 | Issue: | India 2013 |
| Article no.: | 8 | |
| Topic: | International long-distance in India | |
| Author: | Chandan Ghosh | |
| Title: | Head-Global Wholesale & Carrier Business | |
| Organisation: | Aircel, India | |
| PDF size: | 217KB |
About author
Chandan Ghosh is the Head-Global Wholesale & Carrier Business for Aircel, India; he has 20 years of experience in the telecommunications sector. Prior to Aircel, Mr Ghosh worked with Bharti Airtel Limited to start the first International Long Distance Business of India. Previously, he served at British Telecom as Director South Asia on the International Carrier Business, Mr Ghosh also worked for Aircel Limited/ Maxis Group of Malaysia, AT&T, and Global Tele-Systems Limited.
Chandan Ghosh holds an Electrical Engineering degree from Bombay University.
Chandan Ghosh is the Head-Global Wholesale & Carrier Business for Aircel, India; he has 20 years of experience in the telecommunications sector. Prior to Aircel, Mr Ghosh worked with Bharti Airtel Limited to start the first International Long Distance Business of India. Previously, he served at British Telecom as Director South Asia on the International Carrier Business, Mr Ghosh also worked for Aircel Limited/ Maxis Group of Malaysia, AT&T, and Global Tele-Systems Limited.
Chandan Ghosh holds an Electrical Engineering degree from Bombay University.
Article abstract
The international long distance carrier business in India has changed dramatically since the government ended their monopoly. The licensing of private international long distance operators, and the liberalisation of India’s arcane international charges, set the stage for inexpensive international calling. Initially, there was little difference in the prices – partly because of the prices charged by VSNL for capacity – but with time, better technology and fierce competition from VoIP operators like Skype and Vonage and calling card companies, prices dropped dramatically.
Full Article
About 15 years ago, the international carrier business was a good business to be in, it was a business meant for relationship management at the highest levels, deals were concluded at dinner tables over bottles and bottles of wines and great meals, deals were never smaller than millions of dollars, when a million was still a big number! The telecommunication industry was an elite club to be in, but the international carrier business was even more coveted and super elite – a billionaire’s club!
International telecommunication, what we call today wholesale long distance or carrier business, has come a long way from the old monopolistic regime to a complete transformation of this business in India.
The international long distance (ILD) service was the monopoly under the Government owned company Videsh Sanchar Nigam Limited (VSNL) until 2002, when the government ended the monopoly and issued licenses to operate the international long distance business and allowed private telecom companies to build their infrastructure and start their own international long distance operations (ILDO).
Prior to the liberalisation of ILD operations the termination of incoming voice traffic into India was available only via the VSNL monopoly; this was also true of all (international direct dialling) IDD / ISD (international subscriber dial as IDD is known in India). Until then, international calling was possible only via VSNL’s Overseas Communication Services (OCS). The minimum calling charges for individual customers was INR 75 per minute (about US$ 2 / min).
Immediately after the launch of the ILDOs the TRAI (Telephone Regulatory Authority of India) reduced the lowest IDD calling charges by 67 per cent. In those days, the tariffs were so complicated, that unless one was an accountant there was no way to calculate the charges for a call.
There were several reasons that the India Government and the Department of Telecommunication kept calling charges high, especially the need to limit the free flow of foreign currency and support the balance of trade statistics.
Prior to 2002 the settlements between an VSNL and a foreign international carrier was calculated using the official ‘TAR’ (total accounting rate) which was settled in various currencies, such as SDR, Gold Franks, USD, GBP. The settlements process was extremely complicated, and it was setup in such a way that payments by carriers in other countries to India exceed the payments that India had to make to foreign carriers. As a result, millions of dollars flowed into India’s coffers each and every month.
Other factors and commercial arrangements also existed in those days such as Symmetric / Asymmetric Settlement Rates; this meant the TAR settlement rate division could be 50:50 or disproportionate. ‘Parallel accounting’ assured all competitors from the same country paid the same rates.
Interconnections were established on a bilateral basis; this meant that the carriers in each country had to each agree to contribute 50 per cent of the cable capacity needed to handle the bilateral voice traffic volumes. If there were any additional capital or operational expenses, these too had to be shared equally. These the terms were such that only large international incumbent carriers in each country could establish bilateral interconnections with VSNL.
