HailStonE
Skilled
Found this article few days back but was quite busy to post it sooner..
Source : - What stops internet access from being cheaper - The Economic Times
Hard Landing
But what about India? In data provided by to the telecom regulator TRAI, state-owned BSNL pointed out that bandwidth charges for a 2,500 Mbps line have fallen dramatically in the past four years — they are now a fifth of what they were in 2008 (see The Cost of Access). So the 'first mile' costs for India have actually fallen sharply.
But it's another component of costs, paid by telecom operators, and internet service providers in the 'middle mile', which have proved controversial. In March this year, TRAI called for comments on a consultation paper it issued on costs paid by ISPs and telecom operators, for twelve cable landing stations, located at different parts in the country (half of them in Mumbai), through which India connects with the rest of the world.
Such stations are the key points on the map through which submarine cables cross into the Indian mainland, and link up with the domestic telecom network. It is at such stations that domestic operators, who buy bandwidth on an international submarine cable, actually connect their systems to the cable.
Tata Communications and Bharti together have a 93% market share in the cable landing station 'market'. Tata Communications for instance, owns 5 cable landing stations, which together handle 56% of the total 'activated' capacity of bandwidth in the country. Bharti owns two stations, which together handle 37% of such bandwidth.
The key problem: the costs charged by cable landing station owners to other providers to connect to the global network, are high, haven't changed in years, and now account for a significant chunk of bandwidth costs. According to the same BSNL note submitted to TRAI, while bandwidth cost has fallen, access costs paid at cable landing stations to reach the global network in the first place, have remained unchanged in the last five years, and now account for 56% of bandwidth costs.
The comparison with similar charges in other countries are stark — such charges in Singapore are around $1,200-$3,875 per year. In India, such charges range from a low of $150,600 per year charged by RCom to connect to its Falcon cable in Mumbai (part of the FLAG network), to a high of $687,200 charged by Airtel to connect to the Europe India Gateway cable, also in Mumbai.
The costs to be paid are determined by TRAI taking into account the costs of cable station owners (it's effectively cost-plus pricing) and other operators have asked TRAI to actually set the rates of such access altogether. "The cable landing access costs should probably be market-based, but subject to a cap set by TRAI," feels the MNC executive, who has earlier been involved with efforts to set up a landing station.
However, current station owners themselves point out that entry is open - anyone with an international long distance licence is free to set up a landing station. Airtel, in its response to the TRAI paper, points out that stations are likely to increase to 16 in the next two years.
"We strongly believe that the current setup is enough to make the market competitive," says Ajay Chitkara, chief executive of global voice and data at Airtel. "There is no need for a system of regulated pricing." He says such charges are about 5-13% of the end-to-end price of bandwidth.
Perhaps the next big wave of innovation in telecom markets will move from the retail end to the wholesale end, pushing bandwidth costs down even further.
Source : - What stops internet access from being cheaper - The Economic Times
