VSNL, Reliance bury bandwidth hatchet

Videsh Sanchar Nigam Ltd (VSNL) has extended an olive branch to the Reliance group-owned Flag Telecom, hoping to end the ongoing rivalry between the two companies.

The Tata group company, in a letter on July 27, 2005, to the Telecom Regulatory Authority of India (Trai), said the companies had amicably settled the bandwidth issue.

Reliance Infocomm and VSNL were on a war path, with the former stating that the Tata group company was restricting access on its Flag Europe Asia (FEA) cable, resulting in an artificial rise in bandwidth prices. On the other hand, VSNL had accused Reliance of overselling bandwidth on the cable system and creating a bandwidth shortage.

In a letter dated July 12, 2005, Reliance Infocomm had also accused VSNL of possessing "virtual monopoly" in submarine cable landing segment and had sought Trai to "adopt a ex-ante regulatory approach".

Reliance had acquired Flag Telecom, which has a landing station in Mumbai, on October 16, 2003. Incidentally, Flag's landing station in Mumbai is controlled by its arch rival VSNL, under a construction and maintenance agreement signed earlier. VSNL in its letter to Trai, a copy of which is in possession of Business Standard, states that the issue was settled as early as May 4, 2004.

"Flag Telecom and VSNL had settled their differences amicably on the issue of access for existing capacity under the C&MA for sale on the Flag Europe Asia (FEA) cable system," the letter said.

This was a commercial dispute and was resolved to the satisfaction of both the parties, and there is hardly any evidence of undue competition in the submarine cable system in India.

It also said that there was no need for Trai to adopt to burdensome regulations governing access and pricing. The resolution of the dispute also points to the fair and reasonable approach of Indian carriers in dealing potential disputes related to submarine cable systems.