Videsh Sanchar Nigam Ltd [Get Quote] intends to slash bandwidth prices on westward routes by 20 per cent, a move that will result in huge cost savings for over 3,000 international private leasedline circuit (IPLC) customers in India.

The company would cut prices by 10-12 per cent "immediately" and further reduce it to 20 per cent in 12 months.

"The price reduction is being effected as infrastructure costs have come down, leading to reduction in prices for setting up networks and submarine cables. Moreover, with commissioning of the Tata Indicom Singapore-Chennai cable (TIC) and the expected lighting up of new cables, the bandwidth prices are slated to fall further," said a VSNL source.

According to industry analysts, the reduction in prices will help Indian BPO and call centre companies to "competitively price their services and offerings in the global market". Bandwidth is one of the key elements for any BPO company.

For example, a couple of years ago VSNL had to spend around $100 million to set up a 1,000-km-long, 10 GB network. But the fall in prices has enabled the telecom and Internet companies to set up a 320 GB network, spread over 3,000 km, at the same investment.

The expected commissioning of the consortium cable - SEA-ME-WE-4, for which VSNL is a landing partner, will also help in reducing the prices.

VSNL, along with the consortium members totalling around 90 firms, intends to light up the cable in December this year. Once commissioned, the 100-GB cable SEA-ME-WE-4 will connect Europe to Asia.

The Tata group-controlled company intends to pass on the benefits to its customers, most of them being IT, ITeS and BPO outfits, this would help India becoming more competitive on the price front in the outsourcing sector, they said.

At present, VSNL levies around Rs 4.21 crore (Rs 42.1 million) for an half-circuit on the India-US route for an STM-1 mode (155 MB connectivity), while its competitors levy Rs 8 crore (Rs 80 million) per annum.

This will be the third reduction by VSNL, which had earlier slashed prices between India and the US by a whopping 48 per cent over six months since May 2005.

It had also slashed prices since the launch of the Tata group's submarine cable TIC in November 2004, with prices reduced by around 50 per cent, with an STM-1 connection priced at Rs 3.76 crore (Rs 37.6 mllion) a year, against Rs 6.57 crore (Rs 65.7 billion) being offered by the consortium cables.

However, VSNL has no intentions to reduce prices on the eastward routes, as company sources are of opinion that the prices have already touched a nadir. There are five consortium submarine cables landing India now - SEA-ME-WE-2, SEA-ME-WE-3, SAFE, WASC and IndiaGulf, and VSNL is the landing partner for all the cables.