‘Compared to other telecom services, I think our segment [Vsat] has done the best.’ – Shashi Ullal, President and MD , HECL

com-4.jpg (14240 bytes)“Compared to other telecom services, I think our
segment [Vsat] has done the best.”

–Shashi Ullal, President and MD

Shashi Ullal has been with Hughes Escorts Communication
Ltd since July 1995. Prior to his current assignment, Ullal has been with a string of
companies like Modi-Olivetti, Alcatel, Modi-Telstra, IBM and DCM Data Products. With 43
years of total experience, Ullal has spent around 40 years in the IT industry. He has also
served as the President of the VSAT Service Provider Association. Ullal spoke to DATAQUEST
about the various issues tacing the VSAT industry in the country. Excerpts:

Our target customer is
one who wants to have a WAN. It means that he has multiple locations and values up-to-date
information. He also wants to be an all India player. I feel there are millions of such
companies waiting to be tapped.

VSAT remains the best
medium available both in terms of cost and reliability. Though cost benefits are not
immediately visible but over a period of time, they do come out to be cheaper.

Having joined the industry in its
nascent stage, what changes do you see since then?

The industry has reached a certain level of maturity during the last 3-4 years. By
maturity I mean that the technology is working, the support level to customers is pretty
good and comparable to international standards. Moreover compared to other telecom
services, I think our segment has done the best. Look at the situation in the basic
telecom service. Some companies are stillborn, some are in dire straits and others are
still groping in darkness. Despite our problems I think we have done pretty well. I think
installation of about 6,500 VSATs in a matter of three-and-a-half years is pretty good,
given the constraints.

Why should a company choose VSATs over
other available media?

It remains the best medium available both in terms of cost and reliability. Though cost
benefits are not immediately visible but over a period of time, they do come out to be
cheaper. Also, it is a much more reliable and robust technology compared to others. Nobody
can give an uptime of 99.5-plus percent. I think it is an ideal technology for getting on
to new applications that are coming as a result of the internet revolution. Internet is
asymmetric traffic implying that queries can be of small kilobytes while download could be
in megabytes. Terrestrial technology does not discern between these two and so in the
query mode you waste a lot of bandwidth. Such wastage is eliminated by satellite
technologies like VSATs.

Moreover, the kind of research that is
being done on this medium is amazing. The effort is to transfer a lot of functions that
are being done on earth to the satellites. This translates into less investment on earth
and more functions to the sky. So a company need not choose it just because of reliability
but also keeping the future in mind.

Despite the advantages, VSATs are still
not very popular. What are the major problems being faced by the industry?

Like others in the telecom sector, we have our share of problems too. Some are the same as
in other telecom segments. Like the one-sided license conditions faced by all the
segments. Our licenses are titled as 64Kpbs domestic VSAT services. Our contention is why
only 64Kpbs and why the cap?

However the bigger problem for us, both in
the short and the long term, is the availability of transponders. The government has
created a new frequency called the extended C-band. We call it the ‘India band’.
In terms of frequency specification it only operates in India and nowhere in the world. So
the basic issue is what happens if something happens to this particular frequency. We will
be stuck. There is no compatible frequency available anywhere in the world on any other
satellite. Moreover, most of the players have already exhausted their bandwidth and are
asking the government for additional bandwidth. We don’t want it on the C-band as it
will have interference with DoT’s terrestrial networks. Our demand has been to allow
the usage of Ku-band, like the rest of the world.

Any government reactions so far?
Although this has been our long-standing demand, the government has finally given a
breather with some favorable announcements in the New Telecom Policy (NTP). It says that
users would be permitted to use foreign satellites after consultation with the Department
of Space. Moreover, the policy also says that we will be allowed to use the Ku-band. We
are still waiting for more details about the terms, rates and procedures.

How much will this translate in cost
reduction for VSAT users?

The extended C-band is India-specific and most of the equipment is imported. So a vendor
supplying the equipment has to do special engineering and refitting. Also, the software
has to be modified and hence the increase in cost. Now if the changes actually happen, I
think that users would see a cost reduction of about 20%. This is just a rough calculation
as we really do not know the actual impact. For all one knows the government might
increase the license and transponder charges to offset the equipment reduction. There are
still big question marks and the final calculation will be clear only once the finer
details are known.

