In its recommendations to department of telecom (DoT), the sector regulator also suggested major changes in financial and regulatory levies. Against the current free entry, TRAI recommended levying entry fees of up to Rs20 lakh and a uniform licence fee of six per cent of gross revenue.

For national level licence, ISPs will have to pay Rs20 lakh as entry fee while it will be Rs10 lakh for state level ISPs. The minimum annual licence fee has been pegged at Rs5,000 for district level ISP, Rs10,000 for state level and Rs50,000 for national level ISP.

ISPs having 100 per cent FDI equity should be given two years for reducing foreign holding to 74 per cent, it said.

TRAI''s suggestions, if accepted, could make increase the cost of Internet and broadband services in the country but improve services .

The regulator has taken a tough stand as the objective of competition and growth of Internet have not been met.

"Out of 700 licences issued within three years of opening of ISP sector to private service providers, only 389 licensees exist today. As per the performance monitoring report with TRAI, only 135 Internet service licensees are functionally active," TRAI said.

At present, there''s one set of norm for internet with telephony and another for internet without telephony. The new regime, as per the Trai recommendation, would move away from the current norm of two sets of licensing.

Voice over internet protocol (VoIP) offered by Indian ISPs, that allows long-distance calls at a much cheaper rate than through regular telephony, may be controlled to some extent, sources said.