Section 11 of the TRAI Act of 1997 provides that TRAI shall recommend the terms and conditions of licenses to service providers, ensure compliance of the terms and conditions of the license and recommend revocation of licenses for non-compliance of terms and conditions of license.

The verdict came as a shock to the government's attempt to liberalize Internet service, which is monopolized by the State-owned Videsh Sanchar Nigam Limited (VSNL). The verdict came a day before the License Forms were to be made available for applications.

The order means that the entry of private Internet service providers (ISPs) could be delayed by as much as six months because TRAI will need time to formulate its recommendations. It may even take more than two years, if the matter is litigated, as DoT is considering an appeal to a higher court.

The ruling came as a surprise to the computer industry and prospective ISPs. They feel that TRAI's decision will hurt the spread of the Internet in India.

"The process should have been allowed to begun and whatever problems that crop up could have been addressed in due course," said Dewang Mehta, executive director of NASSCOM (National Association of Software and Service Companies).

P.K. Sandell, president of the Telecom Industry and Services Association (TISA), urged TRAI to present its recommendations regarding Internet providers. He said that after the DoT announced the Internet policy, a number of foreign and Indian investors had lined up proposals.

The delay will jeopardize the government�fs projections of building an Internet subscriber base of about 2 million by 2000.

VSNL, the main beneficiary of the delay, has projected an increase of almost 200 percent in the number of subscribers to its Internet service by 1999, from the current 70,000.

VSNL offers Internet services in six cities: Delhi, Mumbai, Chennai, Calcutta, Bangalore and Ahmedabad.

Internet policy

Keyword: Guidelines For Internet Service Providers License

The Standard License Agreement and Application Form for Internet Service Providers (ISPs), which contains guidelines and details of the License Agreement, was finalized by the Department of Telecommunication on Jan. 16. The Application Forms were to be issued to interested parties on Feb. 18, but were withheld in view of the TRAI judgment on Feb. 17, which invalidated the Internet policy.

Highlights of the guidelines are:

* A company registered in India under the Companies Act of 1956, will be eligible to submit a proposal for providing Internet service. Foreign equity participation up to 49 percent will be allowed. The firm need not have prior experience in information technology or telecom services.

* The government has grouped Internet service areas into three categories: A, B and C. In category A, an ISP can provide the service throughout the country, in category B, the ISP is allowed to operate only in a restricted area. This category includes 20 telephone circles and four metro areas: Delhi, Mumbai, Calcutta and Chennai. However, four cities, Ahmedabad, Bangalore, Hyderabad and Pune, will also be treated as category B service areas. Category C includes any Secondary Switching Area (SSA) with the geographical boundaries defined by DoT. The SSAs of the four metro areas and Ahmedabad, Bangalore, Hyderabad and Pune are excluded from Category C.

* ISPs will deposit a performance bank guarantee of Rs. 20 million, Rs. 2 million and Rs. 300,000 for each category along with an application. The bank guarantee will be valid for two years.

* The license fee will be waived for five years up to March 31, 2003.

* The license will be valid for a period of 10 years if not terminated. An extension of five years may be granted on request from a service provider. (return to news)

(S. Swarn, Asia BizTech Correspondent)