By JENNIFER NETHERBY Staff Reporter India may have some of the top engineers in the world, but when it comes to connecting to the Internet, the country remains in the technological Stone Age, with only 500,000 Internet users in a country of 1 billion people. But all that could change if a Studio City company gets its way. NetConstruct Inc., a firm that builds the networks needed for Internet service, has teamed up with one of India’s biggest retailers to build and operate a new Internet service similar to America Online. The obstacles are huge. Just 1.9 percent of Indians even have phones. But with a market of 300 million college-educated people, the potential payoff is immense, said Martin Leufray III, the company’s CEO. “Their thirst for services is tangible. We think we’ve uncovered a market that hasn’t really been looked at very strongly,” said Leufray. “We expect it to be one of biggest Internet services in the world.” Cliff Numark, program director of the Los Angeles Regional Technology Alliance, said India is attracting growing attention from Western technology firms. But while many Internet providers have opened their eyes beyond U.S. borders, the Indian market remains relatively uncharted territory, he said. “That’s a market that’s just ready to explode,” Numark said. “It’s the second largest country. Their middle class is huge of course, their standard of middle class is defined differently.” The country also has a highly skilled sector of engineers, which has already attracted many American firms to build offices there or hire foreign workers, he said. NetConstruct has teamed up with K.K. Modi Investment and Financial Services Ltd., which wants to expand into e-commerce. Modi, which sells cosmetics and other retail products in India, chose NetConstruct because the company has experience building expandable networks, said Michael O’Brien, NetConstruct’s vice president of administration. India’s government just opened up Internet service to foreign providers in November, taking control away from a state-run agency. It is working eagerly to lure foreign Internet service providers, expecting the number of Indian users to reach 8 million by 2002. The government has earmarked funding to expand the country’s telecommunications infrastructure and lowered licensing fees. More than 200 companies applied for permits between November 1998 and March 1999 to provide Internet service in India. But Leufray said Modi’s large Indian customer base and name recognition, paired with NetConstruct’s network experience, will give the partnership an edge over other companies. NetConstruct officials won’t release projections on how many users are expected to sign onto the network, but they’re hoping it will be millions over several years. Still, there will huge technological hurdles in serving the Indian consumer. In Indian cities, Leufray said the company will be able to provide Internet service through existing copper telephone lines. But in the rural areas, it plans to use a high-speed wireless line on a scale never done before. The network would be based on similar principles to digital cell phones, but at speeds up to 100 times faster. Rather than using modems and analog phone lines, a wireless network would use a completely digital line, with digital “tranceivers” which can transmit and receive radio airwaves connected to home computers that connect directly with digital ISP lines through radio waves. “It can be very easily done now,” O’Brien said. “You can hook your laptop to a cell phone.” A wireless network has already been successfully tested in Palo Alto, and Leufray said India has had a tremendous growth in cell phone usage, which would make the network ideal for a country that lacks phone lines. NetConstruct technicians will visit India in the coming months to do a site review and determine what type of network will be most appropriate. Once the company finds a suitable location for a data center, it will take about three months to set up the online service, at which time customers will be able to subscribe. Company officials said they have designed the network so it can be easily expanded over next several years. This isn’t NetConstruct’s first work outside the U.S. The company, which has set up networks for Orange County-based First World, an Internet service provider, and DHL, a courier service, has also done networks for a Panamanian phone company and a cable company in Chile. In those deals, NetConstruct was contracted to build the network and train the company’s staff in how to use it. The deal with Modi is the first time NetConstruct will be involved in operating the system. South American countries are far ahead of India in phone infrastructure, and the continent boasts the world’s fastest-growing Internet population. In South America, NetConstruct got involved partly because of the continent’s growing mean income. In India, it was the potentially huge market with a heavily English-speaking, well-educated middle class, Leufray said. The biggest obstacle to working overseas is more cultural than technical. Joining with Modi in India will give the venture credibility, Leufray said. His hope is that the deal with Modi will put NetConstruct on the international radar. “We expect for this to make it clear that we’re one of the top Internet services in the world,” Leufray said.