From this month, millions of surfers will pay more for accessing the Internet

The government has dealt millions of Internet and broadband consumers a cruel blow by deciding to increase the cost of accessing the Internet from this month July this year.

The users will pay 7 per cent more every month, with the increase in revenue share imposed on Internet Service Providers (ISPs). Worse still, the levy will increase to 8 per cent from April next.

The decision comes despite India having one of the lowest Internet and broadband penetrations, compared with other developing countries. It has missed many of its own targets, including the one to reach 40 million broadband users by 2012: it hit barely 14 million connections this year. Furthermore, the decision will aggravate the problem users face because of low speed, high cost and unpredictable quality. All this, because the government is unable to check the financial misdemeanours of powerful telecom companies.

Consumer organisations’ opposition to this unreasonable and unsubstantiated increase was ignored. In 2009, Jyoti Consumer Advocacy Group and VOICE submitted written objections in response to the statutory consultation undertaken by the Telecom Regulatory Authority of India (TRAI).

“It is unfortunate that the government has hiked Internet prices without understanding the aspirations and affordability of consumers, and struck a body blow to broadband access, the lifeline of economic growth, national competitiveness and social development,” says consumer expert Bejon Misra.

Independent studies by the World Bank, McKinsey & Co and Booze Allen have all conclusively established that in low and middle income countries, a 10 per cent higher broadband penetration accelerates the Gross Development Product (GDP) by 1.4-2 per cent. India is in a desperate need to increase broadband access to deliver public services, banking services, healthcare and the government’s flagship projects like Aadhar, and eventually for disbursement under schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme.

The decision to increase access cost is driven by the government’s intent to address the “arbitrage,” arising out of the differential revenue share payable by large companies against their multiple licences, leading to the alleged underreporting of revenue. Companies tend to earn revenues under licences which attract a share of 6-10 per cent, but report them under their Internet licence that enjoys a lower levy.

This comes amid reports that the government is moving to impose Rs.1,594 crore in penalties — in a related matter — on Bharti (Rs. 292 crore), Vodafone (Rs. 254 crore), Idea (Rs.113 crore), Tata Teleservices (Rs. 273 crore), Tata Communications (Rs. 120 crore) and Reliance Communications (Rs. 551 crore). The operators are contesting these findings.

Instead of taking timely action against wrongdoers in the cases pending for the past five years, the government has instead chosen the easier route of penalising unsuspecting users.

Even small and mid-size ISPs are complaining bitterly. “For ISPs, this is the last nail in the coffin. We are being punished for the government’s failure to audit big players,” says Internet Service Providers Association of India (ISPAI) president Rajesh Chharia.

The broadband space is skewed in favour of large players: of the 155 operational ISPs, just three — BSNL, MTNL and Bharti — control 82 per cent of the subscriber base. The decision will likely worsen the competitive landscape.

The government’s decision will impact the viability of standalone service providers. Consequently, competition will come down, since ISPs now have diminished ability to compete with big telecom companies, whose resources and bandwidth they usually hire for providing services in districts and cities. Even cyber cafés — used by a large and growing population of students and the middle class for Internet access — will suffer because of the cost increase.

Ironically, the move also goes against the key objective of the National Telecom Policy (NTP) 2012: to provide “affordable and reliable broadband-on-demand by… the year 2015 and to achieve 175 million broadband connections by… the year 2017 and 600 million by… the year 2020.” The increase neither makes Internet services affordable nor increases reliability.

On the one hand, the doublespeak in the government’s public policy objectives is reflected in this sudden increase in cost, while on the other, the government is spending roughly Rs. 20,000 crore from a Special Purpose Vehicle (SPV), called Bharat Broadband, to connect 2.5 lakh gram panchayats through a national fibre-optic network.

The SPV is funded, to a large extent, by levies charged on telecom companies and now on Internet users, which contribute to a Universal Service Obligation (USO) Fund. Defying logic, the government’s enhanced levy on Internet services increases the cost of Internet access, but seeks to contribute to a USO subsidy scheme to fund a broadband network meant to reduce the Internet access cost.

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