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VSNL-FLAG Battle Escalates

Accusations are flying fast between Indian carriers Videsh Sanchar Nigam Ltd. (VSNL) (NYSE: VSL) and Reliance Communications Ltd. (RCom) , engaged in a long-standing feud over access to a subsea cable landing station in Mumbai that’s heading back to the courts.

Here's the background: Reliance has long accused VSNL of inflating access charges, blocking its FLAG Telecom Ltd. subsidiary from selling capacity to other companies, and refusing to grant access to the landing station so that it can upgrade its FLAG Europe-Asia (FEA) cable system.

In May the International Chamber of Commerce's arbitration tribunal ruled that VSNL was in the wrong and must grant FLAG access to the landing station and negotiate reasonable, cost-based charges.

At the end of August, Reliance re-approached the tribunal since the 90-day period for negotiations had ended without an agreement, asking it to “[set] a time-table for determination of damages due to the unlawful refusal of VSNL to grant access to Flag from 1998 onwards," according to a notice filed with the Bombay Stock Exchange.

VSNL and Reliance have carried on a PR war since then. Last week VSNL issued a statement to the effect that it has filed an appeal with a court in The Netherlands because it’s "disappointed" that the tribunal disagreed with its understanding of the construction and maintenance agreement between the group of carriers operating on the route.

It did add, however, that "the Company will continue to comply with the terms of the award, as issued, until such time as it may be set aside."

Reliance fired back a response yesterday, arguing: “This action of VSNL is designed to delay the implementation of this Award with a view to continue its monopolistic and anti competitive practices in India which will harm the ultimate users of international capacity such as ITEs/BPO etc due to exorbitant bandwidth prices maintained by VSNL.”

The carrier notes that it has completed the upgrade of the FEA cable from the U.K. to the United Arab Emirates, "with the co-operation of the relevant Landing Parties," evidence that they "do not share" VSNL's interpretation of the agreement.

Reliance claims that "Filing of Writ by VSNL is in violation of VSNL's commitment under the Construction and Maintenance Agreement (C&MA) that any decision of the arbitral tribunal shall be final."

VSNL has pointed to recent price cuts as evidence that it's doing its part -- it has cut international private leased circuits (IPLCs) prices by 25 percent and Internet leased lines (ILLs) by 40 percent. (See VSNL Plans Two Cable Systems.) "The price reduction is part of [parent] Tata Group’s initiative to support and encourage the globalization of India," it says.

Both carriers are busy building out their submarine networks to meet growing demand for international bandwidth into and out of India. Last week FLAG launched the Falcon cable, adding 2.5 terabits of capacity to its subsea network.

VSNL has announced plans to invest over $600 million in new cables connecting India with Europe and the rest of Africa, in addition to upgrading its trans-Pacific capacity. (See VSNL Boosts Asia Subsea Capacity.)

— Nicole Willing, Reporter, Light Reading

materialgirl 12/5/2012 | 3:40:36 AM
re: VSNL-FLAG Battle Escalates Sounds like VSNL is learning how to maintain a rich monopoly by copying MSFT's delaying tactics. Too bad so many badly needed jobs hang in the balance.
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