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March 13, 1999


Slash, slash, backslash! VSNL has cut dial-up rates. Again. By 20%. But nearest rival MTNL is not reacting.

Priya Ganapati

For every action there is an equal and opposite reaction. Right? Wrong.

The Videsh Sanchar Nigam Limited's announcement late last night that it has slashed its Internet access rates by 20 per cent has not been met by a similar offer from archrival Mahanagar Telephone Nigam Limited.

Email this story to a friend. Right away, the VSNL price cut is good news for most of the country's online community that is still largely on VSNL accounts.

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Yet, the lack of a competitive response from MTNL or other big ISPs like Satyam Online is quite a no-show for most people who are eager to see a price war spark an explosive growth of the Internet in the country.

Even the VSNL price cut of 20 per cent for its dial-up TCP/IP accounts is only for those renewing existing accounts.

Actually, this renewals-only discount looks like a clever ploy to retain existing subscriber strength of about 220,000.

VSNL, which had the government's monopoly market until recently, caught the wave of early technological adopters and the few that followed it.

Now that the market has been opened to competition from the private sectors, start-up ISPs like MTNL and Satyam Online have the task of inventing a new market if VSNL subscribers don't wander their way.

And why not? Most industry watchers were actually expecting an exodus of VSNL subscribers to the shiny new ISPs, promising better services.

Now, in one stroke, VSNL has put a hedge against that erosion. The Indian market is extremely price sensitive and it would be difficult for existing VSNL subscribers to choose between the devil and an unknown devil that charges 20 per cent more.

The obvious way out for the newbie ISPs would be to match VSNL, paisa for paisa. But they surely, don't seem to agree.

When Rediff reached MTNL and Satyam Online, both declared that they do not immediately plan to cut access rates.

MTNL General Manager, Marketing, K J Chacko claims "We may also have some strategies but we have nothing to announce now. But both of us (VSNL and MTNL) are government companies and it does not have to be an action-reaction kind of thing."

But whatever, veiled strategies Chacko may be alluding to, he confirmed with Rediff that MTNL is unlikely to change tariff rates for another two to three months!

He, however, pointed out that VSNL's new tariff card is only for renewals. "MTNL is yet to announce its renewal rates. We have just started a month back. We can think about tariff for renewal of account but any announcement will be only after one or two months."

Chacko repeatedly emphasised that any move on part of MTNL should not be viewed as war between the two.

Chacko reminds "We (VSNL and MTNL) are both partly owned by the government. So, it is not necessary that because they have dropped their rates we have to do the same thing. We will do it only if the market dynamics demands it."

Never mind  the fact that MTNL Chairman and Managing Director S Rajagopalan does not tire of telling reporters that his government owned company should be viewed and treated like a private company, because except for the government's investment in it, MTNL is no different.

A senior Satyam Online executive told Rediff that as of now Satyam also does not have any plans to prune its tariff card to match that of VSNL or MTNL.

"I don't see a drop in prices right now. It is possible, though it may take place about two months later," the executive said.

"The problem is we have to depend on MTNL and VSNL for all set-up like bandwidth and gateway. We are stuck with both these agencies. They are our service providers and unless there is a reduction in the price we pay for their services, I don't think we can reduce prices. We are already in a corner and this slash in rates has only pushed us more into it," he complained.

But according to VSNL's acting chairman and managing director, Amitabh Kumar, the discount in account renewal rates is a step towards VSNL's commitment to provide cost-effective and high-quality Internet services.

While applauding, VSNL's initiative towards better and cheaper Internet access, a technology savvy businessman commented that the real assurance of quality could come only with cut-throat competition among ISPs.

Videsh Sanchar Nigam Limited
. Plan PSTN dial-up ISDN dial-up Leased line port
64 KBPS 128 KBPS 64 KBPS
TCP/IP plan 100 hrs Rs 3,000
(First-time rate)
Rs 2,400
(Renewal rate)
Rs 5,500 Rs 11,500 Rs 800,000
per annum
250 hrs Rs 6,500
(First-time rate)
Rs 5,200
(Renewal rate)
Rs 11,500 Rs 25,000
500 hrs Rs 10,000
(First-time rate)
Rs 8,000
(Renewal rate)
Rs 19,000 Rs 38,000
Registration fee Rs 500 Rs 5,000 Rs 20,000

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