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February 5, 1998

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'You cannot break monopolies for
the sake of itů I have no sympathy
for these ISP aspirants'

VSNL Chairman B K Syngal
Photo by Jewella Miranda
Videsh Sanchar Nigam Limited, India's gigantic overseas telecommunications corporation, is also the country's sole commercial Internet service provider.

Today the monolith stands isolated in a debate against dismantling monopolies, on the brink of a revolution which will usher in private operators in most sectors of the telecom industry.

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The country's ISP policy is complete and several private companies are readying to make their applications for the licence.

However, they will not be allowed to port with foreign companies directly and will have to mostly go through VSNL's gateway.

In turn, VSNL will have to give up its ISP business. Yet it has managed to swerve through the process in such a way that it can continue in the ISP business through a subsidiary.

VSNL has emerged badly scarred in the long-drawn battle since Internet access first became commercially available in the country over two years ago. Its biggest casualty has been PR, as the media blitz targeted not just the corporation's policies but also Chairman B K Syngal.

He took time off to clear the air and count the score in a rare interview with Vijay Shankar before plunging back into the battle for control of digital India. Excerpts:

What kinds of companies are likely to apply for the ISP licence?
I expect there will be only four to five large organisations entering the fray. As for the small ones, hundreds may apply. Most are likely to opt for the creamy areas (category A and B areas which are expected to be more profitable).

A business case will need to be built for the inclusion of the less popular service areas.

Do you see a migration of your current subscribers once the private businesses come in?
They will continue with us. A VSNL subsidiary for Internet services will be in place, probably by March or April.

The current email service providers have had to pay licence fees. But the ISP policy now has waived licence fee for the first five years of operation. If the old email service providers now opt to become ISPs, how would the fee issue be resolved?
The email people did not get their act together. They are supposed to be technology savvy and market smart. How come they did not see the future would be the Internet? Actually, they have no reason to complain at all. They are being noticed only because of their decibel power. Their case has no merit at all. Even VSNL has paid a licence fee just as they have.

ISPs are to be given a free hand to fix charges. The policy is clear -- that tariff should be left to market forces. Yet profitability would depend on the porting charge the ISPs would have to pay for your gateway?
Costs have been falling in direct proportion to the port costs. In the last two years costs have dropped 30 per cent. VSNL is taking all the risks of keeping the gateway and yet it has never tried to profit on porting charges right from day one. The risk in terms of managing to sell the bandwidth is taken by VSNL alone.

We don't distribute only on utilisation basis but cover capacity about three times. First the capacity required for reaching about 2.5 million subscribers and the framework for it is assessed. Then a gradual infrastructure upgrade is planned.

Although there is a slight slowdown owing to undercapacity we are taking the necessary steps to build infrastructure to tackle the problem. I am sure that VSNL is moving in the right direction.

Also, unlike in the US, we cannot oversell capacity in the ratios of 1:10. There is not enough demand. We should be able to make only 1:3. We cannot copy everything from America. There is no Chapter 11 here!

The NAP (network access point) to which VSNL is porting is located in the USA. Would it not reduce costs if the negotiators had insisted that the NAP be situated on Indian soil?
No. It would make no difference in terms of costs. Even if the NAP were based here we would have to establish links with overseas servers.

Now VSNL can itself function as a NAP for neighbouring countries. As for costs, we are constantly evaluating opportunities and negotiating with our provider for lowering costs.

The arrangement with MCI is negotiable at any time and changes will depend on competitive offers. It is a misinformation spread by a few people here that porting costs are not being watched.

The people who criticise (AT&T) have themselves paid the same as VSNL for their porting arrangement. They have no business to be talking about our negotiating abilities.

This talk of monopoly is only the talk of certain vested interests and the multinationals.

Our books are always open. We have already brought charges down from $ 36,000 to $ 20,000 a month for a 2MB pipe. With continuing negotiations, we expect this to come down to the range of $ 5,000 to $ 10,000 a month by next year or so. But there is little possibility of going below that range.

There's been a lot of criticism from the private sector about VSNL's monopoly in the Internet service business.
It must be clearly understood what it takes to provide services. You cannot aim at breaking monopolies just for the sake of it. Some of the private companies in the field of teleservices are only interested in monopoly bashing and have no commitment whatsoever towards consumer service.

These (private companies) have raised much capital through public issues, yet what services have they offered? Where have they invested the money they have raised? These questions must be asked.

I have no sympathy for these ISP aspirants. They are only crying hoarse for more and more (concessions). They have no merit in their case. When they attack VSNL it is mostly by misleading the public through the press and other media that they have a hold over.

They are depending on their lobbying power more than merit. Consumers can be taken for a ride if they are not better informed.

I have no sympathies for consumers who fall for misleading propaganda and pretend to be better informed.

Monopolies all over the world have been broken down only over the last few years. In my opinion, the time is not yet ripe for that to happen in India.

Given the same freedom that a private company enjoys, VSNL can surely perform better.

VSNL has recently talked of getting into Web telephony. Doesn't this fly in the face of the ISP policy which specifically says voice telephony on the Internet is forbidden?
Yes. We are carrying out pilot studies for this. We are on just grounds in getting into Web telephony as we are using the Internet as a technology for providing consumers with better services at a lower cost.

We have the mandate to provide telephony. This must not be confused with the use of the Internet PC for telephony, which is not being allowed.

The ISP policy of restricting the use of Web telephony is quite reasonable and does not in anyway contradict our policy of achieving bandwidth efficiency for providing better service.

Have we not moved from the analogue to the digital in television? It is merely adoption of a technology. There is no case for objecting to the VSNL plans. Right now we are only experimenting.

How profitable has VSNL's Internet business been?
If you look at the retail connections we are in fact losing marginally. But in the 64kbps leased line business there are some margins, though not substantial. Our pricing has been fairly promotional in nature.

But once the media costs come down to about $ 5,000 per metre for 2mbps things should improve a lot. We always pass on the benefits from lower porting charges to consumers. We are also getting some good deals from British Telecom.

I think it is time for the lobbies that are making so much noise against VSNL to consider having their Web servers here instead of the US. This will improve the balance between inflow and outflow of traffic.

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