archives-1999

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Archives - 1999

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The communications minister, Mr. Paswan announced on December 10, 1999, that Internet Service Providers (ISP’s) could uplink directly to foreign satellites and connect their gateways to overseas backbones. ISP’s can set up their international gateways and uplink to any satellite without having to go through Videsh Sanchar Nigam Limited – the state owned ISP.

The applications for uplinking will be cleared by a committee that comprises of representatives of Departments of telecommunications, space, infotech ministry, telecom services, including the wireless planning and co-ordination wing.

The telecom department is also likely to allow the use of Very Small Aperture Terminals (VSATs) to provide Internet services. Mr. Paswan also agreed to consider a proposal for village telephones through VSATs.

In the meeting, the basic telecom operators also requested for the formation of a Universal Service Obligation (USO) fund to facilitate expansion in rural areas.

Certain differences have cropped up between Videsh Sanchar Nigam and FLAG international undersea cable system, with FLAG wanting to directly market its services to Internet Service Providers (ISP’s). VSNL has taken the stand that it has exclusive rights for FLAG services in India. FLAG states that it has been marketing its services to private ISP’s. It states that VSNL only implements the connection between the cable when it lands in Mumbai to the rest of the country’s telecom network. That is why VSNL may have the right to charge an access fee to implement the connection between the ISP and the FLAG network, but that does not imply a monopoly over the service. FLAG in this case, wants to directly negotiate tariffs with the ISP’s and VSNL disagrees.

Mr. Gupta, FLAG Telecom director, said that VSNL did not own any equity in FLAG Telecom, unlike the other cable systems for e.g. SEA-ME-WE, which is owned by the national telecom carriers. FLAG is the main undersea cable company and any telecom carrier can use its privately built system and the use of bandwidth is not the monopoly of one operator. FLAG has implemented this agreement in many countries, and wants it to be implemented in the right spirit.

The Internet portal, Rediff on the Net, has given the mandate for American Depository Receipts (ADRs) offering to the investment banker Goldman Sachs. Rediff is planning to make its initial public offering (IPO) on NASDAQ by March 2000.

This would be the third round of fund raising, which will be undertaken by the company since its incorporation three years ago. Investment banking sources have valued the company in the range of $125m to $150m.

Besides the IPO, Rediff is also planning to place some part of its equity with a private equity fund.

The Information Technology ministry is planning a bill that would enable Indian companies and individuals to take patent rights for computer chip designs. For the first time in India, semi-conductor design would come under legal protection.

The bill is likely to be put before the Cabinet on December 14, 1999, as the ministry is keen to get it passed in the winter session.

It seeks to give exclusive rights to creators of integrated circuits (IC) and to protect the layout design on the chip from commercial exploitation. As per the bill, it will be illegal to copy partly or wholly a protected design. Copying, import, sale or any other type of commercial distribution will be considered illegal. A patent registration can also be obtained if the design has not been used for less than 24 months. The bill also suggests that the right to the layout design shall belong to its creator. If the layout has been created in the execution of an employment contract or a commission then all rights shall belong to the person who commissioned the work, unless it is mutually agreed otherwise. The protection will be valid for 10 years starting from the date of its first commercial exploitation.

The Union Cabinet on December 7, 1999, cleared amendments to the Copyright Act 1957, to make it in accordance with India’s commitments to the Trade Related Intellectual Property Rights (TRIPS) agreement.

The new bill, which is to be introduced in the current session of the parliament, would be compatible with the TRIPS agreement. It would also protect the intellectual property of Non Resident Indians’ residing in other WTO countries. Indian traditional music and folklore will also be protected under the new law.

The government is likely to reintroduce a draft broadcasting ‘Bill’ in the parliament to facilitate private sector participation in the broadcasting sector. Mr. Chaturvedi, the secretary for information and broadcasting said that the new broadcasting law should be in place by March next year.

Efforts in 1997 to pass a legislation to facilitate enhanced foreign equity participation were hampered as the bill was referred to a select committee of the parliament and there was a subsequent dissolution of the house.

Clearance of the Bill would allow for 49% foreign equity participation in the domestic sector. Private companies could enter the broadcasting sector subject to existing guidelines and regulations applicable to the broadcasters.

According to the Information and Broadcasting secretary, Mr. Chaturvedi, the government is likely to consider the issue of allowing foreign direct investment (FDI) in the country’s print media.

He felt that there was a need to loosen restrictions and allow investments by foreign companies in the domestic print media. India had prevented entry of foreign print media and foreign investment in 1955 through a cabinet decision. This was because the domestic print media was at a development stage.

Now as the domestic companies in the print media are on a stronger footing, foreign investment could be permitted.

IT offer norms may be eased; 3-year profitability norm may be waived for Net firms

The Securities and Exchange Board of India (SEBI) is considering allowing information technology companies in the Internet business freer access to the capital markets. Mr. Mehta, the chairman of SEBI, said that the IT companies especially in the Internet sector may be allowed to float an Initial Public Offering (IPO) without showing a three-year consecutive profit report. But these projects will have to be approved by financial institutions, with over a 10% stake being held by the institutions.

SEBI has laid down minimum capitalization profitability and track record norms for companies that want to come out with an IPO. However, the business model of Internet companies and hi-tech start-ups is such that it is difficult to show a consecutive three-year profit.

A few months earlier, Sebi had partially relaxed the listing norms for IT companies by allowing them to sell only 10% of their capital during the IPO, compared to the norm of 25% for non-IT companies.

