In April, one might see the monopoly of VSNL coming to an end. Data Access and Bharti Telesonic are planning to start ILD service by mid April and others will follow soon. There has been an overwhelming response from service providers to join VSNL in the ILD league as the entry barrier is low but the promises are high in comparison to other telecom services.

At present, international traffic of India is estimated at 2.7 billion minutes and the gray market is estimated at around one billion minutes. The inbound traffic is around 2.1 billion minutes and outbound traffic is around 0.52 billion minutes. According to Telegeography 2002, ILD volumes are expected to exceed 4 billion minutes in 2002, so the potential is very high. According to Siddhartha Ray, managing director, Data Access, the Indian ILD market in 2002 is estimated at around Rs 8,000 crore. Although ILD prices may fall drastically with the launch of services by new service providers, the overall market is going to increase as there will be a major shift from the gray market. Even due to reduction in price, there will be a sudden increase in international traffic, which will be proportional to percentage cut in international tariff.

To start an ILD service in the country, the government has fixed a one-time entry fee of Rs 25 crore and an unconditional bank guarantee of Rs 25 crore, which will be released as soon as rollout obligations are made. In addition to the one-time entry fee, ILD service providers will be required to pay an annual license fee including USO levy, which will be 15 percent of the adjusted gross revenue (AGR).

Since the entry barrier is low, nobody wants to be left behind in the ILD race. The capital expenditure is expected to be around Rs 100 crore, which includes even the license fee and bank guarantee. Even the rollout obligations are not stiff as one has to set up a minimum of four PoPs, one each in east, west, north, and south, and the delivery of traffic to all countries in the world has to be ensured through at least four direct routes.

Players in the Fray
Bharti Telesonic, Reliance, and Data Access have already got the license whereas Aircel, Net4 India, Satyam Infoway, Spice Communications, Connecting Networks, and others are still awaiting the LoI or still thinking when to convert the LoI into a license agreement. It seems that Bharti Telesonic and Data Access will get the first mover advantage as they are planning to start the service in April. Aircel, the cellular service provider in Tamil Nadu has also applied for the ILD license through partners Asia Tech Mauritius and Cellunet of India. Net 4 India is planning to fund the ILD operations through its promoters and financial institutions. Estel Communications is planning to move along with Fusion Telecommunications International, an international carrier in US. Spice Communications is moving along with Singapore Technologies Telemedia Communications, an ILD operator in Singapore. Satyam Infoway has listed Sterling Commerce International and Government of Singapore Investment Corp as it partners for the ILD project. Even MTNL and BSNL are firming up their ILD plans so that they can be ready when the government gives them a go ahead to start ILD service in the country.

Data Access, a JV of Spa and PCCW, where PCCW has 49 percent and SPA 51 percent stake, is planning to launch its operations in the third week of April, according to Siddhartha Ray, managing director, Data Access. Even Bharti Telesonic is planning to launch its service in April as the company has deployed two international gateway switches from Siemens in Chennai and Mumbai.

The Network Plan
Companies coming from the traditional telecom background are planning to start ILD service using the TDMA technology whereas the new service providers will like to opt for the VoIP technology in order to roll out services at a faster pace and even reduce infrastructure costs.

Although the incumbent’s network is based on TDMA, Data Access has opted for a packed-based network. Industry insiders say that Reliance too is planning for a VoIP network. On the other hand, Bharti Telesonic is planning for a TDMA-based network to start with and later on deploy a VoIP-based network so as to have a mix of both. Service providers coming from the ISP world will deploy VoIP network as they already have an existing IP network which has to be voice activated.

According to Vijay Yadav, country manager, CommWorks India, service providers in ILD should start with IP and then move to a hybrid network as services deployed on IP are less costly and there is a lower risk of failure. ILD networks of future will be a mix of IP and TDM as only TDM or IP will not survive in the long run, he adds.

Service providers have to be very careful while choosing the partner carrier for different routes. According to Sharat Jain, regional director, BCE Teleglobe, they have to choose the partner for a particular route by comparing the different carriers settlement rates.

The Pricing
Recently, TRAI reduced ILD tariffs by around 20 percent. For example, a call from India to the US is presently Rs 40.80 per minute (based on Rs 1.20 per pulse) whereas earlier it used to cost Rs 49.20 per minute. But it seems that Bharti is looking at a US tariff of around Rs 25 per minute. It seems that even Data Access is working on a tariff plan ranging between Rs 12 and Rs 15 per minute for calls originating from India to anywhere in the world.

Every service provider, with the launch of its service, will like to beat the competition. So one can see a lot of downward movement on the ILD tariff front. Companies that can keep their operation costs to the lowest and play in small margins of less than 5 cents will be winners in the long run and will get the maximum share of the pie. Service providers have to focus more on the quantity front as the margins will be wafer-thin in future. Not only in voice but also in data, one can see the prices coming down by around 50 percent.

The Issues
Most of the service providers are still in a dilemma whether to go for the service at the earliest or to wait and watch till the policies are announced or fine-tuned. The interconnect policy is not out yet and one has no clue about the revenue sharing terms and conditions for termination and origination of tariff. To start with, new service providers can only terminate the call outside India but origination will be a problem which has to be sorted out. Connectivity to FLAG is still not finalized as VSNL has not come out with the access charge plan for service providers.

Commenting on the issues related to ILD, Umang Das, managing director (corporate), Spice Communications, said, "Before the rollout of infrastructure, one has to get the numbering plan whereby the customer can choose his international long distance carrier and whether BSNL is ready for its implementation. Second, TRAI has to come out with an interconnect agreement for ILD which will specify the revenue sharing agreement between FSPs and CMSPs with ILD operators in the country."

Both these issues will result in delaying the launch of ILD service in its entirety. TRAI has come out with a draft of reference interconnect offer. Service providers have to make specific suggestions and once the suggestions are received they can be looked in entirety before finalizing the interconnect agreements. One can expect the agreement to be ready only by last week of April or in May.

When the government disinvested its stake in VSNL, it committed that VSNL will remain the most preferred ILD operator for BSNL and MTNL for two years. The government has also said that this will be under the condition that VSNL competes with other ILD operators in terms of quality and price. In order to get a good valuation for VSNL the government has provided a two-year lock-in period to VSNL for routing ILD traffic of BSNL and MTNL. Das feels that this arrangement is not good for operators as well as subscribers as all the outgoing calls through the incumbent will be either through the customer choice or through default traffic which can be passed to VSNL, provided it is competitive."

To start with, the new service providers can only terminate traffic from different countries to India. Data Access has signed interconnection agreement with BSNL for termination of traffic to India but for call origination, the new service providers are left with only private basic service providers and cellular service providers. About routing of BSNL and MTNL traffic, there is still no clarity on how new service providers can cater to that market. The only option is carrier access code but BSNL exchanges are not carrier access-ready. So the subscriber won’t have the option to choose a service provider for at least a couple of months.

On the submarine cable front, VSNL has still not finalized the access charges for connecting to VSNL as currently the landing station is located in VSNL premises. One is still not sure when VSNL will come out with the charges and how cost-effective the charges will be.

In fact, ILD providers are looking at the market very cautiously and are planning not to implement ILD services unless and until interconnect agreements are finalized.

Pravin Prashant