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The Videsh Sanchar Nigam Limited is likely to reduce its leased circuit charges by 25 to 30 per cent. This is a strategy decision aimed at picking up as much ISP traffic as possible before the new ISPs set up their own gateways to the Internet.

VSNL's monopoly over the ISP business was recently dismantled and private sector Internet service providers now have the choice to either route their traffic through VSNL's existing gateway or set up one of their own.

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Though setting up a gateway would be more attractive for an ISP, right now doing that would mean security clearance from the government. Besides modalities for the clearances are not completely in place. But industry sources believe that the wrinkles would be smoothened out within one year.

That is why it is no wonder that VSNL is bracing for the competition and may slash its leased circuit rates.

Already, Indian ISP aspirants have started receiving offers from international telecom carriers at rates that are significantly lower than VSNL's.

VSNL sources have been quoted as saying that rates for a 2 MBPS circuit would be brought down from Rs 7.2 million per year to Rs 5-5.4 million. A similar scale of reduction may apply to 64 KBPS circuits from Rs 800,000 per year to Rs 560,000-Rs 600,000 per year, they added.

Hutchison Telecom has agreed to set up gateways for as less as Rs 250-300 million for a national-level ISP aspirant.

Since this includes the cost of the hardware, the connectivity is priced significantly lower than the VSNL charges, it is explained.

However, in the initial 12-18 months, it is unlikely for many ISPs to set up their own gateways or lease circuits from international carriers. This is because the process involves security clearances from the government.

"The government is yet to come out with the guidelines for getting security approvals. It will take a year or so to happen," an ISP executive explains.

Since the late 1997, VSNL has increased its international leased circuit bandwidth from around 35 MBPS to 80 MBPS. It intends to further increase this to 125 MBPS next year, expecting a proliferation of ISPs in the country.

According to VSNL, in February it leased out three 8 MBPS circuits from MCI at a monthly rental of around $17,000 for each 2 MBPS link.

The country's largest Internet service provider with around 150,000 subscribers, VSNL is expanding its international Internet capacity to keep pace with the exploding demand for Internet services in the country. It has projected over 200,000 subscribers before the end of 1998-99.

Connectivity to international Internet backbones and 'network access points' is a crucial link in an ISP's architecture and determines to a large extent the speed of access to the Internet.

Since an overwhelming majority of Internet sites are in the US, ISPs in other parts of the world have to lease links to American backbones.

VSNL hopes to earn Rs 600 million in the current financial year by providing international connectivity to private Internet service providers, claims Amitabh Kumar, acting chairman and managing director.

Over 20 private ISPs have already filed applications with VSNL for a leased circuit. VSNL's strategy would be to attract as many private ISPs as possible as they would require huge capital expenditures to establish their own gateways, sources say.

This would allow VSNL to recoup investment made in the infrastructure.

- Compiled from the Indian media

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