VSNL losing ground in Indian ISP war

104 Internet Service Providers cater to India's growing Net subscriber base

In this story: Stumbling to attract new subscribers Satyam Infoway gaining on leader Lower rates, more users RELATED STORIES, SITES

By Kristie Lu Stout
CNN.com Writer

MUMBAI, India (CNN) -- Internet service giant VSNL is facing increasingly fierce competition for India's 5.5 million Net users.

The public sector telephony provider once laid claim to virtually all of India's Net subscriber base.

But it must now fend off challenger Satyam Infoway, a newer entrant that is outpacing VSNL in both growth and user uptake.

Stumbling to attract new subscribers

While VSNL is still the market leader in India's ISP sector, it has been stumbling in its efforts to attract new subscribers.

"VSNL is the number one but they are losing market share to SIFY (Satyam Infoway)," says Sangeeta Gupta of India's National Association of Software and Service Companies (NASSCOM).

Private sector ISPs like Satyam Infoway received government approval to start offering its services in 1998, three years after VSNL launched its service.

"VSNL has had a three-year head start, starting in 1995," says Rajesh Jain, a member of Satyam Infoway's advisory board.

"If you look at it from that perspective, the private players have done very well to take away market share from VSNL."

Satyam Infoway gaining on leader

Industry watchers estimate that VSNL has just under 600,00 Internet accounts, with Satyam Infoway already at 450,000.

India's Economic Times reports that VSNL has added only 35,000 subscribers since December 31.

In the last few years, Satyam Infoway has managed to claim 40 percent of new Internet users in India.

Satyam Infoway is setting up 12 new international gateways that will be commissioned by the end of 2001, according to the Economic Times.

"Given the current growth rates, it definitely looks like SIFY will overtake VSNL within the next year," says Jain.

Lower rates, more users

There are 104 regional and national Internet Service Providers (ISPs) catering to India's growing Net subscriber base.

NASSCOM estimates that India has 5.5 million Internet users accessing the Internet with 1.8 million ISP accounts.

With Internet dial-up rates falling, many say the Indian Internet market is set to boom.

"The rates of access have fallen dramatically," says Jain.

"It's now 200 to 250 rupees a month for unlimited access. That's roughly 4-5 dollars a month."

NASSCOM projects that India will have 30 million Internet users by the end of 2003.

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