The customer may have a bewildering choice, but ISPs are stumbling badly. Still, it is possible to stay afloat. Here's a rough guide.

By Vinod Mahanta

They came in droves, all led by the dream that millions of Indians would get onto the internet. The web was supposed to change the world and they wanted to own the links to the web. They were India's internet service providers (ISPs), the toll-keepers to the information superhighway. By 2000, a total of 480 ISPs were on the government's licence books.

Today, they are a part of one of the biggest carnages of a dying era. The ISP industry has accumulated losses of Rs 1,400 crore during the last three years on investments of Rs 5,250 crore. That's despite aggregating revenues of Rs 2,000 crore during this period. Only 90 ISPs are operational across India today, and none of them makes any money-even if a couple claim otherwise.

''The ISPs are going to have a tough time if the government doesn't give sops,'' says Amitabh Singhal, General Secretary of the ISP Association of India. But state intervention is unlikely; and besides it is unlikely to make a difference. And so, a consolidation has begun. Data Access of Delhi recently bought over two ISPs, BPL net and Space Age Internet, in a deal bereft of cash. Some like Tring Tring and w3c have shut shop. Most national ISPs have shelved expansion plans. Many just haven't used their licences.

Cut-throat competition dropped prices to such a level that most ISPs, for whom dial-up services should ideally be ISP bread-and-butter, lose money simply by servicing their clients. And the clients are just too few. At the last count, there were only 3.2 million paying net customers in India.

Can ISPs still survive? Well, some manage to limp along and hope for a better tomorrow. Here are five possible paths to salvation.

1. It is all about smart bandwidth management. Buy bandwidth in bulk, then focus on enterprise customers

The cost of providing bandwidth (local and international) can vary between Rs 14 to Rs 16 per hour for a dial-up account. Contrast that with an ISP's return: Rs 8 to Rs 10. In this scenario, it is imperative to optimise revenue from bandwidth, and also buy bandwidth at low costs to be viable. ''Running an ISP successfully is all about bandwidth management,'' says Siddharth Ray, MD, Data Access. ISPs must base bandwidth management on consumption patterns of enterprise and retail users. Data Access, which owns the net access provider now, buys 200 mbps at the lowest costs (20 per cent lower than VSNL) because of large-volume purchasing, and sells it cheaper than VSNL to other ISPs. Mantra also has the advantage of buying bulk bandwidth; owner Bharti Enterprises is a bulk purchaser, which also sells bulk bandwidth. Another major player Dishnet earns revenue by focusing more on digital subscriber line services, which earn more money than plain vanilla dial-ups.

2. Use all the resources at your disposal. Many ISPs that survive do so by scrounging deals from parent companies

When big brother is around, make full use of him. Struggling companies must leverage all the resources of their parent organisation. The best examples are HCL Infinet and Bharti's Mantra. HCL Infinet uses its parent's infosystems infrastructure, brandname and expertise extensively. Every pc that goes out of HCL Infosystems ships with an Infinet connection. HCL Infosystems has a presence in 154 locations and it helped set up infrastructure for seven isps before Infinet. The ISP also gets to use the parent's relationship with 500 corporates across India. On the other hand, Mantra gets its entire revenue of Rs 32 per connection for providing access in four states where Bharti is the basic telecom provider. That includes Rs 24 for telephone charges and Rs 7 for net access. ''We will leverage the advantage of having the parentage of a group like Bharti,'' says Ashok Juneja, CEO, Bharti Broadband.

3. Don't spread yourself thin. The four metros account for three-fourths of all net users. Pursue high-use zones.

National ISPs are bleeding because they have spread themselves all over the country. The national presence doesn't really work, although Satyam says that is the one great strength it has. That might be, but how many Satyams can co-exist? Since 72 per cent of web consumers reside in the four metros, don't be overly ambitious. Small and regional operations can also be successful. There are 35 ISPs operating in Ahmedabad, where Icenet has emerged as the best with a subscriber base of 20,000 in nine cities of Gujarat. It's that way globally too. In New York, an unknown Concoft, not AOL, is the leading ISP. The national ISPs are marginal players in Ahmedabad, and so are scaling down operations. Icenet has widened its revenue base by launching internet over cable, offering leased lines, developing a network consulting services division and limiting revenues from dial-up to just 30 per cent from 80 per cent. ''A regional player is more focused to a particular region's needs than a national player,'' says Chirag Patel, CEO, Icenet.

4. Bundling is vital. Until markets mature, get money any which way: networking, consulting-whatever works

The days of those who believe they can make money only by getting surfers onto the net are done. Every ISP now tries a variety of methods to make money. A recent IDC study says the value-added service segment in the ISP business is expected to grow at a compounded rate of over 159 per cent to touch Rs 296 crore by 2004. Companies like Satyam, Infinet, Net4india, that have some it domain expertise have ventured into value-added services for corporates. Infinet offers services like networking, consulting, access solutions, messaging solutions, and managed hosting, and network services. And Net4india offers a full suite of solutions and services.

Don't knock dial-up though. Dial-up customers are important for positioning a company and getting the market to know you.

''We are creating a range of services and are able to cross sell all services by bundling them,'' says Jasjeet Sawhney, CEO, Net4india. Besides, corporate bandwidth is sold on a cost-plus basis, so margins are pretty healthy. NetKracker identified 70 computer assemblers across the country and offered consumers high-quality assembled PCs bundled with NetKracker ISP connections. Basically, companies need to do whatever works in these days of crisis.

5. Hack costs. Avoid big marketing dos and ad spends. Get visibility instead by riding on the backs of others

Gone are the days of huge marketing and ad spends. Net4india doesn't advertise. It gets customers by bundling its offerings with products of other companies. Recently, it did a campaign with Essar in Delhi: a 10-hour net connection was sold with every Essar pre-paid mobile card sold. Every permanent mobile connection was bundled with a 100-hour connection. As for costs, slash them. Saurav Adhikari, CEO, HCL Infinet keeps his team at a bare 62-this for an ISP with a presence in 42 cities. He's probably the only HCL CEO who stays in economy hotels and travels economy. ''We are not a product of easy times, but a child of tough times,'' says Adhikari, who is looking at a period of 12 quarters for break-even. Communication with colleagues is mainly through chat and mail. And that-eating your own dog food-should be the last lesson.

Issue Contents  Write to us   Subscription   Syndication

INDIA TODAY | INDIA TODAY PLUS | COMPUTERS TODAY | 
THE NEWSPAPER TODAY |  TNT ASTRO |  TEENS TODAY |  CARE TODAY
MUSIC TODAY | ART TODAY

© Living Media India Ltd