NASSCOM (National Association of Software Companies) officials felt that Sebi's move also comes at a time when Indian dotcoms like Satyam Infoway and Rediff.com are looking at the US markets, because they cannot list under the existing norms in India and 3 years is too long for companies in this sector to wait for raising capital. To prevent that, India should actively promote the infusion of venture capital skills and capabilities, either by attracting global venture capital funds or attracting managers from these funds.

After agreeing to jointly revive ICO Global Communications, Craig McCaw of the Teledesic Group and Subhash Chandra of Zee Telefilms have decided to work together on a revival package for global satphone service provider Iridium LLC.

Sources said Mr. McCaw and Mr. Chandra had discussed the idea at meetings on December 2-3, a day after Iridium held its crucial board meeting with lenders in Washington. At the board meeting, the lenders concluded that without a new investor, the $3bn bankrupt company that owns 66 satellites would have to go into liquidation.

Sources in New York confirmed that Mr. McCaw has completed a comprehensive 'due diligence' on Iridium and that discussions were on as to whether it was economically viable to pump in huge equity funds in the over-$3bn venture.

The two parties — Mr. McCaw and Mr. Chandra, are working on the deal together that involves guarantees of funding to the tune of $500m to $700m in phases. The proposal, if cleared by Mr. McCaw and Mr. Chandra, will be forwarded to the Iridium board for final approval.

The government plans to formulate a new broadcasting bill for introduction in the Parliament at the earliest, minister of state for information and broadcasting Arun Jaitley informed the upper house of the Parliament (Rajya Sabha) today.

He said a committee had been constituted to study the working of Prasar Bharati (the government body which has been constituted to oversee the functions of Doordarshan) and make appropriate recommendations to improve its quality of service, credibility and professionalism. The committee, constituted on November 22, 1999, has been given three months to submit its report, he said.

Forty-seven producers and agencies have failed to clear the outstanding fees for Doordarshan (the state owned broadcasting corporation). Legal action has been initiated against the defaulting producers and agencies by discontinuation of their programmes on Doordarshan.

Mr. Jaitley also said Doordarshan had identified sensitive areas of their activities and issued orders streamlining the procedures involved in processing the serials, programmes and events to bring transparency in its functioning.

In a move that will delight Internet users and put further pressure on rival Internet service providers (ISPs), Mahanagar Telephone Nigam Ltd (MTNL) said on Saturday that it will cut its Internet tariffs by 15 per cent from December 13.

Srinivas Rajagopalan, chairman and managing director, MTNL, said that the board of directors, in a meeting late on Friday in Mumbai, had approved the tariff cut and the company’s plan to list its shares on the New York Stock Exchange (NYSE) before the end of January. The board cleared the listing of ADRs (American Depository Receipts) on the NYSE by January-end. Tariffs of the company's Internet services will be reduced by almost one-sixth, Mr Rajagopalan said and new flexible packages, with unlimited usage will also be introduced.

A French court on Saturday sentenced an Indian business executive to a six-month jail term for violating trademark and copyrights law on a complaint given by French carmaker Peugeot.

Businessman Chand Mehta was sentenced to a six-month term and a three-month suspended term by the court, the executive's lawyer, Vijay Phadke, said. In addition to his prison term, Mr Mehta, chief exports manager of Jaipur-based Autolite India Ltd, has been asked to pay a fine of Rs 15 lakh by the lower court in Bobigny, a Paris suburb. The arrest forced many Indian exhibitors to leave Paris in a hurry fearing other French firms on similar charges may also target them.

Mr Mehta was arrested by the French police in October during the Equip Auto ’99 exhibition on complaints from Peugeot that the Indian firm had put on display a headlight for Peugeot-205 for which it had no licence. In today's verdict the judge found Mr Mehta personally responsible for trademark infringement, a criminal offence according to the French law.

Satyam Infoway has acquired IndiaWorld, a Mumbai-based portal company, for $115 million. IndiaWorld was formed in March 1995, has a turnover of only $0.3 million and is a very small player compared to Satyam. The Satyam Infoway-IndiaWorld deal sets a benchmark for future Internet deals in India. It is also the most expensive net related deal in the country.

This deadline can be extended by three months. If Satyam fails to implement phase III then IndiaWorld gets to keep the deposit. This kind of a cash-only deal in the form of an options contract makes its unique.

After the deal Satyam would not only own and run popular websites such as samachar.com, khel.com and bawarchi.com but will also attract eyeballs of the NRI community in U.S.A. Thus with this deal, Satyam Infoway becomes a provider of Internet services as well as e-commerce services, portals, development etc.

The board of Infosys, announced a 2-for-1 split of its equity shares, dividing the par value of each of its Rs 10 share into two of Rs 5 each. This disappointed the market segment that expected it to have a stock split ratio of a 3-for-1 or even a 5-for-1 split, causing a fall in the price of its share at the BSE sensex.

Rupert Murdoch-controlled News Corp has set up another company in India, Broadcast Worldwide Pvt Ltd, to be headed by Mr. Rathikant Basu, who is currently the chairman of another Murdoch company, News TV India Ltd. The new company will be based in Mumbai and will be involved in the development and production of multi-media content and related activities.

News Corp is one of the largest media companies in the world with total assets of about $36 billion and total annual revenues of about $14 billion.

News Corp's has also launched a second venture, eVentures India that will focus on both taking high profile Indian ventures to their full potential in India and raising them to international standards.

