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MTNL Triggers Off Indian ISP Price War

Mahanagar Telephone Nigam Ltd. (MTNL), the government-controlled telecom operator now offering Internet services in Delhi and Mumbai has set its tariff 15 per cent lower than that of Videsh Sanchar Nigam Ltd.(VSNL).

The move has triggered a price war in the ISP industry.

In order to attract corporate clients, MTNL is offering leased lines and ISDN dial up services at rates much lower than its competitors.

MTNL subscribers will pay Rs 2,550 (US$60.06) for 100 hours; Rs 5,525 US$130.14) for 250 hours and Rs 10,000 (US$235.56) for 500 hours.

VSNL on the other hand, charges Rs 3,000 (US$70.66), Rs 6,500 (US$153.11) and Rs 10,000 (US$235.56) respectively.

Similarly, MTNL will charge less incremental tariff of Rs 20 (US$0.47) per hour in a slab of 20 hours for additional time used against VSNL's fee of Rs 30 (US$0.70) per hour.

The tariffs are to be reviewed after three months and revisions are expected to be downward for eventually market conditions that dictate the tariff, MTNL officials said.

The public sector undertaking also expanded its projection of the Internet subscriber base from 5,000 to 25,000.

The revision was effected following good response for the service with 406 bookings being made on the first day itself.

By the end of the year, MTNL plans to serve 100,000 subscribers in each of the two cities.

The investment in Internet service infrastructure will also be correspondingly increased from Rs 4 crore (US$1 million) to Rs 20 crore (US$5 million), chairman and managing director S. Rajagopalan said.

He added that the company was planning to set up two Internet gateways and offer concessions to its phone subscribers who take Internet services.

Currently, VSNL and Satyam are the main rivals of MTNL. However, with many companies applying for an ISP licence in these two cities, competition is likely to gain momentum in the next few months.

Unlike VSNL, MTNL will not offer concessional tariff to students.

Also, the company has no plans to charge lower tariff for shell accounts.

VSNL charges students Rs 500 (US$11.77) for 500 hours of Internet use.

G D Gaiha, director (technical) of MTNL, feels that the Internet operations of the company will be able to break even in a year's time.

The company has allocated 480 ports each in Delhi and Mumbai to serve the initial 5,000 subscribers.

This means that the port-subscriber ratio is 10.5:1 which is comparable to international standards.

VSNL also maintains almost the same ratio for its TCP/IP services.

Rajagopalan pointed out that initially they would use the VSNL network, but once MTNL's own network commences, customers using a dial-up connection would no longer have to pay for the local call.

The new ISP policy allows private ISP's to set up their own network by either leasing transmission networks from other agencies like the railways and state electricity boards who already possess them or establish their own networks subject to the Department of Telecommunications (DoT) approval.

ISP's can also set up their own gateways and last-mile linkages (the telephone lines linking them to their subscribers) which makes them totally independent of VSNL.

However, the rush has just begun. The players--VSNL, Satyam Infoway, Global and even local players like Rolta - are already harping on providing content rather than mere connectivity.

Satyam Infoway, which launched its services earlier than MTNL, has stuck to the same tariff card as VSNL.

Fritz D'silva, CEO of Global Electronic Commerce Services Ltd is pretty upfront: "We are not in competition with VSNL, as we cannot go head-on with them."

VSNL already has a bandwidth of 80 mbps (megabits per second) and is pushing hard to expand it to 300 mbps.

The DoT will soon offer Internet services in locations where VSNL does not have a presence and is in the process of setting up a completely new connectivity grid to offer its own Internet service.