VSNL's demands unjust, says Trai

The Telecom Regulatory Authority of India (Trai) said the points raised by Videsh Sanchar Nigam Ltd (VSNL) in its appeal to the telecom tribunal on the reduction of international bandwidth tariffs were unjustified and contradictory to the regulator's projections.

VSNL had on Wednesday challenged Trai's regulation on reducing international private leased circuit (IPLC) tariffs by 70 per cent, stating the issue could not be looked at in isolation.

On VSNL's primary contention that the regulator's move was an incomplete exercise since it failed to address last mile access costs and domestic tariffs, Trai executives said they had stated in "clear terms that domestic bandwidth tariffs too would be revised, and the new rates would be announced by the end of the month."

VSNL has said the "unbundling of the last mile" was the biggest hindrance to broadband growth. "This was not being done as it was controlled by government monopoly companies," it added.

"Our earlier recommendations had said unbundling was the step forward. VSNL is aware of the authority's stand on the issue. Non-implementation was the government's decision," a Trai official said.

In Indian cities where broadband was available, tariffs were in the region of Rs 299 per month for a 512 Kbps connection, as compared with Rs 2,000 in the UK and Rs 1,200 in USA, VSNL had argued. Trai,has however, said it never came across such tariffs in the country.

Replying to VSNL's query on the sudden need for the imposed regulation, a Trai official said: "International bandwidth tariffs in India were found to be higher than in many countries owing to lack of effective competition in the market.

The authority had therefore found it essential to intervene in order to secure future growth.

VSNL had also faulted the regulator comparing the price drops in the Western market and said "they were not relevant as they were triggered by massive capital write-offs". "'Imposition of similar tariff levels might also significant losses in the Indian operations. The move to regulate prices will harm return on investments," a VSNL executive said.

"Operators will not make losses. Our calculations were based on costs, with enough margin for profit. The calculations were primarily done on the costs provided to us by VSNL and not by those of international carriers," a Trai official said.

The private carrier had also said that "as international bandwidth was hardly 5 per cent of ILD voice traffic, he reduction would not have any bearing on the total costs."

Countering this, the authority said that while the total costs may not see a fall, it would nevertheless allow their competitors (operators who did not have submarine cable systems) to buy bandwidth at cheaper rates.

'When bandwidth is cheaper, it gives increased room for these operators to compete with those who own cables such as such as VSNL (Tata), Reliance and Bharti (Airtel),' the regulator added.