The Hindu Business Line : Cheaper bandwidth

THE TELECOM REGULATOR'S decision to reduce the ceiling on international bandwidth prices by 35-70 per cent is a step in the right direction as it will a go a long way in helping India retain its competitiveness in the IT services and BPO arena. Internet service providers (ISPs) will also stand to gain as they use international leased line circuits mainly to access content. Changing prices by mandate is not always desirable, but this intervention by the Telecom Regulatory Authority of India (TRAI) was overdue as market forces failed to reduce international bandwidth prices in the way they ought to have. While in the rest of the world, including parts of Asia, international leased line rates have dropped by 50-60 per cent, in India, it has come down by just 10 per cent over the past three years. If TRAI also brings down the ceiling tariffs for domestic leased line by 60-70 per cent in the near term, as proposed in its Consultation Paper, the stage will be set for a strong improvement in the overall broadband penetration in the country.

This new international bandwidth ceiling, to come into effect from April 1, will work only if TRAI ensures that two elements consistently remain in play. The first is the availability of adequate international bandwidth for corporate and other end-users at all times. This aspect is critical as there is lack of effective competition in the bandwidth marketplace in India vis-à-vis other countries such as Korea, France and the US. Videsh Sanchar Nigam (VSNL), which has a virtual stranglehold over the entire estimated bandwidth capacity of about 15 Gbps, is one of the three operators in the marketplace at the moment. Second, unfettered access to submarine cable landing stations is essential to ensure that these do not become constraints in the provision of bandwidth service. As practically all the landing stations are controlled by VSNL, it will be TRAI's mandate to see that access to them remains smooth and trouble-free for all service providers. In this latest recommendation, TRAI has drawn attention to this issue and underlined the need to remove bottlenecks in cable landing stations. Instead of addressing this issue, however, it has merely indicated that it will be the subject matter of another consultation paper. Considering that TRAI had faced complaints from US-based facilities, carrier associations and other domestic operators in the last quarter of 2003 on removal of restrictions on access to cable landing stations, it could have started a process of consultation on this issue much earlier.

Practically every single Internet service provider has welcomed these new rates, but most of them also echo the view that this could have had a much bigger impact on the ISP industry had it happened at least one-and-a-half years ago. At the moment most of the standalone ISPs are fighting with their backs to the wall, stuck with the burden of an entry fee and revenue share levied by DoT on their virtual private network service. On top of that, DoT's recent proposal to revise the FDI cap from 100 per cent to 74 per cent may prove quite onerous for some of them. Unless these issues are resolved for the ISPs, the regulatory changes may prove but a temporary palliative.

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