Illegal VoIP

Internet telephony is great. Download free software, like Skype, get a headset and you can talk to anyone in the world from your PC.

However, internet telephony, estimated at 200 million minutes a month, has become a battle ground between Internet Service Providers (ISPs) and internet companies backed by India’s two largest internet associations. The Internet Service Providers Associations of India (ISPAI) — on one side and the Internet and Mobile Association of India (IAMAI), on the other. The issue is unlicensed use of net telephony — estimated at 100 million minutes a month.

ISPAI with its members like Worldphone, Webtel, Sify, Net4India is alleging that large MNC players like Skype, Vonage have eaten into their market share by offering unlicenced net telephony illegally. ISPs also allege that voice chat through Google, MSN and Yahoo is resulting in revenue leak for the government and posing grave security concern.

MSN and Yahoo, however, denies such claims. IAMAI, the association supporting Yahoo, MSN and others, says, that since these companies offer free service there is no question of levying a service tax through licencing.

"We will abide by whatever the government asks us to do. On the service tax front, we don’t accrue any revenue as our PC to PC telephony service is free. We offer PC to phone service globally, but not in India as it’s not permitted,” said Microsoft India country manager (online services business) Jaspreet Bindra.

Internet companies offering chat services also say that security checks are random and they cooperate whenever government ask them to do so. But ISPAI disagrees, saying that it’s a grave security risk as call data records under voice chats are not saved by unlicenced providers.

“Apart from the revenue leakage, these sites pose a threat to security as they don’t provide surveillance or monitoring. In India, companies like Skype, Vonage, Packet 8, Go2call, Lingo, Impetus, Dialpad and Net2Phone have been offering unlicenced net telephony services, which is mostly illegal. If they don’t opt for a licence the government should block them,” said ISPAI president Rajesh Chharia.

Vonage refutes these claims. “We have zero revenues from India. Nevertheless, we applied for a licence in March 2006. Moreover, only US and Canada credit cards work on our site so their claims are baseless,” said Vonage’s India representative Janki Raman. Internet companies claim that since no calls are terminated in India, there is no illegal play.

Meanwhile, ISPs like Worldphone who have taken a licence and pay about 18.36 per cent in taxes alone, say that they are being disadvantaged as more than half of the net telephony market has been captured by illegal players as it’s cheaper.

The net telephony market is estimated to be about 200 million minutes per month, at present. Almost half of which is estimated to be captured by unlicenced players. There are an estimated 10 lakh users of which only about two lakh are legal users of net telephony.

"We pay about 12.5 per cent service tax alongwith a 6 per cent tax on our gross revenues. Add to it the cost of maintaining call data records (CDRs), overheads, marketing, reseller/retailer’s share and the difference between our and their price becomes 25 per cent. We want a level-playing field,” said Worldphone chairman Aditya Ahluwalia.