MTNL, which entered the Internet market in early February, is also planning to quadruple its capacity in Delhi and Mumbai to 20,000 each, MTNL chairman and managing director S Rajagopalan said.

"I have to match my tariff and packages in the new market to remain competitive. But at the same time market reality has to be taken into account", Rajagopalan said.

He said MTNL, which fixed Internet tariffs for a period of three months initially was due for review. "The board will consider if any modification is required in the present market conditions", he added.

Without divulging details of the new package, the MTNL chief said it was difficult to say whether the rates would be reduced but different kinds of packages may be offered.

MTNL has already exhausted the existing capacity of 5,000 in Delhi andMumbai, Rajagopalan said, adding that "we have arranged for immediate expansion of 1,200 lines in each city."

In Mumbai the arrangement has already been made for additional 1200 lines and the corporation has placed orders for equipment to expand the capacity to 20,000 involving investment of Rs seven crore, Rajagopalan said.

The corporation is charging Rs 2,550 for 100 hours, Rs 5,525 for 250 hours and Rs 8,500 for 500 hours apart from a registration fee of Rs 500 on the public switch telephone network (PSTN) Internet account.

Most of the MTNL's Internet subscribers fall into the category of 100 hours, he said adding that "we are expecting increase in number in other categories of 200 and 500 hours soon."

Apart from MTNL, Videsh Sanchar Nigam Ltd (VSNL) and Satyam Infoway are major players. Bharti Telecom also launched Internet services last week in association with British Telecom in major cities including Delhi and Mumbai.

He also said that MTNL would resort to aggressive marketing for otherintegrated network (IN) services like premium services, virtual private phone network and free phone services.

The company has also started direct marketing to approach high end users of basic telephone services in Delhi and Mumbai.