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Private ISPs charge VSNL with cross-subsidising, threaten action

Thomas K Thomas

The tariff slash announced by Videsh Sanchar Nigam Ltd (VSNL) last week on Internet leased lines has set off alarm bells for private Internet Service Providers (ISP). Some of them have even threatened to approach the Monopoly and Restrictive Trade Practices (MRTP) and the Telecom Regulatory Authority of India (TRAI), accusing VSNL of cross-subsidising.

Sidharth Ray, chairman, SPA Enterprises, and promoter of the NOW Internet services brand, said, "If VSNL is able to provide good quality service at such low tariff levels, then obviously there is some cross-subsidising happening. We are monitoring the situation closely and if that is the case then we will go to the MRTP."

But VSNL insists that there is no case for cross-subsiding. Vinoo Goyal, director development at VSNL, said, "We are able to offer bandwidth at low tariffs and maintain quality because we get good rates from the international markets for buying bandwidth in bulk. There is no question of cross-subsidising."

The tariff reduction has also clearly divided the private ISP industry into two - those who have their own private gateways and those who do not.

For those who do not have a private gateway and depend on VSNL for bandwidth, the tariff reduction has come as a welcome move as they will be able to cut their costs.

Says Saurav Adhikari of HCL Infinet, one of the ISPs who do not have their own gateway yet, "The reduction in leased line tariff announced by VSNL is a good move as it makes our business plans more viable. We can also pass along part of the benefit to our customers. We have also put on hold our plans to set up a gateway in Bombay. After the announcement, private gateways have become unviable."

But the number of ISPs who have set up their own private gateways is in a majority and they are frantically reworking their strategy now.

Ramesh Awtaney, CEO, Jain Networks, and a promoter of ISP Free Dial In said, "In one year's time, private gateways will disappear as VSNL will adopt a fierce pricing strategy. The strategy that we are adopting is to offer gateways that can carry both data and video which is at the moment untapped."

Jasjit Sawhney, CEO, Net4India, said, "The immediate impact of the move on ISPs who have their own gateway will be to respond with a matching reduction in tariffs. We are also in the process of rationalising our tariffs."

Mantra Online, the ISP arm of the Bharti Group is also reducing tariffs. Atul Kanwar, CEO, Mantra Online said, "Prior to the price reduction by VSNL, our tariffs were lower. Now we will have to rework and reduce it to at least their levels for Internet leased lines."

According to Ray, VSNL is clearly engaging in an unfair price war.

"On the one hand, the government is opening up the sector to private players and on the other it is adopting such a predatory pricing strategy so that no private player makes money. This is unfair because government units are not accountable to profits and can afford a few losses here and there which they make up in other ventures where they have market control."

Amitabh Singhal, secretary, Internet Service Providers Association said, "We have already approached TRAI on the unfair tariff by VSNL. While VSNL is aggressive on tariff for the local market, it is charging the ISPs exorbitantly for international bandwidth because it has a monopoly in the sector."

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