Zee Network plans an expansion by launching new channels such as Asia News Network. In view of its expansion plans, it also recently signed a deal for C-band transponders between Asia Satellite Telecommunications Company Limited (AsiaSat) and Expand Fast Limited (EFL), a wholly owned subsidiary of Zee Multimedia Worldwide Ltd (ZMWL).

Mr. Deepak Shourie, the operating partner of Zee Publishing, is to be made responsible for all the news operations of Zee channels.

The Department of Telecom Services (DTS) will soon launch Internet-based telephone services in the country. The services will be provided from limited exchanges on a pilot project basis initially.

"The services will be launched within three months on an experimental basis," said Mr. P S Saran, Secretary, DTS. Initially, the services will be launched in four exchanges. Based on the success of the project, the service will be offered from more number of exchanges.

A number of private operators have shown interest in providing IP telephony in the country. Government’s telecom policy, however, does not permit them to provide the service. The private operators, on their part, did not subscribe to the argument of the policy makers in Sanchar Bhawan that IP telephony should not be allowed since it was not good. "The government should allow private operators to provide IP telephone services and let the market decide its utility," said a private telecom operator.

DTS has not yet finalized the tariff for the IP protocol-based telephone services; sources said the tariff for IP telephone services would be much lower than ordinary telephone services.

The Mahanagar Telephone Nigam Ltd (MTNL) is planning to enter into new businesses through domestic and foreign alliances. It plans to list its shares on the New York Stock Exchange in January. Mr Rajagopalan, chairman, MTNL, said that MTNL would announce an attractive Internet package after its board meeting on December 3, 1999.

The company also expressed its desire to seize investment opportunities in other private companies.

Government today said India's telecom sector is fully Y2K compliant and telephones and telecom systems will provide normal services at the dawn of the new millennium. The entire network of Department of Telecom Services (DTS) is Y2K ready as Y2K solutions for both hardware and software programmes have been developed, tested and are in place.

DTS has drawn a contingency plan and circulated it to the field units, while control rooms will be set up at national, state and district level from December 25 to January 1, 2000, to monitor and manage any eventuality.

Telecom Regulatory Authority of India's right to fix revenue share in Calling Party Pays [CPP] challenged

The Department of Telecommunication Services (DTS) and Mahanagar Telephone Nigam Limited have challenged TRAI's right to fix the revenue share between basic and cellular operators in the calling party pays (CPP) regime. The DTS feels that the revenue share should be arrived at mutually between cellular and basic operators. TRAI may step in only in case of a dispute. If the courts accept this interpretation, it might jeopardize TRAI's ability to introduce a CPP regime. In a CPP regime, calls from a fixed to a mobile telephone are charged at higher rates than local rates, as incoming calls become free for the subscriber. The revenue generated is shared between the two. This compensates the cellular operator for the revenue loss.

Under the proposed regime TRAI has fixed the share of the cellular operators as 0.8 Indian Rupees per call. DTS and MTNL do not agree with the rate and thus the dispute.

Agarani, the $750 million satellite communications to broadcast project being implemented by Subhash Chandra-promoted ASC Enterprises, has been accorded infrastructure status. This will allow it to avail several concessions, including a tax holiday for five years.

As an infrastructure project, Agrani can avail 100% tax deduction for the first five years and a deduction of up to 30% for another five years under section 80-IA of the Income tax Act. Agrani is the first global mobile personal communications via satellite (GMPCS) project to be accorded infrastructure status.

The government will introduce fresh amendments to the Patents Act, 1970, in the winter session of Parliament. However, senior industry ministry officials when contacted by the newspaper, denied any such move and maintained that the minister was misquoted.

While the government is obliged to introduce certain transitional amendments - reversal of burden of proof, right of patentee (which implies that patent holders will have the right to import drugs), compulsory licensing and extension of the term of patents - by January 1, 2000, the commitments to introduce a full product patent regime in areas where it does not exist have to be met by January 1, 2005.

It is however up to the government to do so before this date if it chooses, if the language of the bill is drafted such.

The government wants to resolve the situation in the telecom sector through an out-of-court settlement. The ministry of communications will begin discussions with state-owned MTNL and Department of Telecommunications (DoT) and the independent Telecom Regulatory Authority of India (TRAI), to resolve their disputes. MTNL and DoT are currently suing TRAI on its September 9, ’98 order implementing a calling party pays (CPP) regime. The CPP regime governs revenue sharing between cellular and landline operators. The new regime was scheduled to be implemented from November 1, ’99, but has been held up by an October 28 stay order from the high court.

Sources in the ministry of communications say that the bickering between state-owned operators and the regulator was one of the principal points of concern among potential investors during the October summit of the International Telecommunications Union in Geneva.

Following major amendments to its application, the Foreign Investment Promotion Board (FIPB) has approved WorldTel's investment plans for India today. WorldTel has been permitted to set up a holding company which would fund, among other things, a backbone of fibre optic cables for Internet services both in south and north India. The total project size is well over Rs 2,000 crore.

The proposal had earlier been kept pending by the FIPB since it lacked clarity and did not meet the foreign direct investment (FDI) norms. Sources said, the access network will be a combination of wireless, fibre optic and TV cables.

