Net Fees Slashed by Indian ISP Rivals

The ongoing price war between leading Indian ISPs ratcheted up as Dishnet
Ltd. slashed their rates to Rs 600 (US$13.95)
per month for unlimited access.

The rate cut is in response to
the competing Rs 1000 (US$23.25) rate announced last month by MTNL (Mahanagar Telephone Nigam Ltd.).

Market leader VSNL (Videsh Sanchar Nigam Ltd) recently announced a 15 percent cut to take on the
monopolistic basic service provider MTNL on its strongholds of Mumbai and
Delhi.

Other leading players like Satyam Infoway and Mantra
Online are reportedly reassessing their new tariff plans.

The ongoing price war among top Indian ISPs demonstrates the benefits of competition for consumers, and analysts feel that the firms may be trying to cross-subsidize their services by charging high
rates for telephone access to compensate for cheaper Internet access.

VSNL officials criticized MTNL for cutting net rates. VSNL’s director of operations Amitabh Kumar felt that MTNL’s undercutting might lead to an imbalance in competition.

“Unlimited Internet access [offered by MTNL] at Rs 6,000 (US$139.50) a year is not sustainable for
ISPs without a cross-subsidization between dial-up and Internet charges”, claimed
Amitabh.

However, Dishnet’s new lower prices may prompt MTNL and VSNL to further trim their rates. Industry analysts said the Dishnet cut was a welcome move in making
available cheaper Internet access. “This shows that private access
providers are aggressive enough to take on MTNL on its home turf” said Net analyst VR
Shailaja.

“It is worth noting that the drastic fall in rates began when the Internet sector
was thrown open to private companies. The resultant competition has forced
down consumer prices”, Shailaja added.

While VSNL remains by far the leading ISP with a subscriber base of over
325,000 users, private ISPs like Satyam (120,000) and Bharti BT (Mantra
Online)(55,000) are beginning to add market share.