What’s In It For Channels?

ISPs use the channel to spread their reach to various nooks and corners
of the country. They are constantly on the look out for more partners while using every
means to retain those who are already in their network. Here is your chance to learn about
the criteria used by ISPs to select their partners and also see what the future holds for
channel partners when the free ISP model takes over.

Come monsoons and the climate everywhere gets cooled down. However,
this was not the case in the ISP market. The monsoons, in fact, brought a lot of heat.
VSNL’s monsoon package offered free surfing between 11 pm to 8 am from Monday to
Friday and from Saturday 11 pm to Monday 8 am as well as a tarriff of Rs 8,000 only for
2000 hours spread over three years. Even Mahanagar Telephone Nigam Ltd has followed its
footsteps and as slashed its Internet tariff up to 30 percent.

These cool packages have evoked hot reactions in the market and a huge new subscriber
base for VSNL. The VSNL offer did have its impact on other ISPs. Of course, some are
putting a brave front saying that the VSNL offer will not affect their subscriber base.
But others are sporting furrowed brows.

But the fact of the matter is that the private ISPs have managed to
edge out leading PSUs by having higher cumulative Internet subscriber base. And more
multinationals are now eyeing Indian ISPs. They want to either acquire them or buy stake
in these companies. Recently, Startec Global Communications Corporation announced that it
has signed an agreement to acquire up to 49 percent fully diluted ownership interest in
Dialnet Communications Ltd, an ISP in Delhi.

With increasing competition, most ISPs are now making efforts to go
that extra mile to help their marketing channels increase their reach. Pacific Internet
for example is planning to expand its services to several other cities in the country. It
is also looking at appointing more channel partners to provide the necessary services to
their customers. There are others who are looking at revamping their channel strategy to
give them an edge over their competitors.

But the bottom line is that most ISPs recognize that the only way they
can have a larger piece of the market pie is by providing efficient service. “Service
will be the differentiating factor for selection of the best service provider by the
customer,” says Mohana Pillai, President, Pacific Internet India. And this service
can only be provided by maintaining a presence all over the country through channel
partners.

Going straight to the user

The subscription-based ISPs use mainly two ways to market the Net. The
first is the direct model where users can download an Internet account or renew their
existing one from the home page of a particular ISP. This is a medium that is still at a
nascent stage, but would soon catch up to become the main marketing model of every ISP.

VSNL, for one, believes that this mode of marketing will be its forte
in the future. Says Amitabh Kumar, Director (Operations), VSNL, “Our online marketing
model is very powerful and we are concentrating heavily on it. We have received tremendous
response to our recently announced monsoon package.”

There are other ISPs who are considering attractive promotional
packages solely for online subscribers. RoltaNet for example has devised the Doubles
package. Here users can use double the number of hours at night because users will be
charged only half the rate charged during the day. Which means that a 100-hours day
package becomes a 200-hours package, if used during the night. Currently, this scheme is
available both online as well as through their dealer network. But there may be a time,
when separate strategies will have to be thought out for the online and the offline
distribution channel.

The online subscriptions have to be complemented by ample advertising
and media campaigns. The basic objective here is to build awareness among target users and
also to educate them to the benefits of renewing the account online. This is faster and
easier and very convenient. Says Jagdeep Kapoor, Marketing Consultant for RoltaNet,
“This medium is fast emerging as a handy tool for marketing and people are more
comfortable with renewing or registering their accounts online.” Users no longer have
to wait in long queues. Now it is just a click-and-pick choice for the consumer, which
works out well for the ISP too.

Channel strategy

The second mode of marketing online services is through representatives
or the channel. Currently all ISPs with the exception of VSNL are concentrating on
developing the channel medium. Says Mohana Pillai, “We have over 1,000 retailers in
Mumbai and not all of these belong to the IT industry. Some of them are stationery
outlets, yet others are greeting cards and gift article vendors. By applying this strategy
of appointing partners from non-IT sector, we are now able to reach out to a wider
audience.”

Indeed this strategy has held many an ISP in good stead. It is not just
the ubiquitous local neighborhood computer dealer whom they are after. Today one can
purchase a ready to install TCP/IP account out of a box from just about anywhere, a
shopping mall, a departmental store, and even a grocery shop.