India must take an unilateral stand and demand a continued moratorium on taxation of e-commerce at the World Trade Organization (WTO) meet in Seattle later this month and stop its tit-for-tat bargaining policies in trade negotiation. This was stated by Donald L Conover, president, CBay Systems Ltd, in a hard-hitting speech at the US-India Business Council Summit here on Monday. India can retain its brainpower, and the tax revenues it represents, only in an open and transparent e-commerce scenario, said Mr Conover.

The entire financial sector is Y2K-compliant, according to the Reserve Bank of India (RBI). According to the report released on The Trends and Progress of Banking in India, 1998-99, banks and financial institutions have completed the entire exercise of Y2K compliance. Banks and financial institutions have renovated/replaced systems and have also completed its validation through testing the system. They have also worked out contingency plans and the validations and testing of these contingency plans are currently going on. On its part, the RBI is monitoring the compliance efforts of banks and FIs through a monthly reporting system. On-site verification of compliance efforts of banks and financial institutions is being carried out through the regional offices of the department of banking and supervision. RBI has also advised banks and financial institutions to keep their board of directors suitably apprised of their progress, at least on a bi-monthly basis.

RBI has identified various areas of banking operations, which could be impacted on account of the Y2K problem. The Y2K problem could also have credit risk implications and could end up being a legal risk for banks. A separate Y2K project cell was formed in the department of banking supervision to monitor Y2K compliance efforts by the financial sector. The cell also seeks feedback in respect of the compliance efforts of other institutions — such as state finance corporations, housing finance companies, regional rural banks, state and district co-operative banks. According to RBI’s high-level working group on Y2K, chaired by deputy governor S P Talwar, contingency planning was key to ensuring business continuity.

HDFC Bank, on Monday, launched its international debit card. The card would enable HDFC Bank account holders to access their bank accounts from anywhere in the world. The debit card, which has been launched in association with Visa International, can also be used to pay for utility services such as telephone bills, electricity bills. This facility can be availed of by HDFC Bank account holders at the bank’s automatic teller machines (ATMs). HDFC Bank is the third bank to launch a debit card in the domestic market, the first two being Citibank and TimesBank.

Can India survive the e-commerce boom, with a cap on foreign equity? The question is doing the rounds of large consultancies today. A recent proposal by the Department of Industrial Policy and Promotions to cap foreign equity at 49 per cent in e-commerce ventures has come as a rude shock to many. Start-up companies that had already procured foreign investment or were banking on such funds are at a loose end. E-commerce operates in a borderless world. The cap on foreign funding will result in such operations moving out of India. Dubai already has plans to set up an IT centre and could be a stiff competitor,’’ says Nishith Desai, international legal counsellor.

If the government goes ahead with its proposal, the Indian entrepreneurs who are starved for domestic funds could be badly hit. News of this proposal is sending shivers across those companies, which had their `strategic structures’ in place. Experts are unanimous that this proposal requires a rethink.

The domestic software industry has recorded a 58.3 per cent increase in export revenues to touch Rs 8,060 crore during the first-half of the current fiscal, up from Rs 5,090 crore in the year-ago period.

According to a survey conducted by the National Association of Software & Service Companies (Nasscom), during the same period, software exports equivalent to $1.87 bn accounted for almost 10 per cent of the country’s total exports of $17.4 bn. In fiscal ’98-99, software exports accounted for about 8.5 per cent of India’s total exports.

The government has devised a big-bang strategy to iron out wrinkles in India's telecommunications and Internet policies. The three-pronged strategy aims to remove obstacles to the growth of Internet and e-commerce; review the Telecom Regulatory Authority of India (TRAI) Act of 1997 and amend it to strengthen the regulator; implement changes in the Telegraph Act of 1885. The government feels that the growth of Internet services and e-commerce is restricted by the monopoly of overseas gateways by state-owned VSNL. ISPs have been allowed to bypass VSNL gateways for overseas data services, which do not carry voice telephony. But given the rapid convergence among voice and data communications, the government might also relax VSNL's grip over other services.

Finally, the government has changed its mind on referring the Telegraph Act of 1885 to the Law Commission for review. Instead, it will set up a group to recommend changes in the Act of 1885. The archaic Telegraph Act governs all aspects of the telecom industry apart from tariff setting, which is governed by the TRAI Act of 1997. Sources said that the Law Commission route had been dispensed with, since it would be more time-consuming than a review by an expert group, followed by amendments in Parliament.

The telecom commission has decided to appoint a consultant for devising a strategy to corporatise the Department of Telecommunication. An India based consultant may be appointed but it is not clear whether it is an Indian Consultant or an Indian subsidiary of a foreign consultant.

The DOT has set up the Department of Telecom Services (DOTS) to oversee DOT's functions as a service provider. The New Telecom Policy 1999 states that DOT's functions, as a service provider would be separated from its licencing and policy functions.

The Supreme Court today dismissed a petition filed by the Telecom Regulatory Authority of India (TRAI), challenging a decision of the Delhi High Court to stay the implementation of the calling party pays (CPP) regime from November 1. The Supreme Court did not think that it was appropriate to strike down the order of the Delhi high court as the matter was at the initial stage. TRAI had moved the Supreme Court on October 30,1999, challenging the order of the Delhi High Court on the stay of implementation of the CPP regime. According to the telecom regulator, the TRAI Act gives it statutory powers to set tariffs. The CPP regime sought to make in-coming calls free for cellular phone users, while calls from basic to cellular phones would have cost more than local calls. The order of the Delhi High Court came as a blow to the telecom regulator. It had no say in licencing matters and now its tariff regulatory powers are also in question.

