FLAG to re-appeal to ICC Tribunal seeking `reasonable and cost-based' access charges

Our Bureau

Mumbai Aug. 30

The dispute between FLAG Telecom, controlled by Mr Anil Ambani, and Videsh Sanchar Nigam Ltd, owned by Mr Ratan Tata, has escalated, with talks between the two on VSNL access charges hitting a wall.

This has prompted FLAG to re-appeal to the ICC (International Chamber of Commerce) International Tribunal against VSNL, seeking that the latter come out with "reasonable and cost-based access charges."

Earlier FLAG had approached the Tribunal, which directed VSNL in May to provide access to FLAG to the Mumbai Landing station. It also directed VSNL to allow FLAG to upgrade its cable capacity. The Tribunal had given a 90-day deadline for the two parties to negotiate and arrive at mutually acceptable landing access charges.

Three-year long tussle

The nagging dispute between the two companies started about three years ago, when FLAG wanted to upgrade the capacity of its FLAG Europe cable, as the route faced some band deficiencies. VSNL has not been warm to the idea. Apart from this cable, FLAG has two more cable assets Flag Atlantic, which connects Europe and the US and FLAG North Asia.

At present, FLAG Europe cable, which connects Europe, West Asia, India and Hong Kong, has a capacity of 10 GB, which could be upgraded to 140 GB.

Sources say VSNL is collecting access charges at the annual rate of $ 2,25,000 per STM 1 (10 GB is approximately equal to 64 STM).

FLAG has been contending that VSNL's landing charges were "unreasonable", as the average cost of setting up a landing station was Rs 50 to 60 crore, with an annual operating cost of about Rs 4 crore. FLAG feels the charge for a single cable of 10 GB capacity would not be more than $ 20,000 per STM if landing charges were cost-based.

Sources close to VSNL, on the other hand, say that the total access charges negotiated between the two companies in 2004 were a single digit percentage (less than 10 per cent) of the bandwidth price charged by FLAG. They further point out that access charges are not a major roadblock for IT and BPO companies, as they were not paying high prices for bandwidth.

Sources also said that VSNL had allowed FLAG access for upgrading the cable capacity in compliance with the Tribunal award, but even three months after the award, FLAG had not made any serious attempts at ramping up.

When contacted, a VSNL spokesman said its commercial proposal related to access charges was "fair and reasonable" and that it was fully in compliance with the arbitral award.

Related Stories:
FLAG asks Govt to help lower access charges
FLAG Tele wins arbitration case against VSNL
VSNL blocking FLAG, says Reliance

(This article was published in the Business Line print edition dated August 31, 2006)
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