Most incumbent international carriers, including Videsh Sanchar Nigam Limited (VSNL), function through bilateral arrangements, informs DataAccess managing director Siddhartha Ray. So how does it work Under a bilateral agreement, an international carrier of country A has an agreement with its counterpart in country B wherein all calls originating from each of these countries for the other country are routed through a line which is dedicated exclusively for such traffic.
For example, if VSNL were to have an arrangement with AT&T for the United States, then they would have a circuit exclusively for the Indo-US telecom traffic.
In such cases, the circuit is partially owned by both the players which means that the capital expenditure for the circuit is borne on a 50:50 basis by both the players.
This is why such an arrangement is also called the half circuit concept. The international telephone service is provided by connecting the national half-circuits of one carrier with the half-circuits of another carrier.
The negotiated rate for international calls between every pair of countries in the world is called the international accounting rate, informs DataAccess vice president for technology and carrier business Vivek Jhamb. For any outgoing call, one price is charged to users by the originating carrier.
This is called the collection charge, or retail price, and is usually set in local currency units. However, the terminating country operator provides a termination service to the originating country operator.
The bilateral arrangement works on a barter system, informs Mr Ray. Suppose there are two carriers, one operating from country A and other from country B, then at the end of a certain period, both take into account the number of incoming and outgoing calls, and the differential amount gets debited/credited into one players account.
In the year 2001-02 for example, VSNL did a total ILD business of 3200 million minutes (MM) out of which 700 MM was outgoing and the balance was incoming. Mr Ray predicts that the market will grow by another 15 per cent this year.
In this case, the bandwidth is jointly owned. One of the limitations of a bilateral arrangement is its exclusivity that is the traffic through these cicuits is limited to only those two countries.
In addition, in most of such arrangements, the rates per minute are pre-determined, which is the settlement rate. The settlement rate is most of the times equal to half the accounting rate, which corresponds to the price of a half-circuit from the border between the two countries, informs Mr Jhamb.
For each pair of countries operating under a bilateral arrangement, there is usually a single symmetric settlement rate negotiated for traffic going in both directions between them.
This means the originating and terminating carriers are assumed to have equal costs in terminating the call.
As per a multilateral clearing house concept (termed by ITU), which is a recent development, a carrier owns its circuit and the bandwidth is not exclusive for any specific country. It carries different ILD traffic on its pipes depending on the economics. This is how Data Access functions.
We have our gateways in London, New York and Hong Kong and from those gateways, we have agreements with many other carriers, who route our calls, informs Mr Ray. In this arrangement, unlike the bilateral arrangement, the carrier wholly owns the bandwidth and the flexibility that the carrier gets is that the same pipe can carry traffic for more than one carrier.
This model ensures better usage of capacity. Here there are no settlement rates. We buy and sell India minutes and international minutes. We opt for the least cost routing model. Depending on the rates prevailing on various routes, we might opt to go to US via BT in London, says Mr Ray.
Nowadays, most players operate on this model. For operating in this model, the player needs to satisfy some conditions like bandwidth owned purely by the carrier himself, informs Mr Ray. The carrier needs to have multiple operating licences, for all those countries where he is operating.
This arrangement allows flexibility. We cater to 84 carrier networks through three switching arrangements. The rates are purely market driven and are based on demand and supply and they change on a weekly basis. The rates change on a weekly basis. With countries like Middle East and Africa, though, DataAccess operates on a bilateral model, he says.