The Reserve Bank of India (RBI) has decided to display weekly updates on disclosure statements and independent assessments of banks’ Y2K readiness on its website. It has also decided to keep a proper interface with local utility organizations, state administrators and supporting vendors to ensure smooth transition into the new millenium.

The Y2K compliant state-of-the-art IBM 390 mainframes for cheque processing at all the national clearing cells of RBI have come into operation. The national clearing cells are located in Mumbai, Delhi, Calcutta and Chennai.

RBI said that apart from ensuring smooth transition to the new millennium, the new systems would also help image processing in the second phase and the computers installed in these cells will be extensively used for multiple payment systems such as electronic funds transfer, electronic clearing services and real time gross settlements.

The Reserve Bank of India has also directed banks to reject /restrict leave and transfers during the transition period.

The department of Industrial policy and promotions has proposed to allow upto 49% foreign equity in e-commerce ventures. The Cabinet is expected to approve the Information Technology Act (cyber laws) shortly, paving the way for e-commerce activities in the country.

According to the proposal, companies intending to undertake e-commerce have to be registered in India and such ventures should have domestic majority equity.

A large number of companies, both domestic and foreign, are waiting to undertake e-commerce activities once the cyberlaws that would give validity to the transactions are approved by the Cabinet.

Once the cyberlaws come into force, then the service provider can authenticate a customer, enabling purchases over the net using a credit card.

The Foreign Investment Promotion Board (FIPB) yesterday deferred a decision on international telecom major WorldTel's proposal to invest Rs. 570 crore in a fully owned arm in view of certain issues concerning investment norms. WorldTel executives would now be called for talks.

It's going to be a memorable first anniversary for Satyam Infoway. Today, the company still makes losses, but the same does not matter to US investors, who have catapulted the scrip to a market capitalisation of $ 0.95 billion as on last Friday. Satyam's success has awakened investors to the potential of stocks like Videsh Sanchar Nigam Ltd. (VSNL).

Of about 170 ISP licences issued till date, only 30 have made any effort to start operations. Under the 'A' category, only three of the 22 who were issued licences have started services in the country. Although all companies operating agree that the potential of Internet services is high, the present scenario is not very encouraging. Poor infrastructure is the main problem that ISP's are facing today. Another major hindrance in the progress of ISP's is the low penetration of personal computers (PCs) in the country. The Indian ISP industry is showing signs of changing the Internet proliferation in the country.

The union cabinet is set to clear the Information Technology Bill, paving the way for a regulatory mechanism for e-commerce and other related issues, like establishment of one or more appellate tribunals to be known as Cyber Regulations Appellate Tribunals.

The draft bill hopes to "provide legal recognition to transactions carried out by means of electronic data interchange and other means of electronic communication commonly referred to as electronic commerce, which involves the use of alternatives to paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the government agencies and for matters connected therewith or incidental thereto". The key feature of the cyber laws or Information Technology Bill is that it gives validity to transactions over the Internet. The cyber laws also define cyber crime and lay down penalty provisions.

The National Stock Exchange will launch its information technology subsidiary, NSE IT in the first week of November, ten months ahead of schedule. It would provide a cost-effective computer to computer link product with an Internet-enabled trading solution, the first of its kind in the market. NSE officials said that the product would pave the way for expansion of brokers across the country and lay the platform for Internet trading in India.

The newly created information technology (IT) ministry will promote Internet, e-commerce and knowledge-based industries without stepping on the toes of the existing ministries. Sources today said there would be no overlap between the infotech ministry and the communications ministry. "The new ministry will focus on promoting Internet and knowledge-based industries. Licensing functions relating to the Internet will remain with the communications ministry," a senior official in the PMO said.

Mahanagar Telephone Nigam Ltd (MTNL), the state-owned basic telephone services operator in Delhi and Mumbai, has decided to withdraw interconnection facilities to three cellular operators Hutchison Max, BPL Mobile and Bharti Telecom, because they have not paid the security deposit for interconnection. The cellular operators have to make a security deposit of about Rs 2.6 crore to MTNL. However, the three operators in question have not deposited any security for the last four years.

The union cabinet on Thursday approved the migration package for private telecom companies. The telecom migration package envisages a shift from upfront licence-fee payment to a more favorable revenue sharing arrangement for private basic and cellular firms. The Government, based on Telecom Regulatory Authority of India's recommendations will decide the final percentage of revenue sharing.

Rediff on the net, the leading on-line publication and internet services company, will take a final decision on going public in the next 3 weeks. Rediff chairman and MD, Mr. Diwan Arun Nanda, said that the final decision would be taken in next three weeks, whether to go for NASDAQ listing or make an IPO (initial public offer) in India. He also said that the funds raised through the IPO would be used for development of its Internet services. Mr. Nanda said that the extent of equity offering would not be less than what Satyam recently raised from the American market.

The hefty Rs 15 lakh annual fee for a 64 kbps line to connect to close user group is to set to hinder the introduction of Internet trading in the country. National Stock Exchange (NSE) officials say that the fee set by DoT is too high. The government had announced a month back that closed user groups would be allowed to connect with each other. Recently the DoT fixed an annual licence fee of 15 lakh for a 64 kbps line while setting the terms for interconnectivity. The major roadblock for net trading in the country has been that two networks cannot connect.

