Rediff On The Net, Infotech: VSNL asked to further reduce TAR


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July 29, 1998

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VSNL asked to further reduce TAR

Bowing to pressure from the international telecom community, the Department of Telecommunications has asked the Videsh Sanchar Nigam Limited, the state-owned international telecom monopoly, to further reduce telecom accounting rates.

The state-owned carrier is to start fresh negotiations with its foreign

T O D A Y

• Malayali backbone
• TAR trouble
• ESOP downer
• CMC Q1

counterparts on the issue soon.

Late in fiscal 1997-98, VSNL dropped its telecom accounting rates with non-US carriers from an average $1.7 (Rs 72.25) per minute to $1.4 -1.45 (Rs 59.50-61.63). The new rates, which translate into a drop between 12 and 20 per cent, came into effect on April 1.

TARs are rates negotiated between carriers for originating and terminating an international call and are, mostly, shared equally between them. For instance, if the TAR between VSNL and US carrier MCI is $1.30 a minute, the two carriers will share 65 cents for each minute of a call between India and the US.

DoT sources have said that the move is in agreement with its view that "telecom tariffs have to reflect the underlying costs of providing the service". Besides, they pointed out that there is pressure from US carriers to reduce TARs following the decision in March regarding non-US carriers.

In March, VSNL said it decided to drop TARs of the non-US carriers to prevent arbitrage between them and US carriers.

Typically, they explained, non-US telecom carriers in Germany, Australia and South America take advantage of the lower TARs that countries like India have with carriers in the US.

International telecom carriers - most vociferously, those from the US - have been lobbying for a reduction in TARs, which they feel are pegged artificially high, taking advantage of India's monopoly status in international long-distance telephony.

In August 1997, the Federal Communications Commission, the US telecom-and-electronic-media regulator, had published a set of benchmark accounting rates to be achieved by 2003.

The commission wanted international carriers to drop TARs from some $1.6 a minute to a minimum 30 cents. The US telecom watchdog felt that such high TARs significantly add to the high international telecom tariffs between India and the US.

- Compiled from the Indian media

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