Considering the status of the coverage of telecom infrastructure and mobile penetration, the May 1 recommendations of TRAI for creating virtual network operators in India will be a major disaster in the industry.
TRAI, as per its recommendation, emphasized that VNOs will thrive on existing telecom operators’ infrastructure, though VNOs will be allowed to deploy a part of the infrastructure. TRAI believes that VNOs can launch services in rural areas, specialized zones such as Delhi airport, railway stations, etc.
Interestingly, TRAI knows that Indian telecoms did not expand in rural India due to lack of return on their investment in telecom infrastructure. Monthly ARPU of less than $2 from rural India was not enough for telecoms to penetrate more. If Indian telecoms do not have adequate infrastructure, can the VNOs do business profitably?
There are challenges for both telecoms and VNOs. Telecoms say that the sector requires incremental Capex (capital spending) of Rs 90,000 crore to achieve 100 percent rural wireless tele-density by the year 2020.
Telecoms will not spend these funds, if they are not ensured about viability. VNOs cannot run a business if there is no proper infrastructure and enough subscriber base. This apart, telecoms were not bad in creating aggressive marketing plans to achieve subscriber growth. Usually, the role of VNOs will be to create niche markets.
TRAI argues that in areas like airports or smart cities, developers themselves can lay the telecom infrastructure in the form of Optical fiber cables (OFC), ducts, towers etc. and become a VNO and extend telecom services to residents/users of such entities.
In upcoming green-field smart cities like GIFT, Dholera, Dahej, the city services providers can set up their own infrastructure at the development stage and take a VNO license to provide broadband and other telecom services to their residents inside the smart cities.
Indian telecom sector has between 7 and 13 mobile operators in each service area. Can Indian afford VNO in the crowded market? India’s telecom consolidation is yet to take off. The next phase of consolidation did not happen in India because several telecoms are doing badly in terms of revenue and profit in the country. Availability of spectrum with these telecoms did not attract any foreign firm to show internet in the Indian telecom growth story.
TRAI recommendations
TRAI said the terms and conditions of sharing of infrastructure between the NSO and VNO should be left to the market i.e. on the basis of mutually accepted terms and conditions between the NSO and the VNO.
VNOs will be permitted to set up their own network equipment viz. BTS, BSC, MSC, RSU, DSLAMs, LAN switches, where there is no requirement of interconnection with other NSOs. They will not be allowed to own/install equipment viz. GMSCs, Soft-switches and TAX. VNOs will be allowed to create their own service delivery platforms in respect of customer service, billing and VAS.
MSOs/LCOs who want to provide broadband services through their cable network may do so by obtaining a VNO license. MSOs/LCOs may also share their cable infrastructure with VNOs, after the MSO/LCO register themselves as an IP-I service provider.
For introducing VNO in the sector, there should be a separate category of license namely UL (VNO). This UL (VNO) will contain similar authorizations for services and service areas as provided in the existing UL.
TRAI says resale of IPLC presently under the UL shall be shifted from the existing UL to UL (VNO) licensing in order to make a clear distinction among the class of operators.
Like UL authorization, only pan-India or service area-wise authorizations may be granted under a UL (VNO) license. However, UL (VNO) licensee will be able to service an area within the LSA of the NSO with which the VNO has entered into an agreement for delivery of services.
Since VNOs are a new concept in India, initially the duration of the License of a VNO should be fixed as 10 years extendable further for 10 years at a time by the licensor. However, depending on technological developments and experience gathered, this duration of license can be reviewed after 3-4 years. The agreement of a VNO with a NSO will terminate with the expiry of the license of either party.
TRAI said there should not be a restriction on the number of VNO licensees per service area.
To increase utilization and efficiency of telecom infrastructure, there should be no restriction on the number of VNOs parented by a NSO.
VNOs will be allowed to have agreements with more than one NSO for all services other than access services and such services which need numbering and unique identity of the customers
An NSO shall allocate a numbering range to their VNO(s) from the numbering range allocated to it by the licensor. VNOs shall also utilise the LRN and network codes of the parent NSO for the purpose of routing of calls.
A VNO should be a company registered under the Indian Companies Act 1956 (as amended). The entry fee for UL (VNO) with a given authorisation will be 50 percent of the entry fee prescribed for the UL. As VNO would not be forced to create infrastructure therefore no roll out obligations may be casted upon VNOs. Minimum equity and minimum net worth may be kept at 40 percent of the amount prescribed under UL.
under UL(VNO) the provision for restriction of 10 percent or more equity cross holding to be applicable between (i) a VNO and another NSO(other than VNO’s parent NSO) and (ii) between a VNO and another VNO authorized to provide access services using the access spectrum of different NSO in the same service area.
A VNO shall be liable to pay LF as a percentage of AGR at the same rate as that of the parent NSO. (b) VNO shall also be liable to pay the SUC for the wireless service(s) it offers to the customers. The SUC rate will be same as that of the parent NSO.
Since QoS is in the exclusive domain of TRAI, once the UL (VNO) based regime comes into force, the Authority will put in place comprehensive regulations on QoS parameters to be complied separately by NSOs and VNOs.
VNOs should be responsible and comply with Telecom Tariff Orders (TTOs) / regulations / directions / decisions issued from time to time.
MNP process shall be facilitated for MVNO subscribers through the network (MNP Gateway) of the parent NSO. (b) All regulations, orders and directions issued by TRAI in connection with MNP will be applicable to VNOs.
Baburajan K
editor@telecomlead.com