Outlook White Paper:
Private Internet Service Providers in India

1997, 1998 Anindo Ghosh.

This is a copyrighted document, with both copyright and authorship residing with the author, Anindo Ghosh, of New Delhi, India. This document is not a commissioned article, and as such, no other individual or organization can distribute or lay any claims to the use of this document. Anindo Ghosh solely reserves all rights on the use, further publication and distribution of this document.

Document Dated: 15th October, 1997


This document was originally written as an introduction to the Private ISP scenario in India, for clients who had retained the author as consultant for setting up ISPs in India. The audience consisted primarily of potential investors with little or no knowledge of the Internet and its technologies and terminology. Hence some very basic terms are explained in the footnotes. Further, as this document predated the release of the official Internet policy document, some points raised in this document may not hold true. However in the main, this document is still fully applicable to the Indian Internet scenario. All opinions and value judgements are solely the authors personal viewpoint. With this publication of the document on the Internet, it is thrown open for criticism and discussion.


The recent directive by the Government of India to permit operation of Internet services by private Internet Service Providers (ISPs) in India has aroused a lot of interest amongst various parties throughout the country. In this light, the following white paper has been designed to bring the various aspects of ISP privatization into perspective. On one hand, certain misconceptions and fallacies are dispelled, on the other hand, sectors of opportunity and feasible strategies are mentioned. This document is not designed to be a comprehensive project paper, only an introduction to the subject. Detailed project papers would be developed for interested clients on receipt of appropriate retainers and work orders.


The History

Internet access in a sense came into India in the early 90’s. ERNet, a division of Department of Electronics (DoE), and NICNet (Department of Statistics) made the initial inroads in this field. Both ERNet and NICNet are Government projects, but with very different charters and growth histories.

The ERNet (Educational and Research Network) project was designed to provide Internet connectivity to the premier educational and research institutions of India, while NICNet was assigned the provision of Internet services primarily to Government departments and organizations. Under the guidance of Dr. S. Ramakrishnan, Director, ERNet grew from a low-bandwidth, unreliable, shell1 and UUCP2 based Internet service to become the first to provide full TCP-IP3 access to dial-up modem4 customers through SLIP5 accounts around 1993. This was followed by an upgrade to a nationwide V-SAT6 network and passably high-reliability services by 1996. The shaky technical skills of the network management group at ERNet Delhi have perhaps been its weakest point.

NICNet was designed to provide V-SAT and dial-up Internet access primarily to Government departments. It began with shell-only access, at 2400 BPS, but now provides high speed TCP-IP access through 64 KBPS V-SAT links. Technologies were also upgraded to follow current trends, under the guidance of Dr. Sheshagri, Director. NICNet may not quite match world ISP standards, but it is not too far behind.

ERNet and NICNet are thus India’s first ISPs, though their operations have been shackled by the restrictions put upon them by Government regulations and policies of the Department of Telecom (DoT). Despite this, they were doing quite well in providing the essential Internet services to an Internet-starved India, until the advent of VSNL Internet services and the restrictive clampdown that followed.

Another provider of Internet services that preceded VSNL is the Software Technology Parks of India (STPI) Internet service. Again, this service was permitted only for a restricted audience, the software exporters falling under the STP scheme of the DoE. STPI has been providing high-end Internet services through leased lines and dial-up links, in and around several of the Parks, including Bangalore, Hyderabad and NOIDA, through the respective SoftNET networks. Of these, the NOIDA network is perhaps the most ambitious, the most technologically sophisticated, and also the most complex ISP in India. This network, titled the National Capital Region IP Network (NCR-IP7), reaches software exporters in and around New Delhi, Gurgaon, and NOIDA. Connectivity is provided via CDMA and TDMA radio networks, Ethernet LANs and dial-up lines. Currently dial-up access is only available to the STPN network administrators due to VSNL-imposed restrictions.

Entry of VSNL

On 15th August 1995, VSNL launched the Gateway Internet Access Service, for providing public Internet access. Initially, DoT allowed VSNL the license to operate this service only in the 4 metros. By the VSNL charter, it is supposed to only provide international telecom gateways, not end-user services. Thus the name "Gateway Service" was used to cover up for direct service provision.

Starting with only dial-up shell and PPP8 access in the 4 metros, VSNL followed with leased-line access to subscribers, followed by the setting up of points of presence (POP) in Bangalore and Pune. The DoT has turned a blind eye to these license violations, and tacitly helped VSNL with post-facto ad hoc permissions along the way.

VSNL has, since the inception of GIAS, portrayed itself in the press as India’s only legitimate ISP, while forcing many restrictions on the other ISPs through DoT regulations and the telecom policy. The Telegraph Act of 1885, a pre-independence British law, has been repeatedly invoked by VSNL and interpreted to give itself extended powers while forcing the other ISPs to curtail their operations.

