US flays VSNL restrictive trade practices

"They (US companies) complained about the discriminatory and monopolistic practices of VSNL and requested the Indian government to intervene to ensure VSNL makes available submarine cable capacity to other suppliers on a reasonable and non-discriminatory basis," the United States Trade Representative (USTR) said in its latest report.

US companies have recorded protest against restrictive policies by VSNL, in which the government holds 26 per cent equity, on international submarine cable access and landing stations.

VSNL officials in India said similar allegations had been made last year also and the same were found incorrect after scrutiny by appropriate authorities.

USTR's comments come close on the heels of telecom regulator Trai slashing international bandwidth prices by up to 70 per cent and the same was challenged in the Telecom Dispute Settlement and Appellete Tribunal (TDSAT).

Trai's move to cut prices would be beneficial only if the international submarine cable owners were allowed to get access in the country and make bandwidth available for various value-added services especially in the business process outsourcing segment.

The report, in its section on foreign trade barriers, has also said that "private carriers are concerned about the neutrality and fairness of government policy. The Indian government retains a significant ownership stake and interest in the financial health of the dominant telecommunication firms".

Meanwhile, VSNL has got clearance from a US government agency for acquisition of undersea cable assets of Tyco Global Network (TGN) for $130 million.

The approval by the Committee on Foreign Investment in the United States (CFIUS) will give VSNL control over 60,000 km of undersea communications cable spanning three continents.

"CFIUS, the regulatory body tasked with investigating potential national security concerns, issued a formal notice to VSNL that its review of the situation uncovered no significant issues of national security with regard to this transaction," a VSNL spokesperson said.

VSNL had on November 1, 2004 signed an agreement with Tyco to acquire the undersea cable assets of TGN.

Earlier, AP had reported that the US justice department, FBI, homeland security department and defence department signed a 32-page agreement with the company to guarantee the US government can continue to install court-authorised wiretaps on the network and conduct background checks on VSNL employees in the US.

The agreement also requires that VSNL take steps to prevent illegal eavesdropping on US customers and guarantee that foreign governments can't access classified or sensitive US government information carried over the undersea network.

The agreement acknowledges that the US government would suffer "irreparable injury" if VSNL failed to comply with its promises.