Vsat May Lose Out To Leased Lines

The domestic satellite-based very small aperture terminal (VSAT) data industry is likely to come under pressure with the proposed reduction in leased line rental charges proposed by the Telecom Regulatory Authority of India (TRAI). The regulator on Wednesday proposed a 60-80 per cent revision in leased line charges.

Both VSATs and leased circuits are used for data connection applications by users with bulk data connectivity requirements. Although not `perfect substitutes' for each other, leased circuit charges have a demostrative effect on VSAT charges.

In a consultation paper on telecom pricing, TRAI has proposed to roll back the rental charge for a 2 mega bits per second leased lines longer than 1,000 km from Rs 53.70 lakh for a circuit to Rs 21 lakh.

 

The department of telecommunications (DoT), currently prescribes a Rs 2,687 per km rate over the 1,000 km band for the 2 mbps circuit, subject to a maximum of Rs 67.18 lakh. The regulator has also proposed to scale-down the rental for a 64 kbps circuit from Rs 11.25 lakh to Rs 92,500.

In comparison, VSAT operators charge Rs 2-3 lakh for a TDMA (time division multiple access, a technology which supports data connectivity)-based circuit, while a DAMA (demand assigned multiple access, which enables both data and voice applications) solution costs some Rs 10-12 lakh. Additionally, an annual licence fee of Rs 50,000 per terminal is levied by DoT on VSATs.

Besides, users with bulk data connectivity requirements whose needs cannot be met with just a 64 kbps circuit, are likely to opt for higher capacity leased circuit. VSAT operators are not allowed to offer circuits with capacity more than 64 kbps, while there is no such restriction on terrestrial leased lines of higher capacity.

VSAT industry sources yesterday sought to downplay the immediate impact of a proposed reduction in leased line rental charges, but admitted that in the long term, it could drive down prices. Said a top executive of a VSAT company: "We don't feel the users of VSATs pick them up because the leased line rentals are high. The applications differ. They do because leased lines are of poor quality and there is a paucity of such circuits."

Leased line circuits are currently available only in few cities in the country, according to VSAT industry sources. Even when they are available locally, they said, there are not enough circuits available to service clients.

Fortunately for VSAT operators, the charges for ISDN (integrated service digital network) services have not been brought down significantly. Such lines can be used for low rates of data connectivity.

The proposals, if implemented, will greatly help corporates like software companies and consumer goods majors with leased line-based networks linking their distributors.