This Top View discussion says that services must be built to utilize capacity

It is an interesting time for international long distance (ILD) communications in India. The government has adopted an open-market policy, inviting companies to become ILD operators by not restricting the number of players and also pegging an easy entry fee in terms of license fees.

Already, there are two alternate ILD operators to VSNL. One of them owns under-sea cable to Singapore and uses the latest technologies with great capacities in hand. The choice for customers of international connectivity suddenly seems to have multiplied at least in the big metros. But this move from a regulated market to a free market involves some big challenges. Also, since there has been a major chaos in the western ILD market, there is a need to reconsider the business models to be adopted.

To take stock and discuss these issues, VOICE&DATA got together some of the top ILD players in India for its Top View discussion on ILD. Ivano Rondelli, managing director, XA TMI Ltd India; Kishor Tiwari, country manager, Reach; and Pran Mehra, country manager, Band-X; constituted the panel for the discussion. Shyamanuja Das, senior assistant editor, VOICE&DATA, moderated the discussion.

Shyamanuja Das, VOICE&DATA:
What are the things that have impacted ILD services in India as well as in other countries?

Ivano Rondelli, XA TMI India:
It has been two years since carriers have started deploying IP broadband for voice, but many of them still deploy TDM. MPLS services are also starting to be based on IP. ATM is still a big thing and is being deployed on the backbone. It starts from 2 Mbps onwards but not many companies require that kind of bandwidth even today. Frame relay, which remained to be an old technology, is still deployed the most worldwide, and is also the most-requested service except in Japan where it is just the opposite. (In Japan, IP service is the most requested).

There has been a significant change in bandwidth cost in the last two years. Initially, costs were based on assets, as investments were made for 10 to 20 years. But, now most of the carriers price their services on maintenance cost. Services in India are still highly priced, so price is not an issue. But in other countries like the US, Europe, and some of the Asian countries, the price of international services is based on maintenance cost and thus, the prices are very low, as there is a glut of bandwidth.

Shyamanuja Das: Everyone knows that there is a series of Chapter 11 being filed by the carriers, leading to lowering the level of business confidence. Sometime back, Reed Hundt, the then FCC chairman, said you just create capacity and you will utilize it, as it is not a waste. And today, all these guys are going to be bankrupt or are already bankrupt. What do you think has gone wrong?

Kishor Tiwari, Reach: I don’t think that the whole model was wrong and everything is doom and gloom in telecommunications. My firm belief is that telecom is a good industry and will continue to grow for quite sometime, as the needs of the people have not been fulfilled. The market is not saturated and there is a lot of demand.

In my opinion what has happened is when deregulation started, there were a lot of players and they wanted to have their own infrastructure, as they were unable to share it. So, many companies laid cable and there was excess capacity, but not much demand. Therefore, the companies tried to sell it to recover some cost even by selling it below cost. In this process, some companies became bankrupt.

Shyamanuja Das: Well, is there an excess capacity or do you think they have not done enough to build services?

Pran Mehra, Band-X: There is definitely a glut of bandwidth, worldwide. But still customers will not be able to utilize bandwidth effectively, since the local loop provider is not able to provide the service. So if one needs a point-to-point connection from Mumbai to New York, one needs to talk to a number of players. These players have to set up the infrastructure to reach individual offices and if it is not there, they have to make an effort to reach them. Yes, there is a glut. But on the other side, one has to build access to super services at an affordable price.

Shyamanuja Das: What follows logically is some of the wholesale carriers look at this directly or indirectly to get into the building.

Ivano Rondelli: The way I see it, the winners will be the local access providers, as they will expand and get into the ILD business. In the US, the stronger companies are the baby bells. The ones who are weak are long-distance service providers, such as WorldCom. It is the same in Europe. So in general, local access providers are the ones that are in good shape and are the ones who can play the role of a global player too.

Kishor Tiwari: There is so much competition in the trunk routes and inter-country routes because it is an easy business to set up. Just set up a PoP in two cities and put a connecting pipe, and you are in business. In terms of local access here, in India, it is a very capital-intensive business and not many carriers will dare to duplicate the infrastructure. Now coming to the point of access capacity and how it will be utilized, it has been rightly pointed out by Pran that there is a problem in the access network. It is because it takes a lot of money to build the access network. Also, given that the condition of the economy, how many people can afford to have a 2 Mbps link to their homes?

Shyamanuja Das: This is about the residential customers. What about the business users? Today, there are people who are willing to pay more for quality but they are not getting it.

Kishor Tiwari: Quality-of-service (QoS) is a combination of two things. The first issue is how much redundant infrastructure you have. The second issue, which is very prevalent in India, is the attitude and the way we maintain our network. Most of the time, people are afraid to operate their core business process over the telecom network because they are afraid that once they get used to it they will rely on it, and as a result if the telecom network is not reliable, the entire business will fail.

Ivano Rondelli: Are customers willing to pay for quality? I think if you talk about corporate customers, possibly they are. If you talk about public, they are not. If somebody would come up and say you can call for two cents a minute, you will try ten times before you get the lines. However, for a line that costs 20 cents a minute, you will like to get connected with minimum effort. So, you have to be careful because these are two separate things for a carrier.

Shyamanuja Das: One small thing is the end-to-end SLA of network, which today very few carriers are giving. They say that the SLA in their network is fine but after that it is a best-of-effort service. But, a business needs better than that. Any solution to that?

Ivano Rondelli: There are many players providing connectivity—local access provider, long-distance operator and the international connectivity providers. Each of them will have a role in providing a good QoS.

Shyamanuja Das: One reason why IPLC demand has gone up for the last two years is because of the coming up of BPOs and call centers in a big way. You are talking about millions of people working in thousands of centers, and they have all gone for IPLC and for a minimum of 2–4 Mbps of bandwidth. How do you think this will drive the demand for international telecom service?

Kishor Tiwari: Once the requirement of countries crosses a certain level and the products are priced in such a way that the benefit of concentration and statistical multiplexing can be passed on to the customers, it will be a win-win situation, but unfortunately this is not happening. But the day will come when operators will say you don’t need to take IPLC. We are going to give you a look-alike IPLC services at 70 percent cost and better reliability because when you take IPLC, you take point-to-point. If you take two, you are doubling your cost, but such things can be built cheaper on the public network. So the public network is the way to go and it will happen.

Shyamanuja Das: From international point of view, I would request all of you to comment on the future of India becoming a major market for international telecom services.

Ivano Rondelli: In my opinion, India will become a major player once things are opened for real competition. At present, it is a very restricted and regulated market. In China, nearly 8 lakh mobiles are added every month, and we have 1,500 IPLCs going out of the country. I hope all these regulations will not be there anymore and we will possibly grow at the same pace as that of China.

Pran Mehra: Licensing has to become simpler, it has to become more dynamic and provide business opportunity to a larger number of companies and service providers in the West to set up an entire suite of services. They don’t need to replicate the network. That also lowers their own risk in the market because they are selling chunks of network away to larger players.

Kishor Tiwari: Indian market has to grow but real growth would be when the economy will grow. Another issue is that regulation is on a very high level in India, though it is a deregulated market. Deregulation is not working in practice and its usage is restricted. The regulator has to clean up that act and make rules, which are simple with no strings attached.

Shyamanuja Das: Well the message is that the future is definitely there, but more competition is required.

Nareshchandra Laishram