VSNL Price Cut: Too Less Too Soon?

VSNL has recently announced the reduction of tariffs

applicable for fibre-derived Internet leased lines and IPLCs w.e.f. 1 January

2001. The cut is described as being due to reduced tariffs for submarine

cable-based bandwidth capacities world-wide. So, is this a path-breaking act,

coming from a monopoly like VSNL?

One must give some credit to VSNL for bringing the trend of

low floating bandwidth costs to India. World-wide, there has been a flurry of

activity on the submarine cable scene and thereby bandwidth capacity tariffs

have dropped to a record low. The case of bandwidth auctions was not only real;

it had started making appearances in India in the form of bandwidth exchange

companies like Band-X.

However, ISPs are saying that the concession come far too

late and is far too less. ISPs had already gone to TRAI to reduce the high

bandwidth costs - and the regulatory body had even recommended drastic cuts. The

cut, coming just when they had almost lost hope, is still not commensurate to

the levels that bandwidth prices are languishing at globally.

There are reasons to believe that indeed VSNL could have gone

further. One, the new tariff structure mostly affects Mumbai and Cochin (where

international carriers terminate their submarine optical fibre cables at VSNL’s

landing stations). In other places, one has to still connect to VSNL’s

earthstations, the bandwidth acquired out of which still costs approximately the

same as earlier. Though there is an alternate way of leasing an inter-city

circuit to Mumbai or Cochin, this is regarded as a costly option as one has to

dole out additional moolah to VSNL’s sister companies BSNL and MTNL.

Two, there is indeed a major cut in IPLC prices. But, ISPs

say that this being only half circuit, they still have to incur the cost of the international leg and, if not located in Mumbai or Cochin, the

inter-city leased circuits as well as the local leads costs. And three, though

VSNL has reduced tariffs to an extent, it is still not talking of any Service

Level Agreement (SLA). This, ISPs say, would still make them prefer a private

party even if it is the costlier option.

The best part is that this VSNL announcement is shrouded in

another mystery. ISPs say it has come at an opportune time, when a number of

international gateway operators were rearing their heads, some of them promising

better quality bandwidth than the monopoly. This was a perfect way and time to

strike the competition before they even learnt to walk. To gateway players who

had their business case made out for selling bandwidth to ISPs, this development

is bound to have come sooner than expected. Sadly, this is the way VSNL will

move henceforth. "Take it or  leave". Is TRAI  taking note?

Nareshchandra Laishram