richard-brandson-virgin-mobile

They’ll need a license to do this, but now any Indian company can now offer telecom services: the Department of Telecom has issued guidelines on the Virtual Network Operator policy (document). A VNO owns no core telecom infrastructure, but is an entity which can provide their own branded connectivity on top of an ISP or telecom operator infrastructure. They can buy minutes of use, and data in bulk, retail and issue SIM cards and provide services, just by leasing bandwidth from telecom operators and ISPs.

Remember that this has been tried before, though through “franchise agreements”, which technically weren’t VNO’s but were workarounds: Tata Teleservices tied up with Virgin for Virgin Mobile was run on top of Tata Teleservices, and the Future Group tried its hand with T24, which we haven’t heard of since its launch in 2010. This new policy comes when the environment is such that entities such as Ola and Paytm appear keen on launching Internet services and there is less competition than there was post 2010.

Note: If any former Virgin Mobile executive wants to talk to us about challenges in running such services, even if anonymously, ping me at nikhil@medianama.com and +919810310053.

The Lowdown

1. Who can apply for a license and how much will they have to pay? An Indian company,minimum networth and paid-up equity of up-to Rs. 10 Crore (Rupees Ten Crore only), each, in case of a comprehensive license.

India VNO License

Annual License Fee: 8% of Adjusted Annual Revenue (not including pass-through revenue), subject to a minimum of 10% of entry fee from the second year onwards.

2. Crossholding: The wording is strange and confusing: “No one VNO and another NSO (other than VNO’s parent NSO) and a VNO & another VNO in the same service area directly or indirectly shall have any beneficial interest in each other.” Our reading of this is:

  • Two VNO’s in a service area can’t have equity holding (direct or indirect) in each other.
  • A telecom operator can set up their own VNO on their own network
  • A telecom operator cannot have an equity stake in another telecom operators VNO, and vice versa.

2. What can they apply for?

  • Non Exclusive license for 10 years, called a Unified License (VNO).
  • One company can get only one license, but can apply for multiple services and multiple service areas. If a licensed ISP of category C is applying for a VNO license in more than 4 districts, they have to apply for a category B ISP license.
  • Licenses will be pan-India or for a service area, but a VNO can choose to focus on only one area.
  • No spectrum will be assigned to a VNO. They’ll have to use the network operators spectrum
  • There’s no limit to the number of VNO’s in a service area; a telecom operator can have as many VNOs as they want.
  • MOST IMPORTANT: A VNO can tie up with as many telecom operators in a service area for all services other than Access Services, and services which need unique identity for a customer. Update: as per the TRAI guidelines, which appear to be ones approved by the DoT, the VNO can tie up with multiple telecom operators, but only one operator per access service type. This means one service provider for data, one for NLD, one for ILD etc.

4. How long will the license decision take? “so far as practical, 60 days from the application date”.

5. How can they launch? Via an agreement with a telecom operator or ISP (referred to as a Network Service Operator, or NSO). Terms and conditions are a matter of private arrangement between the network operator and the VNO.


Ad from the now defunct Virgin Mobile
6. Telco network sucks. Can VNO’s set up their own equipment? They need to ride on the telecom network, but they can set up their own equipment, as long as it is only for their own networks, and not for connecting to other networks (which can only be set up by telecom operators). So, VNO’s can set up “Base Transceiver System (BTS), Base Station Controller (BSC), Mobile Switching Centre (MSC), Remote Switching Unit (RSU), Digital Subscriber Line Access Multiplexer (DSLAM), Local Area Network (LAN) switches). They can’t set up core infrastructure: “Gateway Mobile Switching Centre (GMSC), Soft Switches and Trunck Automatic Exchange (TAX) or equivalent.”

7. Who does customer service, billing VAS? VNO’s can do their own customer service, billing and VAS.

8. Responsibility of a VNO:

  • Customer Verification (and if not done properly, penalties)
  • Law enforcement requirements (surveillance of calls,messages, Internet access)

We’ll probably see a number of companies applying for a VNO license, but the tricky part here is the relationship with the telecom operators.

For more context on this, a few things for you to read: