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Internet tariff wars re-ignite - Views on News from Equitymaster
 
 
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  • Dec 7, 1999

    Internet tariff wars re-ignite

    Internet service providers' (ISP) majors - Mahanagar Telephone Nigam Ltd. (MTNL) and Videsh Sanchar Nigam Ltd. (VSNL) have slashed Internet tariff rates by 15% in a bid to sustain market share.

    Government-owned VSNL is India's monopoly provider of international voice telephony and the largest ISP in the country. As at October 31, 1999, it had over 300,000 Internet subscriptions.

    MTNL, also government-owned, provides Internet access to Bombay and Delhi. By October-end, it had a subscriber base of 15,000.

    In a recent move, MTNL had slashed tariffs by 15% in an attempt to wrest some market share from VSNL. Now VSNL has responded in kind by cutting tariffs by 15%, with the result that both companies are offering services at more or less the same rate.

    News reports reveal that this round of tariff cuts were prompted by Dishnet's (a Sterling group company) launch of ISP services at rates below those of MTNL and VSNL.

    However, not all ISPs have participated in this bout of tariff cuts. Players like Satyam Info and Bharti BT have yet to respond to the MTNL/VSNL salvo, and will be under some pressure to lower tariffs if they wish to protect their turf.

    The ISP market has now become a pure volume business, with companies compromising on margins to push subscriptions. VSNL, with its infrastructure and higher subscriptions is best placed to compete in this regard. For a government-owned company, it has responded quickly to tariff cuts by competitors. Other players will be forced to re-align their tariffs in line with VSNL/MTNL.

    Internet awareness is catching on fast in the country. This is more discernible in corporates, who are being driven by the lure of e-commerce. That is not to say that individuals are ignoring the potential of the Internet. ISPs will have to well-defined strategies in place if they wish to corner a significant portion of fresh subscriptions. While price may be one criterion, efficient service is another area that will need to be addressed.

     

     

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