VSNL lowers bandwidth rates

Videsh Sanchar Nigam Ltd has (VSNL) slashed international bandwidth prices by up to 40 per cent, a move that might reduce broadband tariffs paid by consumers, and substantially cut costs for small and medium-sized BPOs and ITES companies with clients abroad.

VSNL has reduced International Private Leased Circuits (IPLC "" which are used by corporates like IT companies) prices by 25 per cent, with effect from September 1, 2006, while it has announced a reduction in Internet Leased Line (ILL) tariffs by up to 40 per cent.

Speaking at the time of the announcement, VSNL head (corporate strategy) Srinivasa Addepalli said: "This will help in providing internet connectivity at reduced prices to mid-size information technology, business process outsourcing (BPO), and knowledge process outsourcing (KPO) companies. This will also help new segments like academicia and research institutes in the country."

However, opinion is divided on whether the drop will lead broadband and ISP operators to cut tariffs at which broadband is offered to customers.

Deepak Maheshwari, secretary, Internet Service Operators' Association of India, said, "it is too little and too late."

A senior executive in MTNL, which leases capacity from VSNL and other companies, said: "We have already dropped broadband rates to a minimum of Rs 199, but we will study and see whether we can reduce them further or not." Companies like Tata Teleservices that offer landline connections with broadband could reduce their tariffs by 15 to 20 per cent.

VSNL executives said that with bandwidth constituting over 10 to 15 per cent of a small and medium-sized BPO or IT company's costs, the reduction would make a substantial difference in making them more competitive.

However, for large IT companies in which bandwidth constitutes less than 1 per cent of the cost, it would make no difference.

Competitors are non-committal on whether they will respond to the cuts by VSNL. A Bharti spokesperson said, "We haven't taken a call; we will study the matter before taking appropriate action." A telecom analyst said, "This is a long-delayed move. However, this would invite competition to reduce prices."

VSNL has reduced bandwidth prices by around 85 per cent in the last four years. According to the new tariffs, an IPLC half-circuit will be priced at Rs 7.84 lakh per annum, from the earlier Rs 10.45 lakh per annum.

An STM1 (155 MBPS) connectivity mode will now be priced at Rs 239.20 lakh per annum, a 20 per cent reduction from the earlier Rs 299 lakh per annum.

On the ILL circuit front, an E1 connectivity (2 mbps) will now be priced at Rs 16 lakh, a 20 per cent reduction from the earlier Rs 20 lakh, and an STM1 will be priced at Rs 458 lakh, a 40 per cent slash.