internet telephony–a bliss or a nightmare?

The prospect of using the Internet to make
international calls is attractive. Instead of paying Rs 90 per minute for a call to the
US, it will cost nothing or at the most few rupees a minute. Great news for the consuming
public, but just the opposite for the large telecom companies.

And so not surprisingly, telecom monopolies
are dead set against Internet telephony. India's VSNL has banned providers of such schemes
from using its lines; and considering that all overseas calls go through VSNL, the chances
of anyone offering these services is no better than nil. VSNL has warned its subscribers
of using Internet telephony, only at the risk of losing their accounts.

However, legally, VSNL has practically no
way of telling if a user connected to an overseas web page is sending packets of data or
voice. Therefore, those who are willing to bend the laws a little can take heart.

The marginal cost of carrying a
long-distance or international call is practically zero. And so there are huge margins in
the actual carrying of calls. Of course, gigantic amounts are invested in laying the lines
down, so naturally they are eager to amortize these costs. However, the bandwidth in place
is a consumable resource and which has no value if not used.

Since the Internet is carried over the very
same long-distance lines, one would think the telecom companies would be the first to cash
in on the Internet in general and Internet telephony in particular. Over the past few
years, US giant AT&T has made the right move by offering AT&T Worldnet, an ISP
that pioneered the flat $ 20 fee for unlimited use, and drove the consolidation of the
market.

However, AT&T stumbled in 1997, and it
is the immense combination of WorldCom-MCI (at $ 39 billion, the largest merger in US
history) that seems all set to succeed here by combining WorldCom's already large
portfolio of Internet services and MCI's proven ability to penetrate telecom markets.

As for the current providers of Internet
telephony software, a few months ago, I bought an Internet Phone product. It cost about $
30 in California. What was required was a registration on the company's web site,
whereupon it gave you a free license for a friend, thoughtful of them, so that you had at
least one person to talk to. Thereafter, it was a simply a matter of installing the
software on a multimedia PC-you use a microphone and the speakers built into the PC as
your virtual telephone; and it was up and running. There is already a community of
Internet phone users in various virtual chat rooms. So there is no dearth of people you
can speak to as soon as you log-in. Though the majority of them were from the US, there
were some people from other parts of Asia too.

I found the voice quality adequate for
casual communication, but if I remember correctly, the connection was not fully
duplex-only one person could speak at a time. The recent upgrade of telephony software is
capable of reaching not only other computers but telephones as well.

There are some restrictions like you have
to register on the Net with some service provider who will charge for the number of
minutes you talk. Furthermore, the service is not available to any phone anywhere-even in
the US, apparently coverage is limited. The total cost of all this is about Rs 5,000 up
front for software, plus Rs 1,000 per month as service charges, in addition to the
per-minute charges.

This is certainly a challenge to India's
telecom planners. It is rather odd that in India a user is penalized for using the
telephone 'too much', which means per-minute charges rise, instead of decreasing, if you
make too long calls. As generally, one expects discount for buying in bulk, not penalties.

It appears that bandwidth is considered a
scarce resource in the country, and so is rationed. I hope the threat from the new
technologies will cause the planners to consider creating more bandwidth (or allow third
parties to do so) and figure out some ways of profiting, rather than blocking progress.

Sam Pitroda had cited many case studies in
Harvard Business Review, where simple availability of telephone links had made a positive
impact on village economies. Similarly, I feel the availability of inexpensive overseas
calls too will benefit the India economy as a whole. Internet telephony is therefore a
good thing, and so should be encouraged, despite short-term pain to VSNL.

S Rajeev

is Director (Java and Strategic Alliances), Sun Microsystems, India.