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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