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'It Is Our Long-term Strategy To Diversify Into Telecom Related Service Areas' - BK Syngal, CMD, VSNL.

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VoicenData Bureau
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The

high-profile CMD of the state-owned VSNL
BK Syngal

seems unfazed. Though sitting pretty, he seems to be at the

receiving end for the time being. Recently, there were reports

about his involvement in derailing VSNL’s proposed GDR

issue.

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Given the turmoil in the South-East Asian economies and stock

markets across the world, he seems to be on the right track. To

add to the worries is the growing demand to open up global

telephony and the US pressure to reduce the rates of

international calls to India. He has positioned VSNL to combat

competition in the future, making forays into many value-added

services. In an exclusive interview with Anil Joseph,

Syngal speaks about his plans and strategies to take on the

competition in the offing. Excerpts ...

 

How are you reacting to the

demands to open up global telephony?




It is inevitable that around the world telephony will have to
open up and that eventually it will be an entirely free market,

driven by customer needs. However, I believe it is important that

it is opened up in stages related directly to the state of

development of the individual countries and their economies.

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At present, we have a great many western and

other companies from developed countries which are all looking to

make money by spreading their services to the less developed

countries. These have been through their years of protection and

monopolies which allowed them to be nurtured and to grow to the

size they are and prepare for competition. However, they now do

not want to allow countries like India the same protection that

they enjoyed. They want to impose their state of affairs on us

when we are not ready for it. We support the decisions made by

ITU and the process for liberalization agreed in Geneva. We have

every opportunity to become a competitive global player alongside

the best of the developed world’s companies but we still

need a little more time to prepare for this. Our monopoly is due

for review in 2004 and we are confident that we will be ready by

then.

VSNL is threatening its

subscribers against using the Net for voice telephony. At the

same time, you are planning to offer telephony over the Net. Is

it a strategy to grab a major chunk of voice telephony market

before private ISPs enter the market?




VSNL has always supported and encouraged the use of new
technologies. Technology and its advancements are a part and

parcel of our life. We cannot condone the independent use of

voice on the Net at present because it is illegal since it breaks

our monopoly on international telecommunications. However, if we

offer the service, the monopoly is not broken.

Taking the broader view, voice on the Net has

all sorts of implications particularly in terms of costs of

providing the service and revenues, and this is true for all

international carriers world-wide. We are examining the case

carefully. I think a few years from now you will find that the

tariff rates will balance out and that the cost of an

international Internet voice call will be roughly the same as a

normal international telephone call. It will then become a matter

of preference and quality of service that decides which service

you use.

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What about the plans of VSNL

to enter DTH and data service business in collaboration with the

US-based Intelsat? What will be the advantages to Indian

broadcasters and data communication services?
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The advantages overall to Indian broadcasters are that they will
be able to deliver a very high quality picture direct to

people’s homes through a new and cheap technology. The

customer simply has to put up a very small satellite dish (1.5-2

ft diameter) on his house. On the data side, the technology

allows interactive communication so the broadcasters can offer

value-added services such as telebanking, teleshopping/booking,

pay while you view, video-on-demand, and even have audiences vote

on shows, do surveys and polls, etc. ...

What is VSNL’s strategy

on settlement of rates for international carriers?
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Our strategy is in accordance with the ITU policy on settlement
rates, i.e. they are the result of bilateral negotiations between

international telecom service providers. VSNL does not recognize

the FCC and its target bands. However, we believe that

international accounting rates will have to reduce over time but

this should be achieved in a dignified and well-planned manner

over time at some 6-8 percent per annum.

It is important to remember that VSNL receives

just Rs 10 per paid international minute. The bulk of the revenue

goes to DoT. India has very low telephone penetration rate and

huge investment is needed to build up the network. Traditionally,

almost all countries around the world have used revenues from

international and ISD calls to fund the development of their

domestic works. It is only when these domestic networks are in

place that international call rates are reduced.

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India is actually reducing rates ahead of the

usual schedule than that employed by the developed countries in

the past.

We have every opportunity to

become a competitive global player alongside the best of

the developed world’s companies but we still need a

little more time to prepare for this. Our monopoly is due

for review in 2004 and we are confident that we will be

ready by then.

Given the low infrastructure

provided, ISDN is expensive when compared to the international

rates ...




First of all, the local connection infrastructure and charges for
ISDN are the responsibility of MTNL and DoT. ISDN calls are

treated just like any other call and all our gateways have been

configured to handle ISDN happily. Our infrastructure for ISDN is

certainly not low.

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In almost all services, economies of scale lead

to price reduction. Services and products are usually more

expensive when they are first introduced and less expensive as

demand grows and they are produced in greater quantity–just

look at the cost of cellular handsets at the start and now. We

have been able to reduce the cost of Internet access for the same

reason and look at what ISDN used to cost in the UK when it was

first introduced. I am sure this will happen in India too. In

fact, we have just introduced last month Internet ISDN services

at competitive rates.

Adding bandwidth to Internet

... What are the plans? .... How is it decided? ... What is the

cost for VSNL?




At present, we are adding bandwidth with MCI, Teleglobe of
Canada, Telecom Italia, and others. For example, at current

rates, a further 2 Mbps with MCI and Teleglobe costs $144,000 per

month. We shall continue to add such capacity as it is required .

What are the hurdles faced

by VSNL?




In the short-term, the hurdles we face are mainly in getting
approvals—the final signing needed to broadbase our Board,

and the meeting needed to decide the tenders for the proposed

regional hub, for example. These hurdles are exacerbated by

intense lobbying from private parties who wish to frustrate our

efforts. We also have some hurdles in obtaining sufficient lines

from MTNL/DoT.

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In the medium-term, the hurdles are mostly to

do with preparing ourselves for competition and becoming a more

completely customer-oriented company.

What about VSNL’s plans

to offer domestic telephony services? What is being done on this

front? Do you really expect getting that opportunity?
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It is our long-term strategy to diversify into telecom related
service areas to broaden our portfolio of services and revenue

streams. On the domestic front, we have been looking at domestic

long-distance service provision which our network is well suited

to. Also, the work we are doing on mobile global satellite

services will allow domestic communication also, and we may

consider joining other companies to bid for local fixed line

circles. Inevitably, we want to keep our specific plans close to

our heart at this stage ... I am sure you will understand.

In reference to whether we shall be allowed to

enter, we certainly hope that we shall be given the same

opportunity as other players to bid for licences and that TRAI

will ensure that the playing field is level; and not skewed

either towards private or government companies but in the best

interests of the customer.

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How is tariff planning done?





It depends which tariff you are talking about. International
telephony tariffs are the product of discussions with DoT and

bilateral negotiations with foreign carriers. Value-added

services tariffs are established based on discussions with any

partners we have, the cost of providing the service, and a

reasonable return on our investment and the service provision. We

constantly look at tariffs offered by other companies and when

economies of scale etc. allow us, we revise our tariffs

downwards.

Of course, TRAI will be more and more involved

in tariffs in the future.

Do you foresee VSNL’s

gateway access monopoly slipping out of its hands in the near

future?




Of course by 2004, I expect that the monopoly will go and that we
shall be ready for the competition. We have had repeated

assurances from government that our monopoly review will not

happen before that.

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