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Bandwidth rates in India among highest — TRAI justifies price regulation

13-September-2005
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Bandwidth rates in India among highest — TRAI justifies price regulation

The move has been opposed by VSNL, which controls nearly 80 per cent of the bandwidth market.

India may boast of having the lowest cellular tariffs in the world, but when it comes to international bandwidth tariff, it is just the opposite despite a 65 per cent drop in prices announced by the telecom regulator last week. The telecom regulator has blamed lack of adequate competition in the international long distance segment as the reason for the high tariffs.

For instance, in Japan, a 2-mega bits per second (Mbps) line costs Rs 10 lakh while the same costs Rs 13 lakh in India. Similarly, a 45 Mbps line in South Korea costs Rs 44 lakh while the same costs over a crore in India. While a 155 Mbps line costs Rs 1.32 crore in Singapore it costs more than Rs 2 crore in the hottest telecom market in the world. Even in a small country like Hong Kong, charges for a 155 Mbps line are only Rs 1.3 crore.

Indian IT-enabled service and business processing units and Internet Service Providers have been demanding rationalisation of bandwidth tariffs. The move has, however, been opposed by Tata-managed Videsh Sanchar Nigam Ltd which controls nearly 80 per cent of the bandwidth market. Though VSNL has dropped the tariff by 70 per cent in June, it is nowhere near global standards.

According to the Telecom Regulatory Authority of India, tariffs in India can be brought down to the levels prevailing in other parts of the globe through regulation until the market matures with competition. TRAI has pointed out that in Hong Kong, for instance, the Government fixed price ceilings on dominant operators until 2002. The price ceiling was removed after the market was competitive enough so that there was no dominant player. In Japan, too, operators were subject to price ceilings, and any tariff changes was to be approved by the regulator before implementation. All regulations were abolished in April 2004 as the regulator determined that the market for IPLCs was competitive. In Singapore, dominant licensees have to file tariffs with the regulator for approval.

VSNL is not in favour of any intervention by the telecom regulator on the grounds that there was enough competition in the Indian bandwidth market to allow free market forces to determine the price.

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