BSNL rivals Reliance in Net telephony

India's state-owned telco BSNL is scrambling to woo customers in an increasingly crowded market

By Kristie Lu Stout
CNN.com Writer

NEW DELHI, India (CNN) -- State-owned telco Bharat Sanchar Nigam (BSNL) plans to offer Net-based phone services at cut rates to take on private sector rival Reliance.

BSNL will offer Voice Over Internet Protocol (VOIP) services by year-end with a price tag 40 percent lower than the current market rate, according to India's Economic Times.

The incumbent of the sector, BSNL is scrambling to woo consumers in an increasingly crowded market of competitors that includes Reliance Infocom, Tata and Bharti.

"We will launch a pilot project in the next couple of months. Once the technology is tested, we will provide commercial service on the main trunk routes from where the bulk of the revenue comes," BSNL director B.R. Khurana told the Economic Times.

Roll out one year ahead

BSNL will roll out its VOIP service one year ahead of rival Reliance Infocom.

With VOIP, voice and data are transmitted over the Internet as bundled packets, taking less bandwidth space at competitively cheap rates.

"We will pass on the benefits of lower costs to the customers," says Khurana.

BSNL is challenging Reliance Infocom's bid to become India's leading telecom operator. Reliance Infocom is currently laying a broadband network in 115 towns and cities throughout India.

Indian industrial giant Reliance owns 45 percent of Reliance Infocom, a venture analysts value at between $3 and $6 billion.

Reliance is currently building its network out, with plans to lay 80,000 km of broadband by 2002. The Economic Times reports that already 10,000 km have been competed.

But BSNL already has an inherent edge over the emerging private sector star.

"BSNL is the incumbent, they have to offer these services anyway. They are the only ones having an all India network right now," one Mumbai-based analyst told CNN.

The telecom giant may be stifled however by its own legacy. Most of its network sprawl is made up of old technology switches, virtually impossible to replace due to the substantial investment that has already been made.

In contrast, private sector challengers like Reliance Infocom, Tata and Bharti can be immediately equipped with the latest transmission technology to facilitate a faster VOIP roll-out.

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