Bharti Telesonic Limited was one of the first ILD licensees to commence ILD Operations; they started their operations in July 2002. About the same time, Data Access also commenced its ILD services; Data Access was the most aggressive amongst all ILDO. Reliance was the other ILDO. India had four ILDOs in 2002 – 2003 and the competition was intense.
Before the liberalisation of the ILD licenses, settlement rate for terminating incoming international calls with VSNL the monopoly carrier was about US$ 0.24/ min. Upon liberalisation, the new challengers decided to charge between US$ 0.22 to US$ 0.21 / min. However, within a month after operations began, the rates came down to US$ 0.18 / min and by October 2002 the rates were broken down for cities, mobile and rest of India; the lowest termination rates were about US$ 0.12 / min.
The power of liberalisation and free market economics took its toll on business termination rates they plummeted to less than 50 per cent of their original level within six months of liberalisation. However, licensed competition was not the only cause of these severe price drops; grey market operators also offered international termination of foreign carriers at half the cost. Since no support was forthcoming to erase these operators, this put immense pressure on licensed ILDOs. The margins and the volumes were so large, and the returns so extremely lucrative, that hardened criminals, with the help of influential people, began to operate grey market networks.
These were not the only problems that the new carriers were battling; most of them had no international traffic capacity except what they could get from VSNL. VSNL’s rate, though, for two MB of capacity was more than the revenues a new carrier could earn by filling it with traffic. However, Bharti had the i2i cable between Chennai and Singapore, so it interconnected on a ‘meet me in Singapore’ model. Reliance acquired FLAG, a cable company, and had access to a few PoPs (points of presence) across the globe, so it could invite its customers to ‘meet’ at their PoPs. Data access was completely satellite dependent and established PoPs in London and New York aggregated traffic at their PoPs and used compressed satellite capacity to backhaul the traffic to India.
The Indian carrier companies did not have their own presence in the various carrier hotels (carrier hotels are facilities where all carriers have capacity landings and have a meeting points; they also have data centres where a carrier can host such equipment as switches, compression equipment and the like).
Hence every new Indian carrier, having just recently started its services, had to grapple with high costs and unknown network elements to complete their interconnections. Even the compression equipment was expensive. But they learned fast! The problems were slowly but surely addressed and the business started to become stable.
The big break took place in 2003 around July, when TRAI abolished the RPP (receiving party pays) policy for mobile phones. This was a game changer, until this point, mobile users were very selective about receiving calls, and they would keep calls short and the conversation crisp. After abolishing RPP for mobile users, incoming traffic jumped by more than 100 per cent; this was a big boon to the ILD industry.
Over the years, the price of calls kept dropping, as technology and capacity became more efficient and less expensive. Consumer life styles have changed and this has affected calling and communication behaviour in India. India’s rising standard of living is rising and the number of calls from India to other countries has also increased. There was a time that an Indian with relatives living abroad would only speak with them when their relatives called. Now, many Indian residents can afford to call abroad at their own expense. One needs to look at how this has happened.
The first to take steps were the ‘calling card’ companies operated by non-incumbents operators who brought reduced rate international calling to migrant labour and instituted community calling at economical rates. One of the world leaders in this game was IDT, but for Indian callers, it was Reliance. Reliance’s ‘Call Home’ service in the USA offered record-breaking low prices for call to India. The calling cards used Intelligent Network (IN) Technology [ITU-T Q.1200 series recommendations].
Voice over Internet Protocol (VoIP) was one of the biggest contributors to the economical calling revolution. Starting in 2005 –2006, VoIP technology evolved and high-level compression and other quality improvements made carrier business more efficient. This, and competition from service providers like Skype and Vonage accelerated the tendency towards lower prices.
Now with the smart phones and mobile diallers resident on smart phones, a growing number of calls are completed over IP (Internet Protocol) networks as voice packets without using traditional carrier networks. Over the past few years, about 50 to 70 per cent of traditional network traffic has migrated to the Internet using VoIP. This tendency to migrate to IP will accelerate throughout the world as the availability of low-cost smart phones grows.
The future has arrived and we have embraced it! Telecommunications will run on the Internet; the challenge is to provide Internet access for all.
