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The Explosive Indian Internet Market
By Moti Gyamlani
Assignment for Module 1. Due 9/99
Information Technology & Social Accountability
IRM program, Carnegie Mellon University
Professor George Duncan
Development of Internet in India:
Internet services have been available in India since 1986. On August 15, 1995, VSNL launched Internet services for the common man. The situation has become more favorable when, after announcing a liberal Internet policy in 1998
(http://www.allindia.com/infotechdesk/), the government invited Indian companies to apply for licenses to provide Internet service in India.
Until August 1995, Internet services in India were available only to research and educational institutions, government bodies, and software technology parks. Since then, government-controlled Videsh Sanchar Nigam Ltd. had been the monopoly provider for Internet services until the government opened the Internet services market to private enterprises in November 1998. But some issues like the interconnection tariff, international gateways, and last mile connectivity, are still pending.
Current State:
In last three years India has made an exceptional growth in Internet Usage. For the most part the Internet is being used by students in their research work (till fairly recently, it was easier to get information on India in the US relative to getting information on India being in India), by business to list their products and reach foreign firms, promote tourism, job searches (overseas jobs), stock price listings etc... The largest use of the Internet is through E-mail's.
To get a good feel of how Internet is being used by everyday person in any metro city in India, I have listed a few most popular sites which get highest hits by Indians in India and abroad. Surfing these sites offer a good insight into the culture of a country, and its current state of its Internet Development.
The Indian Top 10
In the last 3 years Indian sites have flooded the net. I have reviewed dozens ... but the ones which stand out are : -
Economic Times <http://www.economictimes.com/today/pagehome.htm> Used widely to review business news and get stock listings.
The Future:
The Internet has traveled a long way, from being the playground for tyros and scientists to becoming the battleground of corporations and government in the new millennium. Consider the following facts that powerfully demonstrate that e-business is more fact than fiction in the India of tomorrow (source:Magazine section of Silicon India:(http://209.35.112.48/):
- Only in its third year of commercial launch (1998), the Indian Internet services market generated revenues of $82.97 million in 1998 and is growing at 38.41 percent.
- E-business in India will be a market worth Rs. 400 million by 2003, says PricewaterhouseCoopers (PWC) in the first ever Indian e-commerce survey. McKinsey pegs the figure at $1.5 billion by 2004 and around $10 billion by 2020, which would be approximately 1 percent of the world's e-commerce business.
- India is likely to have around 3 million households connected to the Internet by 2004 as per conservative estimates. When one adds penetration of the Internet through cable and Web phones, this number could look even more salubrious.
On the other hand, the Intra net is picking up a good pace in the Indian market. Some of the large corporations in India have already adopted to communicate across their companies using the Intra net sites.
(http://www.linkindia.com/osama/casestudy.htm)
Obstacles to the growth of Internet:
Infrastructure:
The main obstacle to e-commerce in India is the absence of a proper infrastructure, especially high-speed connectivity, which has sadly not yet been addressed in its entirety by various versions of the telecom policy. Connectivity in India suffers on various fronts.
-Firstly, it's scarce; connectivity in India is not available as easily and as quickly as in the West.
-Secondly, even where it is available, the speed of connection available would put the proverbial turtle to shame! Although 56k is quite common everywhere else in the world, nowhere in India can one get more than 33.6 through a dial-up.
-Thirdly, connectivity is still very expensive in India (It costs about $250 for 500 hrs. connection); reports reveal that connectivity in India is among the most expensive in the world. Unlimited usage based on a flat pricing is still not implemented in India.
Restricted Environment:
Since the Internet services were privatized six months ago, only three companies have officially launched their access services. The hype that was initially created about the lucrative nature of the market is now fading, and the potential participants are slowly beginning to realize the critical nature of the omissions in the 1998 policy. Some of the concerns of a potential ISP are: Private companies are not allowed to provide international gateway connectivity, and leased lines, which are critical for Internet services, are provided only by VSNL, DoT and MTNL, and they also happen to be the main competitors for the new ISPs. Rates for leased lines in India are among the highest in the world, and except for cable operators, other private participants are not allowed to provide last mile connectivity. Tariffs for interconnections are vague, and India still does not have an Internet exchange. Due to these critical challenges, there has been some delay in the entry of prospective ISPs.
Indian Government is in the process of opening the telecom field even further to foster the very required competition.(http://iic.nic.in/iic/iic3_a03.htm)
Teledensity:
It has been found that teledensity (phone lines per person) in India is close to 1.9 per 100 persons. This falls short of the planned government figures of installing 23.7 million new lines in the country. But the hazy telecom policy, which was launched earlier by the government, delayed the basic service launch of many private operators. This resulted in the installation of less number of telephone lines. The government too did not install its planned number of lines.
This has made an indirect impact, positive as well as negative, on the Internet services market. The fact that there are about 18 million basic telecom service connections in India indicates the potential of the current Internet access services market. Today, only 256,000 businesses/individuals actually have access to the Internet. The possibilities are enormous. On the other hand, the population of India is about 965 million and only 18 million telephone lines are currently installed. The potential can be imagined from the fact that only a teledensity of 15 per 100 has been reached.
The Indian Government has revisited some of the necessary changes in its 1999 Telecom Policy.(http://www.nic.in/got/ntp-pol.html)
All trends indicate a huge potential in the Indian Internet services market. This potential can be tapped only if the government takes positive steps to improve the situation by making policies favorable to these industries.
Certain state governments in India have already started taking a very positive view about the role of IT. .....Information Technology is going to change the way we function both inside and outside Government.....-says the Chief Minister of Madhya Pradesh (A state in India). (http://www.mp.nic.in/ittf/)