The proposal will come up for approval at the next VSNL board meeting. According to top sources, one of these products will be on the lines of the Surf-by-nite product which Bharti-BT has for off-peak hours. Subscribers to this service get double the access time for roughly the same tariff but are allowed to surf only between 10 pm and 6 am. It is not clear whether VSNL will follow a similar pricing strategy, although the services will definitely be at a discount to regular rates.

More importantly, the ISP is planning to come out with a discounted TCP/IP package for students. Until now, students were able to get only 500-hour shell accounts (text-based) at discountedrates. The TCP/IP based internet account had no special pricing for students.

In May, VSNL had taken a decision to discontinue shell acounts and update existing shell users to TCP/IP at no extra cost. However, it had maintained shell accounts for students at Rs 1000. The new student TCP/IP package may not be priced as low, but is likely to be at 50 per cent discount to the existing tariff for a 500-hour package, according to informed sources.

Because the new packages and tariffs are subject to approval by the Telecom Authority of India (TRAI), officials were unwilling to comment on the proposed rates. The TRAI has yet to approve MTNL's reduced tariffs. Private ISPs under the Internet Service Providers Association of India have lodged a protest asking MTNL give them a similar reduction in tariff for telephone lines and other infrastructure.

"It (MTNL's reduced rates) has caused a lot of confusion in the market. No one would like to go in for an new account if they think they can get it for Rs 600 or Rs1000 lesser," said VSNL acting CMD Amitabh Kumar. With telephone rates becoming more expensive than internet rates, other ISPs will have to subsidise heavily if they pare their rates down to MTNL's.

Under the existing telephone and net rates, MTNL would suffer only a 2 per cent revenue drop (assuming telephone tariff at Rs 24 per hour and net rate at Rs 17 per hour) at the new internet tariffs while other ISPs, including VSNL, would suffer a drop close to 10 per cent, said Kumar.