The Telegraph
Since 1st March, 1999
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Internet rates set to tumble

New Delhi, March 11: Internet and broadband tariffs are set to fall by more than 70 per cent.

Overseas call rates are also expected to drop, provided the operators pass on the benefits, which the telecom regulator granted today, to the end-consumer.

The Telecom Regulatory Authority of India (Trai) has slashed the international bandwidth prices by up to 70 per cent, which could bring down ISD tariffs. However, the reduction would definitely bring down tariffs of Internet and broadband services.

International bandwidth is a carrier of data and voice services across the world. The main users of bandwidth in India are Internet service providers, information technology and IT-enabled service enterprises like business process outsourcing units and international long distance operators.

The international bandwidth service is generally provided through submarine cable systems and through satellite media. In India, submarine cable systems is the dominant mode of delivery of international private leased circuit (IPLC) services.

This is the first instance that the regulator has issued a telecommunication tariff order to regulate the rates for international bandwidth.

The ceiling tariff prescribed by this order will take effect from April 1, 2005.

The ceiling tariff for international private leased circuit for E1, DS3 and STM-1 capacities are Rs 13 lakh, Rs 104 lakh and Rs 299 lakh a year, respectively. These are three most commonly used capacities or speeds.

E1 has a bandwidth speed of 2 mega bits per second, DS-3 or 45 mega bits per second, and STM-1 or 155 mega bits per second.

The operators will be free to offer tariffs that are lower than the ceiling tariff fixed by the regulator.

The ceiling tariff for higher international bandwidth capacities has been reduced by about 70 per cent and for lower capacity by 35 per cent.

The IPLC leased rentals are the charges paid for using the services of the international leased circuits. These were found to be higher in India than in many countries owing to lack of effective competition in the market.

Effectively, there are only three operators in India offering this service as against 14 in Korea, 24 in France and 32 in Germany and the US.

A senior Trai official said, 'The regulator found that it is essential to make this key input available to various economic and social activities at a competitive price because the market forces are not effective. It has also being given because the competitive advantage of the user industries can be enhanced in the global market."

The regulator also found that a competitively priced IPLC service is fundamental to achieving a higher rate of penetration of broadband in the country, which provides a basis for fundamentally transferring the socio-economic opportunities, particularly in rural India.

Trai had initiated a consultation process by issuing a consultation paper in the year 2004 in order to examine the possibility of regulating the IPLC market.

Trai officials said 'Worldwide there was decline of 45 per cent in the compounded annual growth rate in the IPLC rentals while the decline in India was only 10 per cent. It is apparent that this has been due to lack of competition in the Indian market requiring regulatory intervention."

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