The NSE officials are going to take up the issue with DoT to urge them to bring down the fees. In the absence of connectivity between two networks, a broker would not be able to get the quotes across to clients as well as collect orders and route them directly into the trading terminal. This is a pre-requisite of Internet trading. The Securities and Exchange Board of India (SEBI) is looking at formulating the guidelines for net trading. Introduction of net trading is expected to significantly boost trading and take the capital market into the rooms of retail investors.

Drop in entry-level costs for users—cellphone firms offer attractive bargains

With cellular phone companies in the metros moving away from fixed per subscriber licence fee regime, entry-level costs for subscribers are heading downward. Some cellular phone companies in Delhi are offering phones with Rs 1000 airtime credit loaded for Rs 8,500 onward. Bundling schemes are making a come back for the first time in over a year, and by paying Rs 12000, to Rs 18000 a subscriber opting for a regular post-paid connection can avail of upto Rs 500 worth of free air-time every month. At the proposed tarrif of Rs 4 per minute, it works out to 123 minutes of airtime free per month.

With such schemes the average revenues per subscriber could fall to Rs 600-700 p.m. from the current level of Rs 1200 p.m. Companies are now more comfortable with adding "marginal" subscribers or low subscribers or low users to their network, in direct contrast to the previous practice of weeding out low users from their networks.

Recently the director general of foreign trade (DGFT) stipulated that units in the domestic tariff area (DTA), having any outstanding export commitment under the advance licence scheme should discharge the export obligation before conversion into 100 per cent export oriented unit (EOU). As a consequence of this stipulation, many DTA units have deferred their plans to convert into EOUs. The EOU scheme is becoming more popular because an EOU can import second hand capital goods freely, whereas a DTA unit has to obtain an import licence. DGFT has prescribed stringent conditions for grant of licence to import second hand machinery by a DTA unit, whereas an EOU needs to only get a list of second hand machinery attested by the Development Commissioner (DC). DTA units fear withdrawal of actionable subsidies, built into schemes like Duty Entitlement Passbook (DEPB), Export Promotion Capital Goods (EPCG), Income tax exemption for export profits etc, on the grounds of incompatibility with the stipulation of World Trade organization (WTO). EOUs are not likely to be hit by such changes. This April, the exim policy made the EOU scheme more attractive by allowing EOU’s to sell in the DTA, upto 50% of FOB value of exports in the previous year. So, more and more DTA units are planning to convert into EOU, even though the duty already paid on their raw material or capital goods cannot be refunded to them, upon conversion.

Venture capital firm Draper International picked up a 51% stake in Lexsite, the company that began the country’s first major Internet databases, www.lexsite.com, for an undisclosed amount. The small Industrial development bank of India also has a one- percent stake in the company. The lexsite website hosts a plethora of legal information that ranges from case laws, statutes, circulars and notifications to rules and guidelines, commentaries on direct taxes and laws pertaining to foreign exchange. Some of the tax cases date back to 1886. The website will progressively host information on banking and corporate laws (by December) and then civil and criminal law. Lexsite currently hosts 300,000 pages, 34,243 cases, 842 circulars, 155 forms and 67 tax treaties. Lexsite will aim for a 20% share of eyeballs in the roughly half a million Indian community of lawyers, accountants and tax experts in two years and 40% a year later. The website provides, in addition to its database, news and developments in the legal world. A visitor to Lexsite can research through the lexsite.com library, get new developments in law, find lawyers in their region and explore nation wide recruitment opportunities in the legal industry. Lexsite is planning to develop reporting cells in various courts to collect judgements.

The government will allow foreign companies to hold 100 per cent equity in tele-enabled businesses. This is a good first step, but a few more need to be taken if India is to get rich from the networking revolution. Services like billing, and financial, medical or technical documentation, order processing, scheduling and so on are already shipped to India from overseas. Software development-and-troubleshooting, and electronic publishing also figure. Estimates peg the total volume of US e-commerce at $200 billion and growing.

The Department of Telecom (DoT) is headed for another confrontation with the Telecom Regulatory Authority of India (TRAI) over the latter's demand for files relating to the cancellation of Koshika Telecom's cellular licence. According to the DoT sources, no files would be presented at the hearing scheduled on Tuesday on the Koshika cancellation. The sources also said that the DoT as Licensor does not see any role for the TRAI in this matter. Although the DoT officials are aware of the ramifications of a refusal to submit the files, there is a sense of indignation over what they perceive as an intrusion in matters where the regulator has no jurisdiction. The sources said that disputes between the licensor and the licensee do not fall under TRAI purview and the consumer interest angle is no ground for such a direction.

The DoT on Tuesday got a reprieve from TRAI, which acceded to its request for more time to produce the files related to the Koshika Telecom's cellular licence termination. TRAI let DoT hook off for the time being by adjourning the case to October 5, 1999, on a written request of the DOT.

The Telecom Regulatory Authority of India is expected to announce the new cellular tariff structure on Friday. The tariff will include monthly rental of Rs 525 for state circles and Rs 475 for metros, but there will be a uniform out-going airtime tariff for both. The tariff structure, which will introduce the calling party pays (CPP) principle for the first time in the country, will come into effect from November 1, 1999.

The $ 1 billion US security software major Network Associates (NA) plans to set up a research & development facility in India next year. The company has decided to set up a liaison office in Mumbai. The company has decided to broadbase the 3-year-old reselling alliance with Wipro Infotech and Godrej Pacific Technologies to include the entire range of products. NA will also setup a support center in India to be able to provide quicker support for its software. The company's subsidiary in Singapore will continue to guide Indian operations. NA aims to aggressively push its network security and management software products (intranet, LANs and WANs solutions) in the Indian market instead of merely selling its anti-virus products, which it has been doing so far here.

