"The competition is building up thick and fast in the Indian market, but ultimately, this is a game which can be played only by companies which have strong business models and are capable of investing in infrastructure," said Satyam Infoway Ltd general manager David Appasamy. More than 60 private Internet providers have entered the fray since the monopoly of state-owned Videsh Sanchar Nigam Ltd (VSN) was lifted in December 1998. At least another 200 have secured licences from the government. "It was inevitable the prices would come down, as they were at too high a level. With competition, it was bound to change," said Amitabh Singhal, the secretary of the Internet Service Providers Association.

India's base of Internet subscribers has risen four-fold to 1.1 million from about 250,000 in 1998, according to Singhal. The rapid pace of growth and the vast number of potential subscribers more than justifies the number of Internet service providers in the market, he added. VSNL has lost some of its market, but still retains a 60-percent share. Private providers are running hard with aggressive pricing schemes in an effort to make inroads into the existing market as well as widen the subscriber base. Packages for net surfing, which used to cost up to 15,000 Rupees (350 US dollars) for 500 hours, have fallen to about 1,500 Rupees for 100 hours, and even VSN has cut prices several Times to retain its market leadership. Private ISPs, such as Satyam Infoway and Dishnet, are now trying to tighten their grip by lower pricing combined with offers such as unlimited access for a limited period.

Some have simply slashed prices. Another leading player, Mantra Online, has stepped in with drastically lower rates for fixed surfing hours, but giving customers the option of stretching their Internet account over an unspecified period of time. Calcutta-based Caltiger broke new grounds earlier this year by shaking up the market with an offer of free access to the net for individual subscribers.

"The companies which are charging a fee and the others (such as Caltiger) offering free access will both survive, but will be looking at different niche segments in the market," said Singha. Industry officials say a user opting for free Internet access is likely to opt eventually for a paid one too, provided he received a quality service. "That is the pattern seen in developed markets. In India, the quality of service is so poor, because of band width problems, there is often little difference between the paid and free providers," said Rajesh Kalra of Net Consult India Pvt Ltd. Investment bankers Merrill Lynch said in a report that the key to lower rates and profitability for ISPs was revenue-sharing with telecoms operators.