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TRAI recommends lower domestic bandwidth rates

Special Correspondent

Releases consultation paper to promote further competition


The telecom authority said it intervened because competition was not fully effective.

NEW DELHI: After lowering the rates for international circuits on March 11, the Telecom Regulatory Authority of India (TRAI) on Thursday turned its attention to domestic bandwidth by directing a three to 70 per cent downward revision for various capacities. The revision in the ceiling tariff for domestic leased circuit, which will take effect from May 1, is being done after six years and is expected to help in the spread of broadband and Internet. Operators are allowed to offer rates lower than the ceiling fixed by the TRAI.

The TRAI also released a consultation paper asking for suggestions to promote further competition in the bandwidth market.

The TRAI has fixed revised ceiling tariff for the most commonly used capacities and speeds — 64 kbps, 128 kbps, 256 kbps, E1 (speed of 2 Mega bits per second), DS-3 (speed of 45 Mega bits per second) and STM-1 (speed of 155 Mega bits per second). The biggest reduction in absolute terms takes place in the higher speeds of 45 and 155 mbps. The ceiling tariffs will be reviewed after a year.

Domestic leased circuit (DLC) or domestic bandwidth is the medium of carriage of data and voice services within the country. It is provided by a number of players, including basic phone and unified access service providers, national long distance companies and infrastructure service providers category II. The key users in India include Internet service providers (ISPs), informational technology (IT) and IT-enabled service enterprises, telecom service providers and corporate enterprises.

The telecom authority said it intervened because competition was not fully effective in the sector despite the presence of several players in the market and the reduction in costs due to rapid technological advances. Reductions were confined to selective routes and selective capacities. Another factor for stipulating fresh ceiling prices was that a competitively priced DLC service was fundamental to achieving a higher rate of penetration of broadband which had the potential to improve socio-economic opportunities, including in rural India. The TRAI has also said that discounts and ceiling tariffs when offered would be transparent and non-discriminatory based on laid down criteria and subject to reporting requirement.

`Bottom-up model'

In an attempt to prevent a backlash from the operators, the TRAI pointed out that the reduction would have been much more. But it deliberately adopted the `bottom-up model' instead of the `forward looking long run incremental cost', as is the international practice in order to prevent a `major shock' to the service providers.

It further recalled that the growth experienced in mobile telephony following the decline in tariffs. "It would be reasonable to expect that the same story would be repeated in the growth of broad band/Internet and other data and voice services that are crucially dependent upon domestic bandwidth," the TRAI noted.

`Below cost'

Bharat Sanchar Nigam Limited (BSNL) has said initial estimates show that the TRAI's fresh ceiling rates for domestic bandwidth were `below cost'. BSNL may forward its preliminary calculations to the TRAI along with a request to review the tariff.

At the same time the company said it was reviewing its tariff following the TRAI order which takes effect from May 1. In case the new ceiling rates are below cost, BSNL will be the biggest loser because it is the country's largest data service provider. The corporation manages a managed leased line network in over 200 cities. It also operates broadband services and offers a wide range of Intelligent network services in 578 urban centres. Its brand Sancharnet is also the biggest Internet service provider with 15 lakh subscribers.

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