(with inputs from Salman SH)
State run telco MTNL has been struggling: it has had a continuous streak of losses since Q1 FY15, and reported a loss of Rs 705 crore in its last quarter, with its operational revenue (at Rs 767 crore) pretty close to its loss. Many (though not all) of its privately owned rivals are growing: making profits, and adding customers, while MTNL has the lowest GSM subscriber base among 7 telcos with just over 2 million active mobile connections as of February, and 1.1 million broadband connection. In Q3FY16, MTNL’s cellular (voice and data) accounted for just 20.95% of total revenue. Nothing went well after MTNL’s Rs 6564 crore spectrum purchase during March 2010 auctions.
As an MTNL customer (for both Wireline and Wireless), I can tell you that their service suffers from poor reliability on wireline broadband, very slow repairs when the connection goes down, and spotty connectivity in several parts of the city, although when it works, the mobile data speeds are much better than Airtel’s. They have bizarre rules: for example, a customer needs to give a written application for a change of plan. They need better infrastructure: they’re unwilling to give a connection of higher than 4mbps, though I’m willing to pay for it.
So what can be done?
The need for MTNL has always been one of unbundling the last mile: it has connections which reach peoples homes (and hence right-of-way), and exchanges all across the two cities of Delhi and Mumbai. Instead of MTNL trying to own the customer, it needs to open up, and allow its underutilized spectrum and right-of-way access to be used by anyone willing to pay for it. It should become the infrastructure provider to those who want to create a differentiated service. This is now possible because the Department of Telecom recently (finally) approved the entry of Virtual Network Operators (VNOs).
Looking at Ola as a virtual network operator
A Virtual Network operator is an entity which doesn’t own the infrastructure or spectrum, but is licensed to provide customers service riding on that network.
A Bloomberg report points out that in the almost 60% of the 300 Mobile Virtual Network Operators (MVNOs) operating in the United States are profitable. According to GSMA Intelligence there were 943 MVNOs and 255 MNO sub-brands, as of May 2014. Europe holds more than two thirds of global MVNOs with 579 operators, followed by the America with 128 operators, and Asia with 79 operators.
Lets look at the TRAI guidelines (approved by DoT), in the context of, hypothetically, Ola setting up a VNO, say, for Internet only for users of Ola cabs:
- Ola can control customer service: “be allowed to create their own service delivery platforms in respect of customer service, billing and VAS.” They can restrict usage to only Ola app users, offer them data access as perks for choosing them over their competitors, and look at adding promotions to those using the network.
- Ola can set up their own network equipment where there is no requirement of interconnection with other network operators. For a pure-play ISP VNO, they don’t need interconnection, and can set up their own base stations, which use the telco infra, to address gaps in the network where MTNL is weak.
- Ola won’t need to shell out Rs 7.5 crore for an all-service license at a national level. VNOs can get national level Internet services for Rs 15 lakh, as suggested by the TRAI, but for a metro area like MTNL has, it is Rs 50 lakh (each) as an Access provider, and only Rs 10 lakh as an ISP.
Why Ola? Because it wants to create metropolitan WiFi networks, using taxis as beacons. According to the guidelines, there is no restriction on the number of VNO licensees per service area, and no limit to the number of VNO’s that MTNL can sign up. So, Paytm could use it for its own WiFi (or Internet access) rollout. Google, which is rolling out WiFi at railway stations could also look at signing up. These don’t just need to leverage mobile networks: MTNL has wireline right of way access, and 3.5 million wireline connections in Delhi and Mumbai combined. That’s not great, but it is the highest in the metros, and it’s unfortunate that only 1.1 million of these are used for broadband.
For MTNL, it will mean better utilization of network, customer service will not be its problem, and the money they make can be used to roll out better infrastructure, possibly even finance FTTH rollouts, and maybe even license spectrum. As it is, they’re losing wireline and wireless customers most months.
All it will take, is for MTNL to open up.
As an aside, BSNL could also open up, and this could possible help improve Internet penetration in rural ares. For example, Amotel is an MVNO in Tanzania that inked a deal with a local operator to deploy voice and data connectivity in rural villages of Katavi, Tanzania. Amotel leveraged World Telecom Labs’ Vivada scheme to provide connectivity in a sustainable manner using a 200W solar battery back-up power. The scheme includes a micro GSM base station, WiFi routers and modems, backhaul integration, billing software, VoIP switches and an SMS server—all backed by solar power.