Indian Software firm Mastek Limited is considering an overseas floatation as it focuses on operations in the US and Europe to boost revenues. Ashank Desai, MD and chairman of Mastek Ltd. said that the company has two options, either to let subsidiaries go public or coming out with an ADR (American Depository Receipt). He said that the company is pursuing both the options and hopes to reach a decision by March 2000. Mastek has wholly owned subsidiaries in 5 countries.

Mindtree Consulting, the new information technology (IT) services venture, is targeting revenues of $ 123m by 2005. Apart from the nine executives of various companies, who have come together to start the new company, Walden International and Sivan Securities have provided venture capital. Mindtree's Managing Director and Chairman, Mr. Soota, declined to disclose the breakup of Rs 40.80 crore equity capital. Mindtree has development centres in Bangalore and in US and plans one more each in Europe and the Asia Pacific region.

In a letter addressed to the Telecom Regulatory Authority of India (TRAI) on August 12, 1999, The Internet Providers Association of India (ISPAI), has alleged that Mahanagar Telephone Nigam ltd. (MTNL) and Videsh Sanchar Nigam Ltd. (VSNL) are resorting to moves which reek of cross-subsidization of their operations and not extending the benefits of lower tariffs to other ISPs. The letter comes in the wake of aggressive lowering of prices by both VSNL and MTNL, both of whom had resorted to 15% reductions across the board for their Internet service earlier this month. There appears to be some merit in the ISPAI's arguments because, MTNL owns the telecom network in Mumbai and Delhi and VSNL is the monopoly International service provider so far. The letter further states that if other ISPs have to survive in the Internet access business they will be forced to bring their prices down to levels lower than their costs.

The Bangalore based, venture capital firm, Sivan Securities has announced plans to invest in Sabeer Bhatia's new Internet venture Arzoo. Arzoo, a next generation Internet start-up, conceived by Hotmail co-founder, Sabeer Bhatia, uses cutting edge technology and innovative business logic to provide a superior user experience in the e-commerce arena. As of today, Sivan Securities is the only one venture capital investor in Arzoo.

ESPN India's Managing Director, R K Singh, is all set to take charge of the broadcasting activities of the ZEE network, promoted by Subhash Chandra. According to the sources, Singh would be responsible for Zee telefilm Ltd's foray into broadcasting that includes starting new digital channels, including one exclusively devoted to sports. Zee telefilms has, so far been a TV software company. According to the industry sources, Singh has already resigned from ESPN.

In its efforts to modernize the markets, Securities and Exchange Board of India (SEBI) has taken the first few steps to lay the foundation for Internet based training. DEMAT, rolling settlement and now, Internet trading. SEBI has setup two working groups to look into the modalities of ushering in Net-trading in India. Technology, connectivity, security, surveillance, and monitoring are among the issues the groups will look into.

ZEE Telefilms (ZTL) and the company’s chairman Subhash Chandra have filed a case against News Corporation and News Cayman Holdings. The suit seeks an order of restraint against Star TV from broadcasting Hindi programmes on the Star Plus channel. In the suit filed by ZTL and Mr. Chandra, it has been alleged that News Corp had violated the shareholders agreement of Asia Today (ATL is the Joint Venture between Zee and News Corp). Rupert Murdoch and Subhash Chandra and their respective holding companies had inked the agreement on September 17, 1994. The suit says that by transforming Star Plus in a predominantly Hindi entertainment channel, News Corp had entered into direct competition with ZEE TV.

The suit has been filed in London as the September 1994 agreement specifies that all legal disputes between the two partners would be adjudicated in London. In Its reply, News Corp has denied that it has violated the ’94 agreement. It has said that Star Plus is predominantly an English language channel. However some programmes are dubbed in Hindi and occasionally a mixture of English and Hindi called "Hinglish’ is used by the channel.

All operators of basic and cellular services, except Essar Commvision, today paid 15% of the outstanding licence fee to department of telecommunications (DOT), thus accepting the package for migration to the new telecom policy. To migrate from the revenue sharing system from the existing regime of fixed licence fees, the operators have to pay total licence fees up to July 31, 1999 to DOT. The balance licence fees can be paid by January 30, 2000.

Earlier in response to DOT's letter dated July 22 offering the new telecom package to the operators all the telecom operators, except Koshika, accepted the migration to the new revenue sharing regime. The new policy envisages that both the cellular operators in the same circle have to accept the new package in order to migrate to the revenue sharing system.

The high level Y2K Action Force, set up by the government under the chairmanship of Montek Singh Ahluwalia, is formulating a Year 2000 ordinance to deal with issues related to Y2K and provide a framework for dispute resolution. The Y2K Action Force secretariat has already prepared a draft ordinance, which has been circulated for suggestions and feedback. The ordinance will seek to encourage compliance and disclose computer-processing problems, solutions, test practices, test results and deal with related matters in connection with transition to the year 2000. It will also provide a framework for dispute resolution. All user organisations will have to keep their offices open on January 1 and 2, 2000 and test all IT products utilized by them for Y2K compliance.

