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International long-distance in India
International long-distance
by Chandan Ghosh, Head-Global Wholesale & Carrier Business, Aircel, India
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 Indias 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
erce competition from VoIP operators like Skype and Vonage and calling card companies,
prices dropped dramatically.
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 rst 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.
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
billionaires 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 completetransformation 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 trafc
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 isknown in India). Until then, international
calling was possible only via VSNLs
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 ow offoreign currency and support the balance of
trade statistics.
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International long-distance
Prior to 2002 the settlements between an
VSNL and a foreign international carrier
was calculated using the ofcial 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 owed into Indias 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 thesame 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 trafc 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 rst
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 sixmonths 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
inuential 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 trafc capacity except what
they could get from VSNL. VSNLs rate,
though, for two MB of capacity was more
than the revenues a new carrier could earn by
lling it with trafc. However, Bharti had the
i2i cable between Chennai and Singapore, soit 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 trafc at their PoPs
and used compressed satellite capacity to
backhaul the trafc to India.
The Indian carrier companies did not have
their own presence in the various carrier
hotels (carrier hotels are facilities whereall 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 trafc jumped by
more than 100 per cent; this was a big boon
to the ILD industry.
Over the years, the price of calls keptdropping, as technology and capacity became
more efcient and less expensive. Consumer
life styles have changed and this has affected
calling and communication behaviour in
India. Indias rising standard of living is
rising and the number of calls from India to
other countries has also increased. There wasa 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 rst 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 wasReliance. Reliances 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 efcient. This,
and competition from service providers like
Skype and Vonage accelerated the tendencytowards lower prices.
Now with the smart phones and mobile
diallers resident on smart phones, a growing
number of calls are completed over IP
(InternetProtocol) networks as voice packets
without using traditional carrier networks.
Over the past few years, about 50 to 70
per cent of traditional network trafc 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. l