Videsh Sanchar Nigam Ltd has reduced international bandwidth prices between India and the US by a whopping 48 per cent in the last six months.
VSNL slashed the prices after the launch of the Tata group's own submarine cable system, Tata Indicom Chennai Singapore Cable, in November last year.
Half-circuit tariffs on the India-US route on TIC were halved to Rs 4.21 crore (Rs 42.1 million) per annum for an STM-1 mode (155 MB connectivity). The comparable figures on consortium cables were around Rs 8 crore (Rs 80 million) per annum, VSNL informed the Telecom Regulatory Authority of India last month.
Bandwidth prices between India and Singapore were also reduced by around 50 per cent, with an STM-1 connection priced at Rs 3.76 crore (Rs 37.6 million) per annum, against Rs 6.57 crore (Rs 65.7 million) being offered by the consortium cables.
There are five consortium submarine cables reaching India now -- SEA-ME-WE-2, SEA-ME-WE-3, SAFE, WASC and IndiaGulf. A consortium cable is owned and operated by a group of companies spread over various countries.
According to industry analysts, the fall in bandwidth prices has helped Indian BPO and call centre companies to "competitively price their services and offerings in the global market". Bandwidth is the most essential commodity for BPO companies.
However, exact gains for Indian companies are not immediately available. Moreover, the reduction also gains importance as the United States Trade Representative office and Reliance Infocomm Ltd, in two separate letters to Trai, had alleged that VSNL was responsible for the high bandwidth prices prevailing in India. VSNL has refuted the charges.
VSNL was also offering a 20 per cent discount for international bandwidth on the TIC if enterprise customers opted for a non-restorable bandwidth offering, the letter said.
The company attributed the sharp reduction in tariffs on TIC to the complete ownership and control of the cable, compared with other cables where VSNL was a consortium member and did not have any control over tariffs.
"The capacity on TIC is under our control and we can take pricing decisions based on our input costs. Consortium cables have come at a much higher cost and the pricing decisions require unanimous approval of all consortium members," said a source.
"In a consortium model, a member buys capacity either on an annual contract or on a bi-annual contract by making an upfront payment. This capacity is then re-sold over rest of the year to the retail users, thus inducing a finance cost over the price of international bandwidth," an industry analyst said.
Bandwidth prices are expected to drop by 20 per cent once upcoming consortium cable -- SEA-ME-WE-4 -- becomes operational. VSNL and Bharti Tele-Ventures are the two consortium partners from India for the cable.
Cutting costs
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VSNL slashed prices after Tata group's submarine cable was in place
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The prices between India and Singapore were also reduced by around 50%
- The fall in bandwidth prices has helped the call centres
