The Law Ministry has nuked TRAI’s recommendation of allowing foreign internet telephony firms to register in India and host their services in the country. The recommendations sought to get foreign firms to be regulated and pay a license fee. But according to the archaic Indian Telegraph Act, 1885, registration alone wouldn’t bring the firms under the ambit of Indian law. Among three reasons why this isn’t possible cited by Financial Express, one major hurdle cited is the 74% FDI and Indian laws not being applicable for companies being governed by the laws in the country of establishment.

Nikhil adds: The TRAI had recommended that scope of ‘Internet Telephony’ be extended to include PC to PC communication within or outside India, covering PC to PC voice communications, the kind that Skype, Google (NSDQ: GOOG) Talk, Yahoo (NSDQ: YHOO), MSN and other IMs offer. Since those recommendations were made, VoIP has grown, with 129.43 million minutes of usage between July and September 2007 (not including PC to PC communication. These requests were based primarily on demands from ISPs, which do pay a license fee to the government. Such issues wil remain as long as the government sees voice differently from data. I’m sure there will be a time when existing telecom businesses will be threatened by VoIP, and that will be a bigger game, and a more political battle.

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