ISPs look for gold in value-added services

Having failed to earn profits from vanilla Internet access services, ABHINAV SINGH finds that Internet service providers are mining value-added services for growth

JASJIT SAWHNEY says that Net telephony works out cheaper by 40 percent when compared to a normal ISD call

TODAY’S corporate customers are a demanding lot. Plain old dialup, ISDN or leased line services no longer excite them. They expect Internet service providers (ISPs) to provide value-added services (VAS) that span the gamut of Net telephony, data centre hosting, mailbox, Web conferencing, video conferencing and managed storage. These offerings have made headway in the Indian market and most ISPs agree that traditional dial-up services are loss-making. That said, leased line and broadband services (read DSL) have done relatively well in the Indian market.

As Internet growth tapers off…

The growth of the Internet subscriber base in India has slowed down, it was less than five percent during Q3 and Q4 of 2003. According to the Internet Service Providers Asso-ciation of India (ISPAI), this is because close to 95 percent of Indian customers are still on dial-up which is unreliable in terms of speed and quality of service. Worse, a dial-up user gets hit with hefty phone bills on top of what he pays the ISP.

ISPAI points out that ISPs are focusing on metros and select B-class cities. This leaves small towns where customers cannot afford the high cost of buying a PC, an Internet connection and paying the telephone charges for ‘net access. These users prefer to go the nearest cybercafe; hence the scope for increasing the dial-up subscriber base is very low. ISPs are therefore forced to look at VAS to make up for the loss they are incurring from pure dial-up services. Says Amitabh Singhal, president, ISPAI, “Out of the 4.1 million Internet subscribers in India, a majority reside in cities. That number can go up to 40 million if we offer value-added services such as broadband.”

ISPAI believes that Indian ISPs have plumped for the VAS route in order to be profitable with a low subscriber base. One obvious route is to sell services that increase bandwidth consumption and thereby the ISP’s revenues. Notes Singhal, “In the last couple of years, many Indian ISPs have shuttered their establishments due to the slow growth of their subscriber base. ISPs will have to offer broadband and value-added services to remain in business.”

…ISPs look to VAS

Among the VAS on the market, Internet telephony is a popular one. Sify and Net4India have set up Net telephony PCOs across the country, and will expand their network further in coming months. Sify has around 1,800 cybercafes across India, and 80 percent of them offer Net telephony services. Net4India has around 400 Net telephony PCOs.

Explains Jasjit Sawhney, founder and chief executive officer, Net4India, “Lower call rates with the same voice quality [as PSTN] will ensure that Net telephony is immensely popular in India. It works out cheaper by 40 percent when compared to a normal ISD call. We grew by 40 percent last year in terms of the number of customers.” Observes Shrikant Joshi, president, Access Media, Sify, “The popularity of Net Telephony in India will continue as long as there is a healthy price difference between a regular ISD and a Net Telephony call.”

Mailboxes for sale

The e-mail box service is another VAS that’s going great guns. The service has become quite popular with corporates and SMEs. With businesses maturing in their usage of the Internet, enterprises and SMEs want to have their own identity while dealing with customers and partners. Therefore many of them are going in for the e-mail box service. Sawhney says, “We have around one million corporate e-mail boxes, and we see this market growing at 100 percent in the next year.”

Video and Web conferencing

According to SHRIKANT JOSHI, small organisations are going in for Sify’s video and Web conferencing services

ISPs are also bullish about video and Web conferencing services. Joshi of Sify says, “Small organisations are going in for our video and Web conferencing services. Some of them are even conducting interviews through these media.” Many corporates are finding it sensible to use Web conferencing as it is impractical for them to send their staff on cross-country trips time and again for meetings. Web conferencing is also popular with middle-class people who use it to chat with their loved ones in far-off countries.

Managed services

As managed services such as data centre hosting are profitable, many ISPs manage mission-critical applications for organisations. For instance, Sify offers hosted services to large enterprises such as SBI, while Net4India hosts 50,000 websites on its network, and has hosted 500 servers for different organisations. Some managed services such as data centre hosting might be low in volume but have generated immense value for the ISP. Reveals Sawhney, “We are getting nearly 30 percent of our revenue from our managed services business.”

ISPs are also betting on managed services such as network management and managed storage services as customers en-counter increasing network complexity in managing data growth.

Value-added services used by enterprises
Internet Service Provider	Customers	VAS
VSNL	ICICI Bank, Rediff, Wipro Spectramind and HSBC	Various
Net4India	Orchid Chemicals, Indian Oil and Oriental Bank of Commerce	Corporate e-mail box services
Net4India	De Beers	Hosting services
Net4India	Hutch and Essar Steel	Data centre services
Source: ISPs

abhinav@expresscomputeronline.com