The primary reason, say analysts, is that the top ISPs hold ITSP (Internet Telephony Service Provider) licences and are already paying 6 per cent annual licence fee.
Also, the top 20 ISPs - seven integrated service providers, 12 category 'A' (national) ISPs and one category 'B' (state-level) ISP - cater to almost 98 per cent of the subscribers. Of these, the top seven ISPs have cornered over 90 per cent market share.
The contribution of other active ISPs, thus, "is either limited or negligible." Of the 135 licensees, 40, 54 and 41 belong to Category 'A', Category 'B' and Category 'C', respectively.
Out of 41 functional category 'C' (district-level) ISPs, 15 have a subscriber base of 150 or less. Around 51-60 per cent of their revenue comes from web hosting, DNS resolution service and cyber cafes and very limited revenue from dial-up subscribers.
Nareshchandra Singh, principal research analyst, Gartner India, says, "All the top players already have both the licences. The top telecom players anyway control almost 95 per cent of the market. What Trai is trying to do is apply the 6 per cent licence fee across the industry which will include the pure-play ISPs too. One of the objective seems to be doing away with non-serious players. It will affect the category C players, who are very strong in tier-II and tier-III cities."
Jasjit Sawhney, CEO, Net4, says, "The announcement is not significant. Opening up of the domestic market for Internet telephony will not make much of a difference for players like us."
He adds, "What this will certainly do is that those small players who had licences but did not use it will either return them as now they will require to pay a certain fee or upgrade themselves."
However, industry observers say the recommendations, if accepted by the department of telecommunications (DoT), will sound a death knell for small ISPs in the country and will widen the digital divide.
Pavan Duggal, a cyberlaw expert, says: "The elimination of Category C providers will definitely increase the digital divide since the top players focus on metros."
The ISP Association of India (ISPAI) President, Rajesh Chharia, says the Trai's recommendation that Category 'C' ISPs who come up for renewal should upgrade themselves to either 'B' or 'A' categories "will literally cripple the 'C' category players".
District level or `C' segment licence holders now would have to graduate to either state or national-level to be in business which means, they have to pay an entry fee of minimum Rs 10 lakhs (for the 'B' category).
However, the possibility is that these companies would shut shop, rather than paying higher fees.
Meanwhile the Department of Telecommunications is planning to set up a group of officials to study the recommendations and would be ascertaining the views of the industry before arriving at a decision.
