Oleoresin                   C
Data Securities                   C
Delux Telecom                    C
E-Connect Solutions           C
EMTICI Engineering             C
Estel Communications        C
Excell Media                       C
Future Consultants            C
Gateway Internet Service C
Gemini Comm.                    C
iLink Communications        C
Independent Bus. Mach.   C
Infonent Services             C
I-Ninety One Interconnect C
J&K State Indl
Devpt Corp.                      C
Jain Studios                      C
Kappa Infotech                 C
Kelnet Comm. Services     C
Khushagra Telecom          C
Kinjaru Appliances            C
Kolaventy Infotech            C
Lee & Nee Software         C
Masterchip Internet Svs    C
Maxwell Tradelink             C
Millennium Svs Online       C
My-Net Services India       C
N.S. Net Source                C
Narmada Cyberzone         C
Netconnect                        C
Online Internet Services   C
Opto Network                    C
ORTEL Comm.                    C
Paliwal Financial Services C
Planet Internet Satellite      C
Quest Consulancy            C
Rajkotnet                           C
Rida Communications        C
S.K. Digital Technology     C
S.N.C. Infotech                  C
Sab Infotech                     C
Sahajanand Internet Svs C
Satyasai On-Line              C
SCAD Consultants            C
Shah Net Technologies     C
Shivam Infoways              C
Somani Overseas             C
Spectra Net                       C
Spectrum Softech
Solutions                          C
Srishti Open Systems      C
Suchibh Communications C
Surevin Consultants         C
Swarnandra Tech.           C
Tandem Infotech               C
Tawi E. Com                     C
TCI Bhoruka Projects        C
Transport Corp.                C
United Internet Comm.       C
Varada Electronics           C
VASAVI Solutions            C
Vasnet Comms                 C
Vertex Comm.                   C
Vintamaas Network           C
Vital Continuity Elect          C
Waaree Instruments          C
Web Surf                           C
World Gate Networks       C
Yenkay Network               C
Yog Kshem Comm.            C
Zaverchand Cyber Info     C

Over the past 3 months, Mantraonline-the ISP service run by Bharti Telecom-British Telecom-has been expanding its features to include portals and community sites for youngsters, with the focused objective of serving up this segment to Net advertisers.

New entrants like Dishnet, Net4India, and Caltiger are playing a furious price-game, offering cut-rate, and even free, connectivity in a bid to take away customers from rival ISPs.

Established players like the Mahanagar Telephone Nigam Limited (MTNL) and the VSNL are looking for ways to leverage the rest of their businesses to grow their ISP ventures. MTNL, for instance, has been offering a free second phone with its Net account, cashing in on the fact that it is the basic service-provider in Delhi and Mumbai, the 2 largest markets for ISPs.

These moves are indicators of the truth for India's-and the world's-ISPs: free competition will ensure that prices of plain-vanilla services tend towards zero, so that the e-Biz players operating in this space will have to either deliver value-added services that they can charge for, or look for alternative sources of income. Predicts Amitabh Kumar, 47, Director (Operations), VSNL: ''With prices falling, it will not be possible for ISPs to sustain themselves on the basis of access charges alone. An ISP depending on access charges alone can never be profitable. All ISPs, whether big or small, will have to move into other services.''

So, while Satyam and Mantra-the first 2 private sector ISPs-have picked the value-addition option, later entrants Dishnet and Caltiger are hoping to grab large customer-bases and trade them in for advertising revenues from companies targeting these segments. Simultaneously, every player is making a bid for a slice of the phone revenues resulting from customers using the telephone lines for logging onto the Net-a slice of the pie that only MTNL, by virtue of its business, can bite into now. Avers S. Rajagopalan, 59, CEO, MTNL: ''I support the demand of ISPs that they should be given a part of the telephone revenues generated because of the use of the Net services provided by them.''

The sights of ISPs, of course, are set on a market currently amounting to 5 lakh customers, but slated to ramp up to 13 lakh by March, 2001. And the availability of accounts, thanks of new players and their easy entry rates, will only accelerate the pace further. A sample of the surge that has been created by new entrants: within 30 days of launch, Net4India mopped up 2,000 subscribers. Says Sawhney: ''This indicates that the number of users will grow very fast.'' Add to that the demand from companies entering e-commerce and Net-based operations and from entrepreneurs setting up cybercafes, and it's easy to see why this market is simply brimming with potential. To win, however, it needs differentiation.

The very first source of differentiation came in the form of service, as the first private sector ISPs-Satyam and Mantra-both launched their service in the form of off-the-shelf packages that did away with the cumbersome process of registration followed earlier by both VSNL and MTNL. At the same time, they improved their phone-line to user ratio from the roughly 1:100 at which their predecessors maintained it to 1:30, besides setting up call-centres to handle complaints and enquiries. But now, with service parity having been achieved in most cases, the ISPs are looking elsewhere.

