Monday, January 1, 2001		Article

Strong-arm tactics by VSNL
by Naveen S. Garewal

Videsh Sanchar Nigam Limited (VSNL), believed to be India’s answer to the US giants like AT&T, MCI etc, has in the past two years grown from strength to strength. Indeed therefore, VSNL seems more like a highly successful corporate rather than a government entity.

Well, not anymore going by available indications. Recent developments at VSNL have only highlighted that being the torchbearer of Indian IT does not prevent it from taking highly arbitrary and controversial decisions.

As the primary Internet bandwidth provider in India, VSNL provides ISPs and leased lined customers with bandwidth. The charges range from around 4.25 lakh for a 64 kbps leased line for corporate customers to around Rs. 35 lakh for 2 mb leased line for ISPs.

To obtain a leased line, one has to hire a local lead (wire) from the telephone department from the nearest VSNL node to premises where the line is required. VSNL, in turn, sends an invoice requesting payment. Advance payments for a three-month period have then to be made.

In October, VSNL took a decision to alter the payment mode. It was decided that instead of a three-months advance charge, the subscribers would have to pay for two quarters in advance. VSNL, accordingly, informed all its subscribers that henceforth they would have to pay for two quarters in advance instead of one quarter. In addition, VSNL also announced a 20 per cent additional annual charge — called rolling deposit that VSNL would itself retain.

So anyone getting an annual bill of say Rs 100 had to pay Rs. 25 every three months. But under this new payment policy, Rs. 50 has to be paid in advance as charges for two quarters and an additional Rs. 20 as the rolling deposit — making a total deposit of Rs 70 to be coughed up in advance.

Again, VSNL announced that it was slashing the Internet bandwidth prices by almost 75 per cent. A number of persons in northern India thought that despite an unreasonable hike, they would be able to balance out the payments due to reduced tariff plan.

However, a caveat was soon added to this new announcement. The new pricing, VSNL said, was only applicable to bandwidth given out in Mumbai and Cochin by VSNL. All those located in places other than these two cities would not only have to continue paying old rates, but would also have to make payments to the extent of 70 per cent of their annual bills in advance.

This means that an ISP in Mumbai were to pay VSNL Rs 25 for a service, another ISP, in say, Chandigarh would have to pay Rs. 100 for the same service. Therefore, an ISP in Mumbai would effectively be able to offer prices at one-fourth of the price that a Chandigarh-based ISP could offer.

In Chandigarh, SAS Nagar-based Punjab Communcations Limited (Puncom) is the authorised agent of VSNL. They have been providing bandwidth for a long time now to the ISPs and corporates in this region for which VSNL has been directly issuing the invoices. Now all of a sudden, it actually makes better financial sense to buy the bandwidth from VSNL Mumbai and port all the way to Chandigarh on a leased line hired from the telephone department. But since the maintenance of this link is going to be a logistical nightmare — a fact that VSNL knows and is banking upon — the ISPs and corporates in the region have no choice but to bow to VSNL’s arbitrary dictates.

It is not just the corporates or the ISPs would be at the receiving end but all government departments, media organisations, software developers in northern India would have to work out budgets for the entire year in advance.

Software developers in the Information Technology (IT) park at SAS-Nagar feel that this step of the VSNL would prove to be a big deterrent for IT industry wanting to set-up shops in the region.