A shakeup in the ISP sector is imminent now: the Indian government has imposed an annual licence fee of 6 percent of ISP revenue, an entry fee of Rs. 20 lakh for national level ISPs, Rs. 10 lakh for State level ISPs, and done away with the licence for local level players, reports ET. Additionally, they’ve imposed a FDI limit of 74 percent. This is a serious jolt for ISPs, when compared to an earlier situation where ISPs got licences for Rs. 1, had an FDI limit of 100 percent, and paid no rev share. This is in line with TRAI recommendations that we’d reported earlier. On a brighter note, ISPs whose net worth is over Rs. 100 crore are now allowed to offer Internet Telephony or Voice over IP (VoIP) services, though these cant be terminated on PSTN networks. Additionally, security norms are being imposed on ISPs. More here.

SEE ALSO: DoT Likely To Impose Licence Fees On National And State Level ISPs

Implications: This is clearly a move that forces consolidation upon the ISP industry. Local level ISPs, which were functioning as bandwidth resellers and leveraging local distribution monopolies will now either have to sell out or join forces. Selling out will pave the way for entry of larger players like Airtel, Reliance and Tata Indicom which don’t have as widespread last mile network as BSNL or MTNL. Small ISPs could join hands to leverage scale, though it will take time; ISP Association of India hasn’t reacted to the policy yet. Either way, fewer, large ISPs will be easier to regulate. However, with all these fees, broadband could become more expensive...hence slow down growth?

P.s.: A larger scale of ops doesn’t necessarily mean improved quality of service…which mostly sucks.