It Doesn’t Get Any Better!

– Ashok Dongre

The ISP price wars are not taking us anywhere. Neither has the situation improved a bit, with falling costs of ISP tariffs. The root cause of the problem lies elsewhere. The future of Internet usage and e-commerce in India depends on the growth in infrastructure and not on lower and lower ISP tariffs.

I have been watching the price wars between the ISPs closely for quite some time and I have learnt two very important things from these price wars.

  1. Even if all the ISPs were to come together and decide that for the future of India’s IT and e-commerce industries – they would make a great sacrifice and provide free Net access to everyone, things will not improve any further. In fact they will get worse.

  2. It is imperative that ISP and telephone (used for Net access) tariffs should be based on the number of bytes transferred rather than on an hourly basis.

First let us look at the falling rates of ISP tariffs. The VSNL used to charge Rs 15,000 for 500 hours when it started giving the TCP/IP connections. A high cost of Net access at Rs 30 per hour. Add to this, the cost of one hour of telephone charges and you found it prohibitive to use the Net. Today the price wars have brought down the average ISP rates to almost Rs 3 per hour including the free nighttime surfing and free Sunday surfing and all other gimmicks. The telephone charges have not been reduced, so the ISP rates have almost become meaningless, and it doesn’t get any better than that!

If the ISPs go on reducing their rates to near zero, they will soon go bankrupt. After all, it does cost a lot to maintain the infrastructure for providing the services. So how low can they go anyway? How can they afford to bring down the rates to such a ridiculously low level?

Next time you connect to the Internet, work exactly for an hour and then go to disconnect and watch out for two magical numbers – bytes received and bytes sent. Add up these two numbers and see what you get. This is the data transfer that has taken place on your Internet connection in one hour. When you see this you will realize who is at a loss in the prices wars of the ISPs.

Data transfer loses out

While the tariffs are going down, the effective data transfer rates are also going down at a matching level. Maybe we are paying ten times less money for ten times less data being transferred. So, is nobody losing anything here? Have we forgotten to take into account something else?

Let us start by taking into account the telephone charges and you will know who is losing how much on the Net access bargain! Reduced data transfer rate means increased time for the same amount of data being handled through your Internet connection, and increased telephone bills. This becomes very prominently visible if you are using the Internet for file transfer.

It used to take about 30 seconds to transfer a 100KB file in 1998; today it takes about three minutes to transfer a file of the same size. The telephone bill goes up by that much amount. In effect, it is costing me more to transfer a 100KB file today than it used to cost two years ago even at a higher rate of ISP tariff. It is like selling mangoes by the boxes and not by the dozens. A box of one dozen mangoes used to cost Rs 150 last year. This year it was Rs 250 for the box of one dozen mangoes. A steep rise in the price in just one year.

Now imagine VSNL selling mangoes instead of Internet access. A box of VSNL branded mangoes would have cost Rs. 50 per box this year. When you open the box you would find only two mangoes in the box instead of 12. This is exactly what is happening when we buy Internet access by the hour and not by the number of bytes transferred!

I am no authority on Telecom and Internet pricing, but as a user I will be happier paying to the ISP and the telephone company by the bytes than by the hour.

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