Broadband connection users might have to pay more for Internet access if the Department of Telecommunications accepts the Telecom Regulatory Authority of India recommendations to impose an annual licence fee for Internet service providers.

Currently, ISPs pay only Re 1 as annual licence fee while Internet telecom service providers, or telecom operators providing Internet services, pay 6 per cent of their annual gross revenue as licence fee.

Trai has suggested there should be uniformity and independent ISPs that provide Internet telephony should also pay 6 per cent of their annual gross revenue as licence fee.

The authority believes a uniform annual licence fee of 6 per cent of annual gross revenue -- subject to a minimum of Rs 50,000, Rs 10,000 and Rs 5000, respectively, for category A (who operate nationally), category B (who operate in a state) and category C (who operate in a city) ISPs per licence area per year -- will "curb non-serious players."

"The move will badly hurt the category C players, who constitute around 80 per cent of all ISPs," said ISP Association of India president Rajesh Chharia. They procure bandwidth from the larger ISPs, which will have to pay the 6 per cent fee.

"The category C players will have to pay 6 per cent to the ISPs from which they get the bandwidth. Subsequently, the additional burden will be passed on to the users," he said.

Meanwhile, Trai has also recommended limiting foreign direct investment for ISPs to 74 per cent to provide uniformity across telecom operations.

Those providers with more than 74 per cent FDI will be given two years to reduce their foreign holding. "This will protect the domestic ISP sector," said Chharia.

Trai has also recommended an entry fee of Rs 20 lakh to category A ISPs and Rs 10 lakh to category B ISPs with immediate effect. This will not be applicable to existing ISPs.

Category C ISPs that come up for renewal will have to upgrade themselves to either B or A categories. "This will cripple the C category players," said Chharia.

Trai has also suggested that the restrictions currently imposed on provision of Internet telephony should be removed. If this recommendation is accepted by the DoT, any device conforming to the standards of international agencies can be used to make Internet telephony calls within India as well as abroad.

However, ISPs will not be permitted to have connectivity with the public switched telephone network. Only PC to PC connectivity will be allowed. For customers, it means they could also use specially designed Interent phones available.

The authority has also suggested that there should be "urgent consultation" with unlicensed foreign entities providing cheaper Internet telephony (Skype, for instance) to register them in the Indian telecom domain and get such Web sites hosted on the Indian territory.

The ISP Association of India believes the Indian government loses at least Rs 50 lakh every month due to these "illegal practices."

"It will kill the ISP industry. Only vertically integrated telecom operators also offering Internet services will survive. We cannot even do content and IPTV, which is the key to Internet and broadband, plus customers have to pay more," said a leading ISP operator.

The recommendations have to be finalised by the licensor, before being made mandatory. The suggestions follow the country not being able to meet the Internet growth targets.

The government had set a target of 18 million Internet subscribers and 9 million broadband connections by the end of 2007.