The Hindu Business Line : Cut in international bandwidth prices

THE massive cut in international leased line tariffs announced by the telecom regulator may run into rough weather with the Tata-managed Videsh Sanchar Nigam Ltd challenging the order with the Telecom Dispute Settlement Appellate Tribunal (TDSAT).

VSNL filed its appeal against the Telecom Regulatory Authority of India's tariff order on the ground that the move would harm the company's investments.

On March 11, TRAI effected a 70-per cent reduction in international private leased line circuits (IPLC). It has fixed a ceiling of Rs 2.9 crore a year for a 155-mega-bits-per-second (mbps) line compared with the existing Rs 10 crore.

TRAI had said the move would benefit Business Process Outsourcing units, IT-enabled services and Internet Services Providers who consume large amounts of international bandwidth. Industry associations, including Nasscom and the Internet Service Providers Association of India, had been demanding a reduction in tariffs.

However, VSNL in its appeal said the end-customer costs should be looked at in the totality of international, domestic and last mile access pieces. "The IPLC forms a very small percentage of the total cost structure of broadband, the IT and the ITeS industry. To focus on the smallest cost component and squeeze it will have marginal impact. Such a move will aid only BSNL as the broadband operator," VSNL sources said.

TDSAT will take up the case on Thursday even as the new rate announced by TRAI is scheduled to be implemented from April 1.

VSNL has questioned TRAI's motive in regulating the IPLC tariffs since "it has not addressed the critical issue of unbundling of local loop, which at present is controlled by government monopoly companies MTNL and BSNL," said a VSNL source.

VSNL pointed out that while the IPLC accounted for only 4-5 per cent of the total costs of Internet service providers, last mile access constitutes 35-50 per cent of the total cost structure. "If we need to encourage broadband penetration we need to look at rationalisation of all key cost components rather than IPLCs, which are the smallest components," VSNL said.

On TRAI's comments that Indian bandwidth prices have not been keeping in line with global trends, VSNL said the comparisons were incorrect. "Most of the cables went bankrupt and several investors, including common citizens and pension funds, lost billions of dollars in the last few years. Many of these cables have now been sold to new owners at 5-7 per cent of the original build cost. The important conclusion that one can draw from this experience is that the current bandwidth prices in those markets can justify returns on only about 10 per cent of the investment required to create the bandwidth," said a VSNL source.

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