This, according to top VSNL sources, has made the setting up of a subsidiary unattractive as the volume of business would not be the same as was being perceived earlier through a national presence. VSNL was hoping that DoT would relent with competition knocking on the doors but this has not happened. As a result, the subsidiary, VSNL Seamless Services Private Ltd, is yet to kick off operations even six months after it was set up as a shell company.

A decision on its activation would be taken only at the next board meeting of the telecom giant. The subsidiary was to take care of the internet, e-mail, EDI and video-conferencing facilities beingcurrently provided by VSNL. The internet gateways would, however, not be transferred to the subsidiary.

At a recent meeting with communications minister Jagmohan, VSNL officials pointed out that they were being allowed to offer Net services from only six cities while DoT offers the facility from other parts of the country. VSNL provides the systems to DoT for offering the facility but DoT is not keen to hand over the operations to VSNL presumably for fear of loss of revenue, officials of the telecom major told the minister when he wanted to know why VSNL was not handling the facility for the entire country.

"We were hoping to be get the nod from DoT to operate across the country. This has not happened and hence a separate subsidiary for internet services does not look very viable under the current structure. We may operationalise it nevertheless, subject to board approval," said a top VSNL source.

The whole idea behind setting up a separate subsidiary was to ensure that the public sector giant couldstart afresh in a highly competitive internet industry through savvy marketing and sound customer service, something which may not have been possible in the current structure.

"By staying restricted to a mere six cities the scope of the venture has got severely restricted," feel VSNL sources.

VSNL had appointed international consultants PricewaterhouseCoopers to advice it on setting up the subsidiary. It was aimed at being able to be ready for competition. There are more than 70 private internet service providers in the country with Satyam Infoway and Mahanagar Telephone Nigam Ltd giving the hitherto monopoly a run for its money.