With national long distance (NLD) and international long distance (ILD) calls comprising only 14.4 per cent and 0.2 per cent of the total outgoing minutes of usage respectively, there is immense untapped potential in these segments. Recognising this, the Department of Telecommunications (DoT) and the Telecom Regulatory Authority of India (TRAI) have been keen to open the sector to more competition and thereby boost growth.
Resale of bandwidth
Recently, the Ministry of Communications and IT announced its plans to permit bandwidth resale by domestic carriers. This would increase competition in the international private leased circuit (IPLC) sector and decrease tariffs in the segment by up to 25 per cent ?? also a longstanding demand of the industry.
Bandwidth resale is not allowed under the ILD licence at present. Though the three submarine cable companies ?? Videsh Sanchar Nigam Limited (VSNL), Flag Telecom and Bharti Tele Ventures ?? have about 700 GB of bandwidth, they cannot resell it.
Internationally too, resale is considered significant to foster competition. The UK, the US and Germany have 33, 32 and 32 IPLC providers respectively, and 29, 26 and 27 resellers. India, in comparison, has only three IPLC providers.
Access to cable landing stations
The communications ministry also plans to allow access to essential infrastructure, including landing facilities for submarine cables at cable landing stations (CLSs). Earlier, TRAI had recommended making this mandatory in order to simplify access to CLSs as this would eliminate a major bottleneck to growth in the ILD segment.
Responding to this development, VSNL declared that it would henceforth provide submarine CLS access to all operators and introduce standard access facilitation charges for the same.
Licence fee reduction
Earlier this year, DoT lowered the entry barrier for the long distance sector by slashing entry fees to a uniform Rs 25 million from the earlier Rs 1 billion for NLD services and Rs 250 million for ILD services. The revenue share was simultaneously reduced from 15 per cent to 6 per cent.
These efforts were expected to spur growth. And have succeeded to a large extent. As many as 21 operators have filed applications with DoT for both NLD and ILD licences. These include Hutchison Essar, Idea Cellular, Mahanagar Telephone Nigam Limited (MTNL) as well as utilities such as Oil India, Power Grid Corporation, RailTel and GAIL. A few international companies, such as AT&T and British Telecommunications (BT), have also expressed interest.
Internet service providers (ISPs) too have jumped onto the bandwagon, following the government’s initiative of doing away with IP-II and IP-VPN licences. Of course, the ruling that ISPs offering domestic and international VPN services must obtain an NLD and ILD licence respectively has a lot to do with it.
Of the 21 new applications for NLD licences, eight are from ISPs. These are Sify Communications, HCL Infinet, i2i enterprises, Hughes Network, Dishnet Wireless, Aksh Broadband, Apaksh Broadband and Tulip IT Services. And of the nine new applications for ILD licences, four are from ISPs that have been in the business for over a decade.
However, even prior to the legislation, several ISPs had been looking at the licences as an opportunity to broaden their operations and offset the high fees imposed by DoT for offering VPN services. According to Bhaskar Sayyaparaju, chief technology officer, Sify Communications, “With the NLD and the ILD licences in place, SifyComm would be able to enhance its portfolio of connectivity.” Besides VPN services, the licences would enable the ISP to offer domestic leased circuits (DLCs) and international leased circuits (ILCs) in addition to long distance subscriber telephony services.
Deepender Bedi, director, Tulip IT Services agrees. He plans to use these licences to route IP traffic nationally and internationally. With a letter of intent (LoI) for ILD services, the company is looking forward to offering international data connectivity solutions to its customers worldwide.
Opening up opportunities
For utilities, already possessing a huge network of optic fibre cable across the country, an NLD licence offers many different and lucrative opportunities. A RailTel spokesperson says: “We have been providing leased circuits till now, which is a low-end service. Now, with an NLD licence, we can provide VPN services and also start routing NLD calls between telecom operators.”
Similarly, Power Grid, which has both NLD and ISP Category A licences, can leverage its 19,200 km long optic fibre backbone network (laid overhead on high voltage power transmission lines) to provide services.
Surprisingly, however, despite the lowering of barriers and the significant opportunities in the Indian telecom sector, international interest has been relatively low. Analysts attribute this mainly to the lack of clarity on FDI norms. So far, only AT&T has acquired NLD and ILD licences, while BT has sent an LoI for the same. And Cable and Wireless plans to apply shortly.
For foreign companies, the licences make good business sense. Sanjiv Bhagat, CEO and managing director, AT&T Global Network Services India, states: “A licence would enable us to enhance our existing services as well as equip us with the capability to offer new services. Initially, we would offer our customers enhanced virtual private network (eVPN)-based services on the multi-protocol label switiching (MPLS) technology, end-to-end ATM and frame relay services, VPN remote access services, and security services. Later, more options would be added to our portfolio.”
For BT too, the licence is its ticket to increased flexibility and freedom as the company currently offers managed services through an arrangement with Bharti Airtel.
Consequently, to battle the onslaught of new companies, the existing players in the field ?? Reliance Communications Limited (RCL), Bharti Airtel, Bharat Sanchar Nigam Limited (BSNL) and VSNL ?? are chalking out aggressive plans. MTNL, for instance, breaking its age-old practice of using BSNL’s long distance network to carry traffic, has started using VSNL’s long distance network to offer local call rates between Delhi and Mumbai.
Tata Teleservices Limited (TTSL) too has recently expressed interest in offering NLD services to subscribers. Currently, lacking its own infrastructure, TTSL outsources its NLD requirements to its group company, VSNL. However, with an NLD licence, TTSL could lease a line from VSNL and not pay for it on a per-minute basis. This could result in cost savings for the Tatas and a revenue loss for VSNL. However, for now, TTSL has only been issued an LoI for NLD services.
Meanwhile, RCL is ramping up its efforts in the ILD segment. Using its Reliance Global Call card, the company slashed its ILD rates by over 66 per cent.
In September 2006, RCL inaugurated the Falcon cable system, an undersea cable aimed at providing cheaper bandwidth to retail and commercial users. With this, the company’s year-on-year growth in international revenues could be 30-40 per cent.
Future outlook
The long distance sector certainly has an exciting future. With virtually all companies that have recently received licences having made infrastructural arrangements, it won’t be long before services are rolled out. Many companies, including SifyComm, Tulip IT Services, HCL Infinet and the utilities, already have their infrastructure in place.
HCL Infinet, for instance, boasts of an infrastructure based on both frame relay and MPLS with points of presence (PoPs) in 42 cities. According to the company spokesperson, “After receiving the licence, we have started expanding our reach by opening multiple `access PoPs’ in selected metro locations. Our future expansion plans would be rolled out with the help of our existing partners.”
Other companies like i2i and RailTel are also aggressively negotiating tie-ups.
BT and AT&T are also investing heavily in NLD and ILD infrastructure. Over the past three years, BT has invested over $100 million in rebuilding its network in the Asia-Pacific region to migrate from the legacy TDM network to the 21st-century MPLS-based network. The two global players are also planning to increase their PoP nodes in India. BT, which currently has three PoP nodes, intends to spend $21 million on additional nodes. AT&T plans to add its fifth PoP node in Hyderabad shortly.
Meanwhile, the government is determined to further enhance competition in the ILD segment. With amendments in the current legislation slated to be enacted shortly, a significant amount of activity can be expected in the IPLC sector in the new year.
To sum it up, both consumers and enterprises are looking at busy times ahead. The long distance segment is geared up for increased activity, more players, and much higher minutes of usage. It won’t be long before distance ceases to be a deterrent to communication between people.
