The New Telecom Policy 1999 envisages grant of license on non-exclusive basis to Very Small Aperture Terminal (VSAT) service providers for a period of 20 years extendable one time by 10 years. Accordingly, licenses are issued to applicants to establish, install, operate and maintain VSAT Closed Users Group (CUG) Domestic Data Network service via INSAT Satellite System on non- exclusive basis within territorial boundary of India.

There are two types of CUG VSAT licenses:

1. Commercial CUG VSAT license and
2. Captive CUG VSAT license. The commercial VSAT service provider can offer the service on commercial basis to the subscribers by setting up a number of Closed User Groups (CUGs) whereas in the captive VSAT service only one CUG can be set up for the captive use of the licensee.

The applicant must be an Indian company, registered under the Indian Companies Act'1956. The Licensee shall ensure that the total foreign equity in the LICENSEE Company does not, at any time during the entire LICENCE PERIOD, exceed prescribed cap for FDI of the total paid up equity. Investment in the equity of the applicant company by an NRI/OCB/International Funding Agencies is to be counted towards its foreign equity.

The salient features of the CUG VSAT licenses are:

• The scope of the service is to provide data connectivity between various sites scattered within territorial boundary of India via INSAT Satellite System using Very Small Aperture Terminals (VSATs). However, these sites should form part of a Closed User Group (CUG).
• The intent of this LICENCE is not to grant long distance carrier rights.
• PSTN connectivity is not permitted.
• The VSAT network shall comply with Technical parameters as specified in TEC Interface Requirements No. IR/VST-08/02.DEC.2003 and its subsequent issues / amendments.