Cost of Internet, leased data lines set to fall 25%

Cost of Internet, leased data lines set to fall 25%
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First Published: Thu, Apr 19 2007. 12 41 AM IST
Updated: Thu, Apr 19 2007. 12 41 AM IST
New Delhi: The cost of Internet access and leased data lines could fall by around 25% if a proposal by the telecom regulator recommending that access to submarine cables be made cost-based is implemented, say domestic Internet service providers (ISPs).
Together with its recommendations last month that retailers of international bandwidth be allowed to operate under a new licence, the new move, if accepted by the government, is likely to increase the number of players in the wholesale telecom-bandwidth business significantly.
The Telecom Regulatory Authority of India (Trai) will hold public hearings on its draft proposals before finalizing its recommendations, which suggest that independent companies be allowed fair access to ‘cable-landing stations’. Such stations are used to connect submarine telecom cables with data and voice networks in the country.
“This proposal, if implemented, will give us the same access to cheap international bandwidth as the telecom operators with their own cable landing stations and go a long way in making the broadband market competitive,” says Rajesh Chharia, president of the Internet Service Providers’ Association of India. “Around half-a-dozen of our own members will be able to enter the market if Trai’s proposal is accepted.”
The wholesale-bandwith market—accessed by ISPs and the new long-distance operators, British Telecom and AT&T, to connect Indian consumers and companies to the rest of the world—is currently dominated by just three companies: Videsh Sanchar Nigam Ltd (VSNL), Reliance Communications Ltd and Bharti Airtel Ltd, which own cable-landing stations.
State-owned Bharat Sanchar Nigam Ltd (BSNL) is in the process of setting up one such station in Tuticorin, Tamil Nadu.
Bandwidth prices in India have tumbled in the last decade, but still remain higher than those in most other countries, especially for international links.
“The cost of a 2Mbps (megabits per second, a unit of the data-carrying capacity or bandwidth of the link) connection is around $18,000 (Rs7.5 lakh) per year in India. In the US and UK, it is only $3,600 (Rs1.5 lakh),” Chharia says.
One big reason for such prices is the high cost of access to the equipment at these landing stations. According to pricing information on VSNL’s website, confirmed by a spokesman, access rates at its landing station is Rs11 lakh for every 155Mbps of leased bandwidth a year. As a result, a small ISP, which directly leases international bandwidth by paying a few lakhs of rupees to an international operator, may end up shelling out at least an equivalent amount as access charges to the landing station.
Spokesmen for Reliance Communications and Bharti Airtel couldn’t immediately provide details of access charges at their landing stations.
Trai said the prices in the retail bandwidth market were high despite customers in India using less than 12% of the 755 gigabits per second (1 gigabit equals 1,000 megabits) on nine international submarine cable that land on Indian shores. “It is observed that problems were faced by new service providers, including ISPs, to have timely access to international submarine cable capacity at a competitive tariff,” the regulator says in its paper inviting suggestions on a cost-based structure for such access charges. Trai could conclude public hearings and submit its recommendations within a few weeks.
Representatives of small-scale consumers of bandwidth such as call centres said the regulator’s call for more competition will cut down prices for smaller establishments. “The present market situation for a small consumer is very monopolistic,” says Sam Chopra, president of the Business Process Industry Association of India. “As far as the small company is concerned, there are only three operators in the entire country from whom it can buy international bandwidth from,” he adds.
Chopra believes the move to standardize the charges for accessing submarine cables, along with the recent entry of overseas players and the proposed introduction of international bandwidth retailers will significantly increase competition and bring down tariffs for small ISPs like cable operators and call centres.
Naresh Ajwani, executive vice-president of Sify Ltd, the largest ISP in India that is not a part of a larger telecom network, points out that the move is essential to achieve the government’s target of increasing broadband connections from around 2.3 million now to nine million by the year-end. “Increasing competition in the bandwidth supply market and giving options to smaller players is the sureshot way to achieve the government’s broadband goals,” he says.
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First Published: Thu, Apr 19 2007. 12 41 AM IST
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