Access to Internet in rural and semi-urban India may be hit, if the Telecom Regulatory Authority of India (trai) has its way. In a set of recommendations submitted to the Department of Telecom on May 10, trai has suggested that Internet Service Providers (isps) at the district level, which provide access to rural and less reachable areas, should be dissolved and should migrate to the state and national levels. It has also indicated that a uniform licence fee of 6 per cent on the adjusted gross revenue of all isps should be introduced, and an entry fee of Rs 20 lakh and Rs 10 lakh levied on state-level isp licences.

The recommendations have raised protests from the telecom industry and isps."This is the last nail in the coffin of isps at the district level,' says Rajesh Charia, chairperson of Internet Service Providers Association of India (ispai ), an organisation comprising isps at the national, state and district levels (categories a, b and c). These are companies with minimal capital and limited infrastructure, sufficient to work in districts that they operate. Introduction of a 6 per cent licence fee will be too much for them, prompting many to wind up, says Charia. Internet access costs will increase by 18-24 per cent, he claims.
Business model not feasible trai says category c isps don't have a viable business model. "We have examined their business model. Their viability stands greatly diminished with the advent of broadband. Even if we do not impose a licence fee, they will not survive because they have no proper business model to follow,' says a trai official. The question isps and experts ask is, why should trai care whether a business model is viable or not?

"The regulator should not concern himself with whether or not a company becomes small or big. These are matters for the market to decide. If a company has an unviable business model, then the market will decide whether they are to stay in business or not,' says Amitabh Singhal, founding member of ispai. But trai says unless it regulates the business model followed by an industry, it might indulge in illegal activities. "If you sink Rs 20-30 lakh into a business and have no method of getting returns legally, you will resort to illegal activities. Hence, the modifications,' says a trai official.

trai recommendations envisage gradual phasing out of all category c isps by non-renewal of licence. "Since all the bandwidth and infrastructure are available to the category b and category a levels, they will be able to handle demand for Internet connections in these (rural and semi-urban) areas easily,' says a trai official. And this, despite the fact that only 54 out of 135 category b isps are functional, with only 40 having a subscriber base of more than 100.

Industry members feel trai's intervention is not logical. "Category c isps cater to local population far more effectively than isp majors because they are able to provide a personalised service and a quicker response to consumers' problems,' says Singhal. "isp majors prefer to stick to markets and areas that give them more connections,' he adds.

Besides, ispai officials say the category b isps, which were being lauded for their business model, operated in Gujarat, Andhra Pradesh, Bangalore and Ahmedabad. Their business model cannot be compared to isps operating in rural areas in Uttar Pradesh. "The owner of a district isp follows the business model that works best for him. He cannot be expected to follow a model laid out by trai,' says Charia.

Although the trai report admits that the category a integrated service providers (offering Internet services, cellular mobile telecom services and unified access services) concentrate mostly on metropolises, and that stand-alone isps provide Internet services to niche markets, their rationale for the recommendation is: "Since computer penetration and English literacy in far-flung areas is low, their contribution...in terms of number of subscribers, is low.' trai feels its recommendations will benefit district-level isps