Addressing the ISP India '99 conference on Wednesday, N Parameswaran, deputy director general in DoT, said the first phase of the project would be completed in June 1999. All 45 internet stations would be connected to the backbone and be operational by January 2000, the deadline fixed by the Telecom Regulatory Authority of India (TRAI).

The backbone will help the new ISPs which are entering the market to address bandwidth needs and offer better service. According to most recent figures, DoT has issued internet service provider licence (ISP) to 50 companies -- nine in Category A, 15 in Category B and 26 in Category C.

Acting CMD of Videsh Sanchar Nigam Limited (VSNL), Amitabh Kumar made out a case for disallowing internet telephony. Allowing internet telephony would result in enormous gains for the United States he said.

Touching on the cost of internet access, he said the primary problem was because there was very little local content on the web -- most of the content on the web was based in US. Of the Rs 20 per hour charged by VSNL for internet access nearly Rs 14 was the cost incurred on international connectivity. "As we see more sites coming up in India, the cost of connectivity will come down," he added.

Kumar said the cost of domestic links would come down when TRAI came out with tariff and quality specifications in a month's time. On VSNL Seamless Services Limited, he said the subsidiary handle access and hosting, while VSNL would only handle gateway services.

Ajit Balakrishnan of Rediff on The Net said the success of an ISP would be determined by price, customer service, call completion rate, modem speed and flavours supported, among other factors. He said the ideal way for an ISP to grow would be start off small and grow into a national service provider.

Quoting figures from the US industry, he said 80 per cent of internet usage was for e-mail, 50 per cent for mail within the same office, 30 per cent within the same city, 15 per cent within the same country and only five per cent international.

Balakrishnan was of the opinion that cable as a means of internet access was vastly over-hyped. "Cable won't get more than five per cent of the market," he said, adding that 80 per cent of internet access would be through dial-up. R Ramaraj of Satyam Infoway said the issue of local content also needed to be addressed.

The ISP India event is also featuring an exhibition where 20 companies are showcasing technology and products for this segment.