The draft ordinance also provides for the setting up of Y2K crisis management centres fully equipped with logistical and technical support in all major cities, state capitals as well as at the district level for managing Y2K crisis. A clearing house is also sought to be set up which shall be responsible for collecting and disseminating all Y2K related information in the country. The clearing house shall also be responsible for managing the Y2K crisis and for establishing Y2K crisis management centres.

According to the draft ordinance, it will be obligatory on the part of the IT product and service providers to ensure the Y2K readiness of all IT products and services provided after January 1, 1996 and ensure that all future supplies are Y2K ready. The draft ordinance gives priority treatment to Indian users and proposes to make it obligatory for the Y2K solution provider to take on priority the request from Indian users for addressing their Y2K readiness problems. The solution provider will be obliged to respond to such requests within two weeks.

The promoters of the Ispat Industries, the Mittals, have decided to sell the 10% stake held by Ispat Industries in Hughes Ispat Limited (HIL), the basic telecom service provider in Maharashtra and Goa. At present the company is not able to sell the equity as per the government guidelines on telecom policy. The company will submit a proposal to the government to sell its stake once the financial closure is attained. The Ispat group holds 51% in HIL, with Ispat Industries holding 10%. Hughes Electronics Corporation holds 34% in HIL and Alltel Corporation holds 15%. The company has also reported Rs. 54 crore as an advance against the promoters contribution against shares to be issued to Hughes Ispat Limited. The company has termed investments in Hughes Ispat under loans, advances and deposits as unsecured and considered goods.

HIL is trying to tie up $ 900 million, including subordinate debt of $ 300 million and pure commercial debt of $ 600 million. It has invested $ 150 million on capital expenditure and $ 100 million on licence fee.

The shares of Saregama plc, a subsidiary of The Gramophone Company of India Limited (GCIL), will be traded on OFEX - the UK bourse for mid-cap companies in London - from August 10. The share float amounting to 2.665 million pounds was oversubscribed and shares of face value 1 pence was successfully subscribed at one pound. This is the first time that an Indian majority owned company has been floated in the UK. Saregama plc has been incorporated in UK to manufacture and market Indian CDs and music cassettes in the NRI territories of the UK, Europe, USA, Canada, the Carribean Islands and South Africa. Saregama is the exclusive licensee of GCIL's vast musical catalogue. It also has the rights to use all future musical acquisitions of GCIL.

In a major policy initiative, the Foreign Investment Promotion Board (FIPB) approved a move to permit foreign companies using proprietary technology to retain their equity and not to divest it in favour of Indian entities. This is a reversal of an earlier stand of the ministry of Industry which imposed conditions under which 100% foreign owned companies had to divest 26% equity to Indian partners or public within three or five years, depending on the case. According to the sources, the clause to retain 100% equity would obviously depend on the sectoral foreign equity caps.

The Delhi High Court yesterday did not grant a stay order and extended a week’s time to the government and private telecom operators to give a commitment that the implementation of the policy would be subject to approval by the parliament after the next Lok Sabha elections.

The hearing of the Delhi High Court was adjourned for a week to take a decision on giving the undertaking. The forum as well as the opposition parties have accused the government of bailing out the operators by bringing in major policy changes just before the elections. The government defended the policy saying that without it there would have been a disruption in communication services.

P.S. The Cellular Operators Association of India (COAI) said that it had accepted the Delhi High Courts decision to refer the telecom policy to Parliament before implementation.

A proposal to hive off transmission activities of Doordarshan, India’s national television operator, into a separate entity or/and simultaneously go in for a joint venture or technical collaboration with a foreign company for setting up a subscriber management system (SMS) for its proposed direct-to-home (DTH) TV service was rejected by the Election Commission (EC). The EC stated that allowing DTH was a major issue that had to be discussed and debated by Parliament and could not be approved by the Government with such involvement by Parliament. Doordarshan had opened up negotiations with Malaysia-based Measat on SMS for KU-band DTH services. Measat had signed a MOU with DD few years back.

The government has finalized guidelines for Internet Service Providers (ISPs) to set up private gateways for international connectivity. It will now be mandatory for the private gateway providers to connect routers above 2Mbps with the monitoring facilities of national security agencies such as the Intelligence Bureau (IB) and the Research and Analysis Wing. Gateway operators would also be responsible for installing the monitoring equipment. The Department of Telecommunications (DOT) will be the nodal agency for security clearances.

According to a press release, the application forms will be available at Sanchar Bhawan from July 26, and the applicants will have to pay a processing fee of Rs. 20,000. The implementation mechanism has following conditions:

The ministry of commerce, in its draft cyber laws, has defined cyber crime and has laid down penalty provisions for cyber criminals. Any person found to be wrongfully obtaining control, damaging, concealing or blocking access, either temporarily or permanently, to any computer, database or computer network will be guilty of computer crime. Computer crime has been defined as an activity done knowingly and with the intent to defraud, make false representation, give a false statement or the unauthorized charging to another account. It also includes intentionally introducing computer viruses on a computer system or network. The definition of cyber crime is based on the Indian Penal Code (IPC) which covers all acts of larceny. The draft cyber laws also contain a provision to prevent unauthorized copying, controlling or damaging of any intangibles like electronic records or data. It feels that the areas relating to cyber cash and digital property need to be addressed separately. The draft cyber laws have also suggested penalties for persons found guilty of committing cyber crimes.

As for litigation, the cyber laws have proposed that such crimes should be bailable, non-cognizable, and triable exclusively by chief metropolitan magistrates, additional metropolitan magistrates, chief and additional judicial magistrates.