ILD: Low-cost Entry Incentive

The acceptance of TRAI’s recommendations on international long distance (ILD)

by the government has paved the way for the entry of private players. With the

VSNL monopoly coming to an end on 1April 2002, things are beginning to

accelerate on the ILD front. It seems that the government is in a hurry to

declare the service providers for ILD services before the deadline. Cheers to

the government for sticking to the deadline on the ILD front, as one can expect

the guidelines to be out in a month’s time and thereafter, finalization of

service providers will take another month. So, before 1April 2002, it will be

clear how many companies are planning to jump into the ILD space.

The industry has welcomed TRAI recommendations, as the entry fee is Rs 25

crore–very low as compared to national domestic long distance (NLD) where the

entry fee is Rs 100 crore. Though this minimal entry fee will reduce the

valuation of VSNL in the short run, but in the long run it will aid in

developing the ILD infrastructure in the country. With the increase in the

number of players due to a nominal entry fee, we can see a drop in ISD cost,

thereby resulting in the expansion of ILD revenue.

Even access providers in the circles have an advantage of directly connecting

to the ILD service provider, which will aid in minimizing the infrastructure

resources and generating additional revenue for the access providers. Though NLD

operators will be hurt by direct connectivity of the access providers, the harm

would be marginal as most of the NLD operators will also be an ILD operator and

they also have the provision of setting up a single switch for both ILD and DLD

operations. This will result in lowering of the infrastructure cost if a service

provider was planning to set up one gateway for both ILD and DLD operations.

The low entry fee also opens new opportunities for Internet service providers

(ISPs) in the country, who are presently going through bad times. Large ISPs can

think of upgrading their ISP gateway and provide voice-based services based on

VoIP technology at a high cost and generate additional revenue for themselves.

Since the service provider has a mandate to set up only four gateways (one for

each region), they do not have to incur huge cost and even they can rollout the

service at a faster rate, as commissioning of gateways is a cumbersome process

since one has to take clearance from around the 19 bodies.

The policy is also helpful for the users, as they have the option to either

go for a PSTN quality voice on a scale of four or above, in terms of Mean

Opinion Score (MOS) or compromise with lower quality voice based on the VoIP

technology where MOS should not be lower than three. Since the user has opted

for the service, he cannot complain about the service till it meets the

quality-of-service requirements as prescribed by TRAI.

Since the recommendations of the TRAI are not going to touch on the

settlement rate between the ILDO and its foreign carriers, we might see a lot of

consortium between the Indian service providers and foreign carriers in the ILD

space. This will help foreign carriers to provide technology as well as market

support to the Indian service providers and one can see a very agressive ILD

field where companies will come out with innovative schemes to lure the Indian

consumers, to increase their pie and make their presence felt in the country.

Pravin Prashant, Voice&Data in New

Delhi