Selection criteria

Most ISPs are always on the lookout for more channel partners. But
parameters for selection vary from ISP to ISP. VSNL, which currently has around 40 —
50 channel partners, has annual recruitment program. Every year, it carries an
advertisement in all leading newspapers inviting channel partners from all over the
country. Anybody with experience of selling IT-enabled services, who can reach sales
targets set by VSNL, is welcome to join the national telecom giant. This year the exercise
was held between February and March.

Existing dealers also have to re-submit their applications if they wish
to continue selling VSNL’s services. “This particular strategy” says
Amitabh Kumar, “helps in infusing new blood into our distribution channel. It also
helps those who are unable to continue selling your services to move over and make way for
those who think they can.”

Other private ISPs>>>

Other private ISPs, on the other hand, do not have this yearly
application format. They appoint channel partners as they expand into newer areas where
they think that the presence of an representative will help them to reach out to the
masses. Says Jagdeep Kapoor, “I interact with all of RoltaNet’s 32 channel
partners in Mumbai regularly. So far we feel that we have covered the entire region well
enough as our services are provided only in Mumbai. But as and when RoltaNet decides to
expand its services to other cities too, we will get in touch with other keen parties and
finalize agreements.”

According to him, the selection process is more or less a funneling
device wherein they go through various applications received. Personal interaction plays a
key role as it is necessary to know just how aggressive and dynamic the prospective
partner will be in this competitive market.

Pacific Internet too has a similar modus operandi. After six years as a
leading ISP in the Asia Pacific, they already have a channel strategy in place,
replicating the same in the subcontinent. Says Mohana Pillai, “As we expand out
services to 25 cities in the country by the end of this year, we are looking at appointing
representatives in at least half of these cities. We have found the channel model quite
successful in the other countries and will emulate the same in India.”

Benefits to the channel

ISPs are vying for attention of channel partners with various schemes
and offers. While partners can aim to earn around eight percent margin, they can also
expect intangible benefits like technical support and training programs. Most ISPs provide
the technology and the bandwidth, while the channel partner pitches in with his marketing
skills.

Says Mohana Pillai, “Our partners can benefit from our long
experience and the goodwill that our brand name generates in the market. It is much more
easier selling a renowned brand name which provides the user with technical support
too.” To add to this, Pacific Internet has also set up call centers to deal with
consumer’s problems and their queries. “This way our channel partners do not
have to bother about deploying a help desk to attend to all the calls made by the
user,” says Pillai. The company also trains engineers from partners to provide onsite
help to customers.

Adds Jagdeep Kapoor, “Rolta has a satisfied channel network as we
interact with them regularly. This way they can air whatever problems they have openly to
us and together we can devise ways and come up with mutually benefiting solutions.”

Free ISP model

In Europe, Freesurf is an ISP that allows its users to access the Net
free. There is NetZero in the US. And in India we have Caltiger. Even Bharti BT has made
its services free in Madhya Pradesh. According to a report, Caltiger, which was launched
two months ago in Calcutta, today has a subscriber base of 1.92 lakh, which makes it
second only to VSNL.

Looks like the free ISP model is here to stay. But how does it sustain
itself? There are various revenue strips that can be used individually or separately to
ensure that the moolah keeps coming in even while you give away your services for free.

The most prominent amongst these is the advertisement model. Others
include tying up with alliances like portals and vortals. This means that the ISP will
divert the users to these sites for a price. Each day newer models are emerging and with
them there also emerges the feeling that perhaps all the leading ISPs will tread this
path.

Mohana Pillai states, “Pacific Internet has no plans to go free.
We offer quality service to our users and there is no reason why we should offer these for
free.” Incidentally, Pacific Internet is the only ISP in Singapore that charges for
its services and it has an enviable subscriber base despite this. Mohana also adds that
the advertisement revenue model is not strong enough to bank on. “In India ad revenue
is very slow and therefore I do not think that this model will work here.”

The disadvantages of the free ISP model is that very few users are
comfortable with the ad bar that flashes the ads eternally which can be very distracting.
Besides, the connectivity is not something to write home about. However, there is a small
niche of the market that will use a free ISP, irrespective of the irritating ad bar that
appears at the bottom of the PC screen.

