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India considers licensing Internet content and services by reopening MVNO discussions


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On 7th July 2014, India’s Department of Telecom sent a letter to the telecom regulator TRAI, seeking its recommendations for “delinking licenses for networks from the delivery of services by way of virtual network operators (VNOs)”. The letter also says that the Unified License, which India adopted last year, “may be introduced in two phases with the delinking of licensing for networks from the delivery of services being taken up in a subsequent phase.”

In its pre-consultation paper (download), the TRAI raises a relevant point:

Another point for deliberation could be that today there is no licensing regime for application providers and Over-The-Top(OTT) operators. With the introduction of the proposed model, would those entities also need to take a licence for providing these services?

As we had pointed out earlier, the report on the TRAI is not looking to regulate Internet services appeared to be false. A mobile Virtual Network Operator (MVNO) is a service provider who, without investing in infrastructure, can pre-buy telecom resources like calls, messages (and possbily Internet bandwidth), rebrand them, and provide these to their own customers.

Read: Our complete coverage of TRAI’s Internet Regulation discussions

Delinking Services from Opertors will lead to licensing of services

The TRAI doesn’t really need to ask the question about whether application providers and OTT operators would be covered other this regime. The telecom policy already defines what a Service Delivery Operator is:

The draft National Telecom Policy-2011 issued by the DoT, on 10th October 2011, envisaged two categories of licenses:

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(a) Network Service Operator (NSO) license; and
(b) Service Delivery Operator (SDO) license.

NSOs would be licensed to set up and maintain converged networks capable of delivering various types of services e.g. Voice, Data, Video, broadcast, IPTV, VAS etc in a non-exclusive and non-discriminatory manner. SDOs would be licensed to deliver the services e.g. tele-services (voice, data, video), internet/braodband, broadcast services, IPTV, Value Added Service and content delivery services etc.

It’s worth noting that instead of Mobile Virtual Network Operators, the government now refers to them as Virtual Network Operators, indicating that the policy will not just pertain to mobile companies. The old segmentation of MVNOs (right) is perhaps now just a part of the the VNO definition

 

The separation of services from network operators is also intended to address interconnection issues at an IP level:

This will enhance the quality of service, optimize investments and help address the issue of the digital divide. This new licensing regime will address the requirements of level playing field, rollout obligations, policy on merger & acquisition, non-discriminatory interconnection including interconnection at IP level etc. while ensuring adequate competition.

The TRAI says in the paper “Thus, through its reference the DoT has envisaged the entry of Virtual Network Operators(VNOs) for delivery of services by delinking them from licensing of networks.”

What this means is that companies like Facebook will be able to take a license from the Indian government and buy bandwidth in bulk from telecom operators, and offer their service to customers at zero or low data cost, under the guise of Internet.org, and “bring the internet to the two thirds of the world’s population that doesn’t have it.”

The collateral damage is how telecom operators use this: It allows telecom operators to push Internet companies to bundle data by buying bandwidth in bulk. Remember that while the net neutrality debate globally has largely been about ensuring that some services are not deprecated versus others, in countries like India, where users are willing to wait for content to load (because connectivity sucks anyway), it is more about the cost of access. Services like deeper pockets will be able to make access to their services free or cheaper to use, and that disadvantages smaller startups that can’t afford to pay telcos, and invariably inhibits competition. Most upstarts will not be able to afford unified licenses. Remember that the Facebook recently joined the Cellular Operators Association of India, a telco lobby.

Nothing is fixed yet and the TRAI has raised the question about the nature of arrangements between telecom operators and service delivery operators:

What will be the model of agreement between the two types of licensees? Will it be left to the market or will it be regulated like mandating NSOs to provide services to SDO licensees and mandating charges etc.?

MediaNama’s Take

While we support the separation of content from its carriage, we do not support the licensing of services or regulation of content. It’s likely that this service will end up creating a situation wherein, if you want to lease telecom resources like Internet bandwidth, you will need a license; if you want to offer services over the open Internet, you will need a license. With limited bandwidth and capacity, we hope this doesn’t lead to a situation wherein open Internet access is deprecated because bandwidth has been bought by Service Delivery Operators.

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Other issues raised by the TRAI in the pre-consulation process

– In the proposed licencing framework, based on the VNO model, one issue could be whether the existing TSPs, will have to obtain an NSO licence or both NSO & SDO licences on migration to the new licensing regime?

– A linked issue for deliberation will be about the necessity of changing the licensing regime at all, at such a short interval since UL was introduced.

– Presently there are 7-13 licensees in various service areas. Therefore, another issue for deliberation could be about the need for introduction of more competition in the form of VNOs. Apart from access services, for other services like V-SAT,PMRTS/CMRTS,GMPCS, it needs to be deliberated whether any business case/revenue potential exists for a standalone Virtual Operator for these services.

– In India, the TSPs have infrastructure, including spectrum, which is just about sufficient to cater to their own requirements. Would they really be able to spare their infrastructure for new SDOs?

– It can also be deliberated whether the reference of DoT envisaged an entirely new licensing regime or could be considered to mean that a chapter may be added to the existing UL for facilitating licenses to the VNO.

– Rollout obligations for Service Delivery Operators, and the worry that “there could be a chance that such a regime may attract some SDO licensees who may turn out to be fly-by-night operators.”

– Sharing of infrastructure between telecom operators and service delivery operators: one telco with many SDO’s or one SDO across telecom operators.

–  Therefore, in the NSO/SDO scenario, how would spectrum usage charges be determined? Also, who will pay the spectrum usage charges?
– Allotment for the numbering resources: As there may be many SDO licensees, there will be issues regarding allotment of numbering resources and charges,if any. Proper utilisation of numbering resources will have to be ensured.
– Lawful interception: In case of lawful interception, whom would the security agencies approach, the NSO or SDO of both?

Previous MVNO/SDO regulations

– What Indian Telecom Operators want from MVNO’s in India
– DoT Accepts TRAI Recommendations On MVNOs In India; Who Has The Spectrum?
– TRAI Recommends 20 Yr License, 74% FDI For MVNOs In India; Favours Telecom Operators

NTP 2012
– India’s New Telecom Policy 2012: What’s Changed? Additions & Omissions

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