Financial Daily from THE HINDU group of publications
Monday, Feb 04, 2002
Info-Tech - Telecommunications
Corporate - Announcements
VSNL seeking lower `settlement' rate -- Overseas calls set to be cheaper
NEW DELHI, Feb. 3
IT'S party time for telephone users. Close on the heels of the drastic cuts announced in STD tariff, Videsh Sanchar Nigam Ltd (VSNL) is due to revise its international call rates downwards come April.
According to senior officials of VSNL, the company is negotiating for lower "settlement'' rates with various foreign carriers, which should make it possible to bring down the prices of all ISD calls.
The officials pointed out that once the settlement rates were finalised (before April), the company could review its current tariff structure. The proposed disinvestment of the company this fiscal will not affect these plans, since the tariff order of the Telecom Regulatory Authority of India (TRAI) has laid down that the ISD rates would have to brought down from the existing levels starting April. TRAI, they noted, had prescribed a ceiling on call charges based on the pulse rates for each of the three regions SAARC & its neighbouring countries; other countries in Asia, Europe, the Gulf & Oceania; and the American continent & other countries in the western hemisphere.
With international long distance services being opened up for competition from April, the company may well introduce tariffs much lower than the TRAI ceiling in order to hold on to its market share and stay ahead of the potential competition.
According to the TRAI tariff order, the call charges ought to be brought down by 14.3 per cent for traffic to the SAARC and neighbouring countries, by 20.6 per cent to other countries in Asia, Europe, the Gulf and Oceania and 17.1 per cent to the countries in the American continent and other countries in the western hemisphere.
Currently, the monopoly in international services has allowed VSNL to charge customers rates higher than its costs. However, the imminent entry of other players as also tariff rebalancing that TRAI is working on, would ensure cost-based charges for basic, cellular, STD and ISD services.
ISD pricing: When a call is made from India to an international destination, it is carried from the point of origin to the local exchange through the basic operator's network (BSNL, MTNL or private providers). The basic operator hands over the call to the VSNL gateway, which, in turn, relays it to the international carrier (for example AT&T in the US) that carries it to the destination country.
The call gets routed to the desired international destination via satellite or undersea cables, or both, based on the routing plan developed by VSNL and the foreign carrier.
The international carrier may deliver the call to the basic operator in that country for further delivery to the terminating subscriber.
Since the international carrier delivers the call on behalf of VSNL, it charges the latter what are called "settlement'' rates for this service. The settlement rate is usually half the accounting rate, i.e. the price charged from the subscriber of the originating country.
Thus, for each outgoing international call, the originating carrier (VSNL, as of now) bills the caller some collection charge, pays a settlement rate to the foreign terminating carrier and retains the balance.
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