The virtual private network (VPN) licensing issue is back in the news. After further rounds of consultation, TRAI has recommended that ISPs pay an entry fee of Rs 300,000 and no licence fee for offering Layer-2 VPN service, which does not require access to the internet. For ISPs offering Layer-3 services, there would be no entry or licence fee. The ISPs are awaiting the government's goahead to restart services.

TRAI's recommendation has been welcomed by the ISPs, who were earlier asked by DoT to pay between Rs 10 million and Rs 100 million as entry fee and a licence fee of 8 per cent of the gross annual revenue for providing VPN services. Following DoT's decision, most operators had exited the VPN business while the bigger players like Sify, HCL Infinet and Hughes, stayed on.

For the ISPs, it has been a long battle on the VPN issue. They strongly opposed DoT's move on the ground that VPN services were a part of their existing internet licences and that by imposing the fee, the government was favouring long distance operators like VSNL. The issue was then taken up with the TDSAT, which, in turn, directed DoT to go through a consultation process before finalising the fees.

The issue was sent back to TRAI's court. TRAI stated that it was not in favour of a licence fee and pointed out that only a few large ISPs had actually taken a licence for VPN services as the fees imposed by DoT were very high. This was detrimental to a competitive market scenario. TRAI also countered the argument that the fees were necessary to maintain a level playing field for long distance operators who had paid Rs 1 billion as entry fee. The regulator felt that long distance operators essentially carried voice traffic and VPN services were just a small part of their services and the ISPs would be adding to the long distance operators' business by taking leased line capacity from them.