However, there are some like Sandeep Agarwal, Director, Brij Infotech
who are confident that very soon all ISPs will begin offering their services free.
“There are many free ISPs abroad who are success stories and I am sure this can be
emulated in India too,” he opines. “Or maybe ISPs here can follow the example of
America Online which offers its services for a nominal charge.”

Jagdeep Kapoor feels that the pricing should cease to be the key issue
and he gives the example of mobile phones to drive home this point. “When cell phones
were launched a few years ago, everyone was concentrating on selling handsets. But instead
they should have concentrated on the airtime that a consumer would use.” Even with
ISPs, he feels that they should stop worrying about the price, but should instead
concentrate on improving services that they offer to the consumer.

And even MTNL has realized this which is why it has proposed that the
pulse rate of local call for Internet usage be increased from three minutes to five
minutes.

Channel reactions

The debate over free services can go on and on. But, existing channel
partners of Indian ISPs have their own set of worries to deal with. There are some like
Vivek Jagasia of Viva Marketing who feels that with ISPs thinking of offering their
services free, the former’s position in the market will be threatened — a worry many are
voicing.

On the other hand, there are others who believe that channels will
continue to play an important role even in the future. Says Nadir Keshwani of Shan
Distributors, “The channel will continue to be there, as even though many ISPs like
Pacific Internet offer renewal services online, customers still have to come to
distributors and dealers like us for getting the code and key for the renewal
packet.”

However, he is concerned about declining margins. Not so long ago a
Pacific Internet kit was available at Rs 400 and the channel partner enjoyed an eight
percent margin. Today the price of the same kit has dropped to Rs 150 and the dealer has
to make do with the same margin. “Earlier I earned Rs 32 on a pack, while today I
have to manage with Rs 12,” says Nadir Keshwani.

Some of the channel partners have already spoken to their principals on
the declining margins. Though nothing has yet come out of this interaction, what is clear
is that the ISPs can’t afford to leave their channel partners in the lurch if they want to
increase their reach across the country.

The price war rages on>>>

The price war rages on

The monsoon package of VSNL brought in 25,000 new customers making its
total Internet subscriber base 3.85 lakh. But different ISPs have different things to say:

Mohana Pillai, President, Pacific Internet India Ltd: I
think VSNL is very late in reacting to the market dynamics. This is a short-term offer
while people at large need a long-term one. I also feel that it will be confusing for the
consumer. Price is not the only factor that determines user-buying decision. It is also
the nature of service, user-benefits offered, connectivity, quality, and the customer
support that make the entire package. After all, service is the key differentiator.
Besides the VSNL package is not the lowest. There are others who are offering even lower
prices. Again, service is the biggest casualty. I am sure, most VSNL users must mull over
one question, "After monsoon, what?"

Jagdeep Kapur, Marketing Consultant for RoltaNet: I believe in the
PIC rule – offer services persistently, insistently and consistently. Because I
believe in this rule, I do not think our existing users will want to go to any other ISP,
irrespective of the schemes they come up with. Besides, VSNL has taken a long time to come
out with this package. RoltaNet has been offering a similar package for quite some time.
We have the Doubles scheme where users are charged at half price for the number of hours
they utilize in the night. RoltaNet does not feel threatened by this monsoon package.
Instead we look at it as an opportunity, an opportunity to give even better services to
our users.

Gaurav Asthana, General Manager, Sales and Marketing, Dishnet DSL:
I think that this monsoon package is a very short-lived offer and it is more prone to
renewals. It is basically a strategy to retain the existing users. Although there are
reports that claim that VSNL has managed to rope in large numbers courtesy this package, I
would like to think otherwise. I think that they have lost out more customers than they
might have gained in this time frame. Earlier VSNL had a monopoly as it was the only
player, but now it is losing its hold as customers are going to newer and better ISPs.

Amitabh Kumar, Director (Operations), Videsh Sanchar Nigam Ltd: I
do not think that we have been late in reacting to market forces. VSNL is one of the
premier ISPs in the country and the quality of our services is evident from the large
subscriber base that we have. Our satisfied customers are testimony to the fact that VSNL
has been providing the best service in the country at cost-effective prices.

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