What would be the implications of the
TRAI’s recent recommendation to cut leased line cost?

It would be very good. In a competitive environment I believe that the cost must come down
and therefore prices of inputs also need to come down. We have seen what happens in a
monopolistic environment like the airline and telecom sectors and the effect it has
generated after deregulation. It is usually a win-win situation for the industry and its

Of course, the reductions will impact our
industry. The SPEC technology that we are selling is basically a 64Kbps pipe in the air
against other medium on earth including leased lines. So the cost differentiation for
these is tremendous and the reduction in leased line rates only increases the gap. So if
price is the criteria for a particular medium then leased line would definitely score over
VSATs. However if a company wants reliability, I think the pipe up in the sky is much more
reliable with around 99.5-plus uptime. No earth medium provider can contractually offer
this kind of uptime.

However, we are not worried about it as we
believe that the cut in leased lines will also expand the market for WAN in the country.
Also 64Kpbs leased lines are not available everywhere in the country. If a company wants
to get into WAN other than the metros and few other cities then the natural choice would
be VSATs. I feel that it will be a mix of VSATs and leased lines. No doubt price is a very
important factor but it has to be tempered with reliability.

We think the move to reduce leased line
cost will see the growth of both the media not by cannibalizing each other’s
marketshare but by expanding the
market pie.

Shouldn’t the reduction in leased
lines cost have been in conjunction with the lowering of license and transponders fees?

We have requested for the same to TRAI. But they have said that it did not fall under
their purview as they are not the licensing authority. TRAI had assured it would be
recommended to the government but we are yet to hear from them or the government on this
issue. This comes under the wider licensing ambit of entry fees, revenue sharing and other

How will technologies like ISDN, FDDI
and others affect your industry?

They will surely affect in some way or the other but the point is that we will have to
co-exist with these technologies. Sooner or later we have to follow the world-wide trend
in which a company deploys more than one medium in designing the network. So it is not
mandatory that you have to use a particular medium to suit all your business needs and
applications. We are getting into an arena where we will have mixing and matching of
various media depending on the needs of users. I think we are moving in the right
direction. No doubt, there will be some problems faced by players in our industry but I
guess that is a part and parcel of living in a highly technological environment.

Will the removal of restriction on
Closed User Group (CUG) help the industry?

The CUG restriction had resulted in VSATs becoming a big companies domain. If this was
removed, it would broad-base the market. It would enable smaller players to deploy VSATS.
Moreover this is linked to the opening up of the long distance traffic. The government in
its NPT has said that this will open up by the year 2000 and TRAI is expected to make its
recommendations by mid August. If this were done, then we would automatically fall out of
the CUG definition.

Who is the industry targeting?
Our target customer is one who wants to have a WAN. It means that he has multiple
locations and values up-to-date information. He also wants to be an all India player. I
feel there are millions of such companies waiting to be tapped. I see the reduction in
tariffs of leased lines along with bandwidth availability go a long way in the
proliferation of VSATS in the country.

What other application areas are you

Recently, the Prime Minister announced that the government would be setting up ‘Vidya
Vahini’ in the country. This project will be mainly satellite-based. So distance
learning would be a great opportunity for us.

Another application area where we see huge
opportunities is the financial sector. We have already bagged one of the most prestigious
order in the country—Reserve Bank of India. The idea is to make the banking sector at
par with the rest of the world. But it will open a big market for the industry. Imagine a
node on each of the 60,000 commercial bank branches in the country. A logical extension
would be to integrate other companies in the financial sector and we are looking at a very
huge market.

The government’s recent announcement
of setting ‘Polnet’ to connect all the police stations in the country has opened
up huge opportunities for us. The stock exchange market is another very potent area which
we are looking at. Already, NSE is one of the largest deployer of VSATs in the country. If
the aim is to connect every nook and corner of the country to enable stock transactions
one can imagine the volumes we are looking at.

Rural telephony is another area which we
are looking at. Sooner or later basic services would have their infrastructure in place.
The government’s decision to have one telephone in every village will surely give a
great boost to the VSAT industry.

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