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January 15, 1998


Finally final

After an interminable wait the ISP policy is official.

A Correspondent in New Delhi

Email this story to a friend. The Department of Telecommunications today finalised the standard application form and licence agreement for Internet service providers.

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This is a follow-up to the announcement of the Internet policy guidelines by the government in November 1997. The guidelines were based on the recommendations of the Bimal Jalan Committee, set up to suggest ways of encouraging Internet usage in the country. Consequently, the government had decided to give away its monopoly of the commercial Internet business and permit private entrepreneurs to become Internet service providers.

The licenses for the private ISPs will be issued to all eligible applicants on submission of completed applications in a prescribed form.

The application forms containing the guidelines, general information and details of the licence agreement will be sold at the headquarters of the Telecom Commission in New Delhi and the 'telecom circles' outside the capital from February 18, 1998, onwards.

The broad guidelines and terms and conditions of the ISP licence are:

Eligibility criteria

Any company registered in India under the Companies Act 1956 will be eligible to submit the proposal for providing Internet services. Foreign equity participation in the venture shall be as per the government policy and guidelines issued from time to time. At present, 49 per cent foreign equity is permitted. There is no requirement for the applicant to have any prior experience in information technology or telecommunication services.

Service area

The Internet service areas have been grouped into three categories. Separate licences would be granted to any company for each service area.

Category 'A' service area

This includes the whole of India.

Category 'B' service area

This comprises each one of the 20 territorial telecom circles and the four metro telephone systems of Delhi, Bombay, Calcutta and Madras as recognised by the Department of Telecommunications.

However, if a licence for the telephone systems of the four major cities of Ahmedabad, Bangalore, Hyderabad and Pune is required, it will also be treated as a category 'B' service area on par with telecom circles.

Category 'C' service area

This includes any 'secondary switching area' (SSA) with its geographical boundaries defined by DoT as on April 1, 1997.

The SSAs of each of the four metro telephone systems of Delhi, Bombay Calcutta and Madras and telephone systems of four major cities of Ahmedabad, Bangalore, Hyderabad and Pune with their geographical boundaries defined on April 1, 1997, however, stand excluded from category 'C'. They already form a separate category 'B' service area.

Performance bank guarantee

A performance bank guarantee, valid for two years, from any scheduled bank in the prescribed proforma will have to be submitted along with the application for each service area.

The value of the guarantee is Rs 20 million for each category 'A' service area, Rs 2 million for each category 'B' service area and Rs 300,000 for each category 'C' service area.

Licence fee

The licence fee will be waived for five years up to March 31, 2003. The fee to be paid relating to the period starting from April 1, 2003 by the licensee company will be intimated on or before April 1, 2001, and shall be payable to the telecom authority irrespective of the time of entry of an ISP.

Period of validity of the licence and its extension

The licence shall be valid for an initial period of 10 years unless otherwise terminated. If requested by the licensee, the telecom authority may grant extension on suitable terms and conditions over a period of five years or more at a time.


ISPs will be free to fix their own tariff. The tariff will be left open to be decided by market forces. However, the Telecom Regulatory Authority of India may review and fix a tariff at any time during the validity of the licence, which shall be binding on the licensee.

Number of licences for ISPs

Applicants will be required to submit separate applications for each service area. An applicant company may be granted any number of licences. There will also be no limit on the number of licences that can be granted in a particular service area.

The leased-line subscribers of the service will be from within the service area but the dial-up access subscribers could be located anywhere in the country.

Technical requirements

The ISPs will be required to set up their nodes and servers within the geographical limits of the service area. They will have to use the Internet Protocol and will have to meet the technical requirements of the ISPs, like DoT, MTNL and VSNL, to which they are connected. The equipment used by the private ISPs will have to conform to the interface protocol requirements as applicable.

Email and VSAT service licensees

Existing email and VSAT service licensees may also obtain separate ISP licences for any number of service areas subject to the fulfilment of the eligibility criteria. They would, however, have to implement the service independent of their existing network.

An ISP may provide Internet service to any VSAT customer (who could be served by a licensed VSAT service provider or captive private VSAT network), if the VSAT is located within the service area of the ISP.


Direct interconnectivity between two separately licensed ISPs shall be permitted. International traffic shall flow only through DoT's Internet node, which is DoT's Internet Access Service (DIAS) or the Videsh Sanchar Nigam Limited's Internet gateway, which is the Gateway Internet Access Service (GIAS).

The ISPs shall have the option to connect their Internet nodes either to DoT's node or VSNL's gateway directly for the purpose of delivery of international traffic.

The licensee may obtain the transmission links on lease from DoT, a licensed basic service operator or any other operator specially authorised to lease such lines to ISPs.

The licensee may also establish its own transmission links within its service area for carrying traffic related to its service provided that such capacities are not available from any other authorised agency. Such an arrangement will also be subject to the permission of the telecom authority.

Resources required for operation of the services for extending them over the network of upstream service provider (DoT, VSNL etc) or any other service provider licensed by the authority, including the timeframe for provision of the same service will be mutually agreed upon among the parties concerned.

Voice over Internet

Voice over Internet is not permitted.

Delivery of the service

The licensee shall be responsible for installation, testing and commissioning of all the equipment to provide the service, including connectivity to DoT's DIAS or VSNL's GIAS for delivery of Internet traffic.

The period of implementation of the licence will be 10 months from the grant of the licence.

Obscene material and cyber laws

Flow of obscene, objectionable, unauthorised or any other content infringing copyrights, intellectual property rights and against international and domestic cyber laws, as and when established, in any from over the ISP's network is not permitted.

Cost of application form and processing fee

A nominal cost of Rs 1,000 for the application form and Rs 5,000 towards processing fee for each application has been prescribed. The fees are not refundable.

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