The Private ISP Outlook

The monopolistic practices of VSNL, coupled with undoubtedly high investments to increase service capabilities, have had two results:


Facts to be kept in mind by potential Private ISPs:


Potential Opportunity Areas

Pointers for Success

The key factors for success of a Private ISP will be a technical edge, financial capability to sustain losses over at least two years, high marketing and promotional budgets, strategic alliances with ancillary service providers, and lobbying power with the central and state governments. These can be further examined further:

Budgetary Outline

Budgetary estimates of cost can only be made in very general terms until the exact terms of the Private ISP policy are announced. There may be many hidden cost factors that the DoT throws in. Further, the costing would vary widely depending on the initial level of service offered, and existing telecom infrastructure in the target region. The ballpark budgetary figures for one year of operation are as follows:

Foreseeable Problems


Concluding Observations

The setting up of a Private ISP has potential for high returns on investment, but with high risk factors. The initial investments are significantly high despite the Government’s decision to scrap license fees. This field will be intensely competitive, and only a few service providers will survive the first two years of operation. Those that do survive, stand to gain anywhere up to 70% ROI per annum over the following years. However, the entire window of operation is not more than a decade, as technologies like Iridium (low-orbit satellites providing global public Internet access) will start entering India with very low service tariffs.

A service that is not well designed right from the planning stage will not be able to survive, so the use of expert consultants, and well trained personnel is critically important. Further, the service must be designed to adopt new Internet technologies as early as possible, regardless of cost. Resource planning should be done with buffer capacity of 100% or more, to cope with bursts of growth. Local connectivity options other than POTS, such as Radio, should be given preference, so that the service is not at the mercy of the weather and the telephone departments.

This document is an attempt to reflect the ground realities in India, which are very different from the book of rules that ISPs in other countries are subject to. Foreknowledge of these realities will mark the difference between success and failure for every Private ISP in India.



1 Shell access:
Internet access supporting only textual interfaces, with Unix or Unix-like operating system commands. Requires "logging in" to a Unix-type user account, and then operating via textual commands or text-based menu systems. Shell access does not use the TCP-IP network protocols between the user (client) end and the servers. Therefore, applications like Netscape, NFS file sharing, and Internet telephony can not be used.
Unix to Unix Copy Program, an early Internet Electronic mail transfer protocol that is still used in many legacy Email situations, and in situations where connection reliability is very poor.
Transmission Control Protocol / Internetworking Protocol, a whole suite of networking protocols that form the basis of the Internet. Often extended in meaning to cover the entire Internet Protocol (IP) suite, including UDP and ICMP protocols, as distinct from TCP. TCP-IP access is required for operation of IP-dependent applications like Netscape, Internet Explorer, mIRC, Internet telephony and video, and many other modern applications.
4 Dial-up modem:
As opposed to leased-line modems, this device is connected between a computer or Data Terminal Equipment and a conventional POTS analog telephone line. Used to dial in to a corresponding modem at the service provider, and connect to the Internet or other services (e.g. INET X.25 network).
Serial Line Internet Protocol, one of the more popular protocols for IP access over dial-up and analog leased lines. Now commonly superceded by PPP, though still in use by some ISPs. See also: PPP.
6 V-SAT:
Very Small Aperture Terminal, satellite-based digital communication system consisting of 1.8 meter (usually) diameter satellite dishes establishing point-to-point connections, often via a V-SAT hub, a central switching system. Bandwidths can be from 2400 BPS to 256 KBPS. Communication delay is high, due to the two satellite hops between endpoints, and hub latency.
7 NCR-IP Network:
This network was originally designed and implemented by the author, in a consultant capacity, for STP NOIDA. The project was executed, from conceptualization to final implementation, between March 1996 and February 1996. (Reference contact: Mr.P.S.Narotra, Director, STP NOIDA, Tel: +91 11 436 3108).
Point to Point Protocol, currently among the most popular protocols used for dial-up TCP-IP access. Variations like Multilink PPP are supported by some ISPs, allowing use of multiple modems for increased bandwidth.

About the Author:

Anindo Ghosh has been a consultant for large network design and implementation for nearly a decade, and has been specializing in Internet related network solutions for the last 3 years. His design and implementation of the National Capital Region IP Network, a project of the Software Technology Park, NOIDA, makes him one of the few consultants in India with experience in design of a modern ISP using leading edge technologies. The NCR-IP Network uses Windows NT and Silicon Graphics servers, network routers from CISCO and Network Dynamics, and communications media including digital radio, Ethernet and dial-up modems. The network connects the software export units in the National Capital Region to the Internet, and hence has been designed to keep pace with their high-end Internet access requirements. The entire network was conceptualized, designed, implemented and maintained during the initial 6 months, by the author. During this time, STP NOIDA personnel were trained in the operation and management of the network, and it is now fully operated by them.