Submarine cables form the backbone of communication networks between countries across the world. In fact, the majority of international voice and data traffic flows through the undersea cable network while the remaining is routed through satellite networks, which were the preferred mode of transmission earlier. The shift towards submarine cables gained prominence with the exponential growth in internet and bandwidth-intensive data usage. In addition, there has been a continuous increase in the number of internet users, which has compelled telecom service providers to purchase more capacity on international submarine cables.

To this end, service providers have either entered into lease agreements with undersea cable owners or set up their own submarine cable to access international bandwidth. Several submarine cable owners have also set up their cable landing stations. Access to these cables has enabled service providers to offer bandwidth-intensive services such as video calling, IPTV and high speed broadband.

 Current status

India is connected to the rest of the world through 13 submarine cables, which terminate at 11 landing stations across the country. These cables are India-Middle East-Western Europe (I-ME-WE), i2i, the Bharat Lanka Cable System, the Europe India Gateway (EIG), FLAG Europe Asia, FALCON, Gulf Bridge International, South Africa-Far East (SAFE), the SEA Cable, South East Asia-Middle East-Western Europe-3 (SEA-ME-WE-3), South East Asia-Middle East-Western Europe-4 (SEA-ME-WE-4), TGN-EA and the Tata Indicom Cable. The combined capacity of these submarine cables is estimated to be over 35,000 Gbps. Of these cable networks, six are owned by consortiums while the remaining have been established by individual companies. Access to these submarine cables is provided to over 27 international long distance operators (ILDOs) and more than 170 internet service providers (ISPs) on a non-discriminatory basis. ILDOs and ISPs offer this bandwidth to end-users through their local backhaul networks.

For India, the upside of hosting several submarine cables has been the low risk of disconnection with the rest of the world. For instance, in March 2013, several countries in the Middle East and Asia witnessed disruption in internet services due to a cut in SEA-ME-WE-4, while others reported reduced international bandwidth. Meanwhile, the other two cables on the same route – I-ME-WE and EIG – were in maintenance mode, which aggravated the situation. However, as India is connected through several alternative routes, the impact of the cable cut was minimal on users. The majority of the internet and voice traffic was rerouted to the cables on the trans-Pacific route, which connect Southeast Asia with the US west coast. As a result, Indian service providers were able to avoid disconnection with global telecom networks.

Cost concerns

Despite the availability of significant international bandwidth, broadband penetration in India is low owing to high tariffs. ISPs and ILDOs say that tariffs are determined on the basis of several cost factors, of which access facilitation charges (AFC) account for a major part. These charges are paid by ILDOs and ISPs to cable landing station owners for accessing bandwidth from submarine cable networks.

ILDOs and ISPs contend that AFC and operations and maintenance charges have not reduced even though capacity utilisation at the cable landing stations has increased significantly in the past few years. They are of the view that AFC has not declined primarily because the Indian cable landing station market is highly concentrated and cable landing station owners allegedly operate in a cartelised manner.

Of the 11 cable landing stations, five are owned by Tata Communications, two each by Bharti Airtel and Reliance Communications (RCOM), and one each by Bharat Sanchar Nigam Limited (BSNL) and Sify Technologies. However, Bharti Airtel and Tata Communications control more than 93 per cent of the international communication traffic to India through their landing stations, and therefore, have a high pricing power. ILDOs and ISPs argue that the differential pricing mechanism adopted by cable landing station owners distorts market competition and precludes the provision of low-cost internet services. According to these players, regulated access charges will allow service providers to reduce broadband prices, which will drive internet usage in the country.

ILDOs and ISPs cite low access charges at cable landing stations in other Asian and European countries as a rationale for a reduction in these charges in India. They argue that 10 Gbps of capacity at the Marseille landing station in France and the Tuas landing station in Singapore is available for less than $7,500 per annum and less than $700 per annum respectively. As against this, Indian ILDOs and ISPs are required to pay $450,600 per annum and $628,100 per annum for accessing the same amount of bandwidth at the Chennai and Mumbai landing stations respectively, as per the Telecom Regulatory Authority of India’s  (TRAI) Consultation Paper on Access Facilitation Charges and Co-location Charges at Cable Landing Stations, 2012. The lowest charge for purchasing 10 Gbps of bandwidth at any landing station in India is $150,000 (at RCOM’s facility in Mumbai).

Meanwhile, major landing station owners like Tata Communications and Airtel have stated that establishing a landing station entails huge investments, which is evident from the decision of other ILDOs/ISPs to not set up such facilities. They, therefore, say that access charges should be market determined.

According to industry experts, a solution to resolve the issue would be to establish a government-owned landing station, access to which could be provided to all service providers at a nominal fee. This will not only encourage more foreign players to enter the Indian market, but would also help existing players to lease bandwidth at lower rates.

Facilitating broadband growth

In December 2012, TRAI reduced access charges to Rs 36,000 per unit capacity per annum for low capacity STM-1 and Rs 625,000 per unit capacity per annum for STM-64 (10 Gbps). The move is likely to facilitate growth in the segment as it will reduce the overall cost of international bandwidth. TRAI is of the view that lower charges will benefit end-users including BPOs/call centres, and small and medium enterprises. The implementation of this regulation has been put on hold by the Madras High Court following a petition filed by Bharti Airtel and Tata Communications. If cleared by the court, the regulation will pave the way for service providers to reduce broadband tariffs and international call rates.

Meanwhile, with the high price of cable access in the country, several service providers have set up or are likely to establish their own landing stations. For instance, Sify Technologies has established a landing station at Mumbai to host the Gulf Bridge International submarine cable system, which links India and Europe via the Gulf region. This will allow Sify to access international submarine cables directly through its stations without negotiating with incumbent landing station owners. Similarly, Reliance Jio Infocomm Limited may set up its own landing stations to host its submarine cable network, the Bay of Bengal Gateway, which is being built in collaboration with other international operators. The establishment of additional cable landing stations will drive competition and compel landing station owners to provide bandwidth access at low rates.

 Future outlook

With the rapid growth in the demand for data services, telecom service providers are increasingly setting up additional submarine networks that pass through India. Currently, five cable networks are being developed on the Southeast Asia-Europe route, which already hosts several international cables. These are the BRICS Cable, the Asia Africa Europe Cable, the Bay of Bengal Gateway, South East Asia-Middle East-Western Europe-5 and the Freedom Cable. However, given the availability of huge bandwidth at Indian shores, these new cables would be unviable in the long term unless new landing stations are built and access charges are reduced. For the latter to happen, industry stakeholders and the government will have to ensure the implementation of TRAI’s regulation for access charges in a time-bound manner.