Dot Stonewalls Move To Slash Internet Charges

A proposal by Videsh Sanchar Nigam Ltd (VSNL) to reduce Internet access charges by 33 per cent is being stonewalled by the department of telecommunications (DoT). The new rate - Rs 10,000 for 500 hours usage as against the current Rs 15,000 - was to be introduced on September 1.

DoT is opposed to the drop in Internet access charges because it would lead to a reduction in its revenues from the service. DoT has 20 Internet nodes in the country in cities like Lucknow, Bhubaneshwar and Ernakulam. DoT officials refused to reveal the quantum of revenue from Internet service provision.

If cleared, the decrease in Internet charges would have been the third in a series of cuts over the last year. VSNL, Indias monopoly international telephony services provider which is also the countrys only Internet service provider (ISP), introduced the service in India about two years ago. Back then it had priced the service at Rs 15,000 for 250 hours usage for every transfer control protocol/ Internet protocol (TCP/IP) account and Rs 5,000 for the same usage for shell accounts.

The rate for shell accounts was one-tenth of these rates if the user was a student. TCP/IP accounts allow users to view graphics besides text at Internet sites, while users of shell accounts can only view text on the Net.

The rates were effectively halved a year back when VSNL decided to double the number of hours usage. Internet users, both TCP/IP and shell account holders, could now access the Net for 500 hours instead of the earlier 250 hours. Users who had registered earlier did not appreciate this change.

Given this feedback from users, VSNL decided to reduce charges instead of increasing the number of hours usage. Initially, sources had hinted that rates would be dropped by 20 per cent, but VSNL decided to go further and reduce it by 33 per cent.

The decisions to drop rates was taken after VSNLs exceeded its projections of the number of Internet account holders. Initially, when it made investments of around Rs 30 crore in infrastructure (servers and routers), it expected between 15,000 and 20,000 account holders. An internal rate of return of about 35 per cent was projected on this user base.

But, when this projection was surpassed and the user-base crossed 25,000, VSNL decided to double the number of hours usage. Currently, the number of account holders on VSNLs internet service is estimated at around 50,000. Hence, the rationale for the current reduction in charges, sources explained.

However, the state-owned ISP does not propose to drop access rates for shell account holders because it feels that the service is already priced quite low. Moreover, several shell account holders are shifting to TCP/IP accounts.