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Wednesday, Oct 16, 2002

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Call troubles

WITH OTHER SERVICE providers too entering the fray, the Videsh Sanchar Nigam's battle for control of international telecom traffic originating from Bharat Sanchar Nigam has well and truly been joined. VSNL would like the existing revenue-sharing arrangements with the latter to be preserved while BSNL wants it renegotiated on the terms that it has entered into with newer players in the international long distance telecom business. The resultant stalemate has seen the former taking the dispute to the Telecom Regulatory Authority of India (TRAI). Now, Data Access, a private player in international long distance, has entered the fray with a plea to the regulator that it too should be heard in the dispute before any decision is taken.

Globally, access providers (such as BSNL) have an upper hand in revenue sharing negotiations vis-a-vis international gateway operators such as VSNL. And in India too it ought to be no different. BSNL can hardly be faulted for wanting to leverage its inherent strength to secure superior commercial terms for itself. But the Government's suggestion of a favoured treatment in routing originating international traffic for VSNL has complicated the matter. The premature termination by the Government of VSNL's monopoly on international traffic was sought to be compensated with a vague declaration that the public sector telecom providers would route their international long distance traffic through VSNL as a "Most Favoured Customer" at "market rates". It is difficult to give a practical shape to what, for all practical purposes, are conflicting objectives spelt out in the government's decision. If VSNL is to be become the "favoured customer" then the question of routing traffic at market rates is no favour to VSNL. Alternatively, if the favour is one of exclusive privilege of handling the traffic, as long as VSNL matches the rates offered by its competitors, that too does not offer a satisfactory interpretation. For then, the competitors could make a mockery of price signals from the market by deliberately quoting uneconomic rates knowing fully well that they would never have to suffer the consequences of it as in the event of VSNL matching it, the public sector service providers would be obliged to offer the entire traffic to it anyway and VSNL alone would bear the consequences of unremunerative tariff.

TRAI, therefore, has its task cut out. It can decide not to intervene in this dispute unless both VSNL and BSNL approach it for mediation. This was the stated position of TRAI articulated this August. The principle that `interconnection' is a matter for commercial negotiation or agreement between parties in the business is internationally well recognised. Secondly, if TRAI chooses to intervene, it should do so only if it can decisively settle this issue among VSNL, BSNL, MTNL and other private operators. And to achieve that objective, the most prudent course will be for TRAI to undertake a cost-oriented tariff and profit rebalancing between international long distance operators with basic service/ cellular service/ national long distance operators. As for interpretation of "market rates" in the terms of the disinvestment agreement, it is something the Centre (through BSNL) and VSNL need to settle.

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