The starting point for competition for most players today is connectivity charges. From Rs 10,000 for 500 hours, where VSNL began, the rate has dropped to Rs 6,000 for unlimited usage, even as slabs like 25-hour connections have been created for newbies and samplers. And price-innovations are abounding. Mantra, for instance, followed up its discounted night-usage package-25 per cent off for surfing between 2200 and 0800 hours only-by automatically charging half for all surfing during those hours. Dishnet responded with a special package for students, branded ETH (Education At Home), with a 5-year, 1-hour-a-day package for Rs 5,000. Net4U marked its debut with an unlimited-usage-for-Rs-10,000-a-year-deal, which MTNL more than matched both by offering the same facility for Rs 6,000.

W3C upped the ante by putting a Rs 350-tag on a 25-hour account. Caltiger offered free 25-hour connections to the first 500 applicants. Satyam linked bonus hours to topical issues like Republic Day and the number of one-day matches won by India. And even as you read this, an ISP somewhere is offering yet another low-priced scheme. The objective that all of them are working towards: taking away surfers from rivals-don't forget, most people have to renew their accounts at least once a year, which is when they can switch to a better offer.

Of course, ISPs are also attempting to home in on different target segments-even if a total universe of 5 lakh surfers may not seem worth segmenting-and packaging their services accordingly. Net4India's pricing, for instance, has been devised specifically to appeal to the home and the small-and-medium enterprises segment. Says Sawhney: ''This segment accounts for 61 per cent of users. That explains our focus.'' Likewise, ISPs like Wipronet and Global Electronic Commerce are training their guns on corporates, throwing in services like industrial strength e-mail, and intranet and extranet management through virtual private networks.

Geographically, too, India's ISPs have chosen to segment their markets, with only 5 players looking at national markets-and only VSNL, Satyam and Mantra operating in more than 5 cities-while 20 are targeting zonal markets, and another 15, strictly single-city markets. Tellingly, only 1 ISP has started rural operations: Narmada Cyberzone in the Bharuch district of Gujarat. While it would be logical to be a national player, the costs involved in setting up dial-up services in different telephone zones-after all, surfers won't want to make anything other than local calls-is what has restricted the majority of ISPs to limited locations.

From the choice of segment is also flowing differentiation in the form of the nature of access. While everyone offers the plain-vanilla surfer the standard PSTN dial-up connection, value-addition is possible in the form of faster and more robust connectivity through ISDN-usually twice as expensive. Or leased lines from 64 kbps to 2 mbps, which offers speed and fat bandwidth alongwith unlimited usage, at yearly costs ranging from Rs 5 lakh to Rs 41.80 lakh, respectively. However, these are not the new weapons: that slot is reserved for Net-over-modem, which involves piping connectivity over the cable-TV lines which have already wired up 23 million homes in India.

Not surprisingly, the initiative is being taken by cable TV companies like the Zee Group's Siti Cable and the Hinduja Group's IN Cable. The only snag: the Rs 20,000-or-so price-tag for a cable modem, compared to the bundled-in modems with PCs that computer-buyers get now. Taking a similar tack, Dishnet is planning to create its own cable network for channelling the Net into homes. All these players will offer the unbeatable benefit of 24-hour connectivity, without jamming the phone lines.

The value-addition game? The ISPs are playing it by offering a gamut of additional services, such as domain-name registration, Web-hosting, server co-location, Website design, intranet and extranet solutions, and e-commerce. Thus, Mantraonline has added downloadable software, while Net4India is preparing to e-hawk ERP solutions through the Net. In the real world, these would be counted as related diversifications, justified by the sharing of a technical competence, and the possibility that a few of their connectivity-customers are also the target audience for these features. More focused is the attempt to allow other marketers access to their customer-base, through their Net pages.

The biggest bottleneck for ISPs has been the lack of access to international gateways connecting them to the Net. So far, all of them have had to buy bandwidth from VSNL, whose own capacity is limited to 165 mbps. Naturally, the more ISPs and surfers there are, the more the squeeze on this bandwidth-worsening the service. However, with the GOI monopoly on setting up and managing gateways having been removed, it should now be easier for ISPs to compete on speed and reliability of access. No wonder as many as 22 companies have applied for permission to set up gateways.

The added benefit that the ISPs could reap is that running a gateway makes for a business proposition. VSNL's charges for ISPs using its gateways, for instance, stand at Rs 41.80 lakh for 2 mbps, and others entering the business can charge at least the same. But whether that will make money for them is open to question. Says VSNL's Kumar: ''I am quite confident that none of the private players offering international connectivity to Indian ISPs can offer prices lower than ours.'' Agrees Pradeep Lakshamanan, 43, Veep, Satyam Infoway: ''International bandwidth prices are very high and at this stage I cannot comment whether we will be able to match VSNL.''

But, make no mistake, an ISP is an ISP is an ISP no more. Says N. Arjun, 41, CEO, Mantra: ''While subscriptions still account for 80 per cent of an Indian ISP's revenues, there's no doubt that they will have to move up the value chain.'' And tomorrow's successful ISP will probably be one of two kinds: either a player with fast, clean, faultless, reasonably-priced access. Or, a free service provider with multiple sources of revenue, all of them leveraging their customer bank. Connectivity-or content, commerce, and communities. 1C-or 3C. Take your pick.