Corporate: Brandwidth - Waiting for the big flag-off

BRADWIDTH
Waiting For The Big Flag-Off

It's turned out to be a hard experience for the bandwidth provider so far. But the self-styled carrier's carrier isn't about to give up just yet.

By Suveen K. Sinha

Niraj Gupta is swearing. From his two-room office in Delhi's Surya Hotel, Flag Telecom's 47-year-old Director (South Asia), has been trying to reach an international destination on his mobile, but the local network has been busy these past two hours. ''Do you think anyone outside the country will believe this,'' he fumes. It isn't just the inability to reach somewhere that is behind Gupta's apparent frustration. There are deeper reasons.

Flag Telecom, a Bermuda-based self-styled 'independent carrier's carrier', boasts the longest under-sea optic fibre network in the world, connecting Japan to the United Kingdom, put up at a cost of $1.5 billion. And a tenth of this cost was incurred in landing this cable at Prabhadevi in Mumbai. Therein lies the source of Gupta's ire. Of the 10-gbps (10,000 mbps) bandwidth capacity of the cable-link landed in India, only the 1.5 per cent purchased by the Videsh Sanchar Nigam Limited (VSNL) is in use. The remaining 98.5 per cent is idle: VSNL isn't buying any more, and Flag and VSNL are locked in a battle over the issue of the former's rights to sell bandwidth to others (read: private ISPs).

Hopes at high-mast

In July, 1999, the Department of Telecommunications (DOT), announced broad guidelines for ISPs wishing to build (first-mile) gateways that link them to global bandwidth pipelines. However, with VSNL staking its claim to being the only company that could use (or resell) Flag's bandwidth, private ISPs had to take recourse to either leasing a line from VSNL or joining its Net port, which is not a dedicated link but a shared one.

It was only in June, 2000, that Telecom Commission Chairman Shyamal Ghosh announced-on the sidelines of a public meeting-that private ISPs could buy bandwidth directly from sources other than VSNL, including Flag, without disturbing the arrangement between VSNL and Flag. Flag finally had reason to cheer. Or so it thought. For, there were several factors that would work to its advantage.

One, optic fibre cable is preferred to satellite as a bandwidth-option for Net gateways. The time-lag associated with data-transfers through satellites can make a crucial difference in mission-critical operations. Optic-fibre offers the scope to enhance bandwidth capacity rather easily. And there is no satellite covering Asia and India at present with spare capacity.

Two, Flag and sea-me-we, are the only two global optic-fibre networks landing in India (although DSL Dishnet has also recently announced its plans to build and land a network). sea-me-we, however, lands at Kochi and will probably not do anything that would offend VSNL, which has invested Rs 184 crore in the network. Indeed, sea-me-we has not tried to sell bandwidth in the country yet.

Three, Flag's charges will be much lower than VSNL's. According to the ISP Association of India, the total cost of a two-mbps international private leased line from VSNL would set an ISPback by nearly Rs 2 crore.

In contrast, a similar connection from Flag will set the ISP back a mere Rs 44 lakh a year. Avers Amitabh Singhal, 38, Secretary, ISPAI: ''Dealing with Flag will spare an ISP the pain of dealing with VSNL's procedures.'' Seconds S. Rajagopalan, 60, Chairman and managing Director, MTNL: ''It makes plain economic sense to buy directly from Flag because their prices are much lower."

VSNL, for its part, points out that its response time in terms of clearing the applications of ISPs for bandwidth is excellent. Says Amitabh Kumar, 47, Director (Operations), VSNL: ''There is not a single ISP application pending with us.'' Kumar goes on to condemn Flag's cables as 'first generation' and ''uncompetitively priced'' and reveals that in a tender floated by VSNL to buy 155 mbps in Mumbai, Flag's quoted price is twice that quoted by the others.

Finally, the country's bandwidth requirement is slated to increase exponentially, and this will again work out in favour of a private bandwidth seller like Flag. According to Operation Bandwidth, a survey carried out by the National Association of Software and Service Companies (NASSCOM), India's bandwidth requirement will jump from five GBPs now to 10 GBPs by the end of this year, and to nearly 300 GBPs in 2005. Says Dewang Mehta, 36, President, NASSCOM: ''The increase in bandwidth will create a higher demand. The main demand is expected to come from b2b, b2c, communications, entertainment, residential video services, software exports, education, banking and financial sector.''

Hopes at half-mast

With so much in its favour, Flag could be forgiven for not being able to hide its joy. But it hadn't factored VSNL into its considerations. The genesis of the dispute dates back to 1997, the days of VSNL's monopoly over the Net gateways. In conformity with its global practice, Flag landed its submarine cable in Mumbai after it and VSNL had signed a construction and maintenance agreement. The landing site in Mumbai is a VSNL-owned building which was located suitably close to the coast. The necessary equipment, too, was provided by VSNL.

The agreement's clause 8.3 reads: ''Each of the landing party (in this case, VSNL) signatories shall make necessary equipment in its segment-T available to the founding signatory (Flag) on reasonable terms so as to enable the founding signatory to lease assignable capacity to international telecommunications entities.''

The dispute is over the interpretation of this clause. According to Flag, it can meet 'reasonable terms' by paying an access charge to VSNL, while dealing independently with 'international telecommunications entities' (read ISPs). VSNL's interpretation, however, is that the clause gives it exclusive rights to market, or re-sell, not only the 155 mbps purchased by it but also the remaining 10 GBPs, for the lifetime of the cables, which is 25 years. Says Kumar: ''We have an exclusive deal. Any capacity sold by Flag in India has to be through VSNL.''

That leaves Flag with two options: seek redressal through litigation, or construct a second landing point in India. The problems are as many as the options: Flag is wary of any long-drawn legal battles in India. And the cost of setting up a second landing point is enormous. ''It will cost about $200 million to construct a second landing station,'' says Gupta.

Nevertheless, Flag's governing board is holding its meeting in New Delhi on July 11. While Gupta calls it a ''routine board meeting'', BT learns that the company's directors will try to arrive at a solution by meeting with government officials. Meanwhile, not one of the 72 operational ISPs in the country has come around to setting up its own Net gateway. Even though the first lot of applications was cleared in February this year.

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