India readies for bandwidth boom

05 Feb 2007
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India's bandwidth market is expected to undergo a radical change because of government moves that have set the stage for open competition and expected price cuts. Some officials believe the country now is positioned to become the most bandwidth-competitive country in the world.

Since early 2006, the Telecom Regulatory Authority of India (TRAI) has been pushing for amendments to the international long distance licenses so that more operators could enter the market. In mid-December the Indian government accepted the recommendations for the re-sale of bandwidth, allowing other players to access the cable landing stations owned largely by VSNL/Tata as well as Bharti and Reliance, which have smaller operations.
'There will be a price reduction in the cost of bandwidth, which will not only help bandwidth-dependent companies like call centers, business process outsourcing [BPO] firms, telecom and media companies compete with the global majors, but also make India one of the most bandwidth-competitive countries in the world,' says Amitabh Singhal, CEO of Telxess Consulting Services, a telecom analyst firm based in New Delhi.

Current bandwidth prices are as much as five times higher than on some international routes, according to industry sources, who add that once the directive comes into force, bandwidth prices could drop by 20%-25%.

'This will enhance competition in international private leased circuits through the entry of resellers, who will be non-facility based operators,' TRAI chairman Nripendra Misra, said while lobbying the government for a more liberalized approach.

Bandwidth growth has been phenomenal in India, with the total installed bandwidth capacity in the range of 19-20 Tb and lit-up capacity in the range of 500-700 Gb.

Currently, three submarine cable companies - Tata group-owned VSNL, Reliance-owned Flag telecom and Bharti Tele-ventures - sell bandwidth in the country to Internet ISPs such as Sify, YouTelecom and Hathway.

However, with the opening of the sector and long-distance licenses granted, new operators will be able to act not just as ISPs but as telecom operators that independently utilize bandwidth. Players include US telecom giant AT&T, as well as government-owned Indian operators like MTNL, Power Grid Corp, RailTel Corp, and other firms such as HCL Infinet i2i Enterprises, Tulip IT Services and Sify.

International competition

Late last year AT&T became the first foreign telecom operator to secure a new telecom license under the Indian government's revised policy on foreign direct investment (FDI) allowing up to 74% foreign ownership. It now competes with Indian telcos in both domestic and international long distance, but it does not operate in the retail space, initially limiting itself to providing bandwidth to Indian subsidiaries of American multinational companies.

According to some industry sources, international players such as BT and Cable & Wireless are interested in entering the telecom market, potentially triggering new competition for Indian telcos. The companies are looking at providing MPLS, ATM, network integration and security services for enterprises.

Sanjiv Bhagat, CEO of AT&T Global Networks India, believes the ability to act independently will allow international service providers to improve customer service.

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