More trouble for ISPs who want to setup VPNs in India

[Suresh Ramasubramanian <ops.lists () gmail com>]

The local incumbent telco loses a contract to provide VPNs to an
insurance company with offices / agents throughout India, and then
refuses to provide last mile connectivity to "any ISPs offering MPLS
VPNs or VPNs, or firms who operate VPNs with other ISPs than the
telco" - with a specific list that includes the insurance company and
the winning ISP.

And while the telecom regulator has the right idea, the ministry of IT
seems to have decided to ignore the regulator ...
 
-- 
Suresh Ramasubramanian (ops.lists () gmail com)

Sunil Jain: BSNL versus BPO             
RATIONAL EXPECTATIONS   
Sunil Jain / New Delhi December 27, 2004

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 (ISPs), 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 (BSNL) 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 (ISPs),
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 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.

suniljain () business-standard com