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What Indian Mobile Operators Want From Their MVNOs

Or “We’d like you to be a part of the value chain, but…”

A couple of weeks ago, I attended the TRAI open house discussion on the issue of regulation of Mobile Virtual Network Operators (MVNOs). Strangely enough, there were no MVNOs present at the discussion, and it appears to me that this policy might just be formed without inputs from potential MVNOs. Perhaps the best thing to do would be to have a basic set of requirements for MVNOs, and no licensing or regulation to first enable MVNOs to enter the market, and then involving them in a discussion over policy review.

The following is an overview of the comments made by telcos at the Open House Discsussion, and the comments submitted by them to the TRAI:

We decide who gets the license
Invariably, most mobile operators want that potential Mobile Virtual Network Operators first get a Letter Of Intent from Telcos (MNOs) for a specific service area, before actually seeking a license from the Department of Telecom. This sentiment is echoed by the GSM body – COAI (GSM body), Spice, Reliance Communications, while AUSPI isn’t clear on the licensing issue, saying that there is no need for regulation for MVNOs, since it is on commercial terms. But the overall push appears for be a situation wherein the MVNOs are forced to get an LOI from one telco, instead of first getting a license and then talking to multiple operators. Verizon, however, appears to be of the opinion that there is no sense in adding another license and a license fee, in the value chain. In fact, Verizon believes saying that the government should exempt MVNOs from regulatory obligations applicable to MNOs. On the issue of regulation, most operators believe that there should be “light though” regulation, or none at all. Reliance and TTSL want no regulation. AUSPI wants regulation only in case of a market failure. Orange takes a contrarian view, saying that the government should regulate MVNOs, in order to ensure their success. Most operators want a “Thin/Slim MVNO”:

Hands off our Spectrum and Infrastructure
Almost all stakeholders – AUSPI, Bharti Airtel, Tata Teleservices, Reliance – have requested that the term “spectrum sharing” be removed from the definition of an MVNO; the term implies co-ownership of the spectrum, and will bring in an element of spectrum trading. They contend that MVNOs buy minutes of use, not frequency from telecom operators. AUSPI and Reliance believe that MVNOs should not be permitted to set up their own telecom infrastructure, Bharti diplomatically says there isn’t any requirement. Tata Teleservices is an exception, arguing that that the decision should be left to market forces.

We get multiple partners, you’re stuck with one
If most of the parties – AUSPI, Bharti, Spice and others want – had their way, while a telco would be allowed to tie up with as many MVNOs as they want in a service area, they believe that an MVNO should be restricted to only one telco. Bharti again puts it diplomatically – It will be a win-win proposition for both the parties as it will develop confidence level between MVNO and MNO, avoid anti-competitive behaviour and will promote long term business relationship. This will encourage the MNO and MVNO to grow together rather than at each other cost.” AUSPI believes that two MVNOs of an MNO in a service area should be allowed to merge.
The reason: an MVNO that can work across telecom operators in a service area can actually achieve sufficient scale to compete with telcos (however, improbable). Telcos don’t want to be “just pipes”, and want to prevent any MVNO from achieving scale.

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What will happen if an MVNO fails? Click more

No Security Blanket (What happens if an MVNO fails?)
Globally, few MVNOs have succeeded; one recent example of a massive failure is Amp’d mobile. So what will happen if an MVNO in India fails? Where will its customers go? Operators are mostly divided on this issue – Bharti Airtel believes that customers should be given a choice to switch to the telco, but the telco should not be bound by the MVNOs tariff plans – a failed business plan should not be forced upon a telco, and customers can choose from the MNOs plans. TTSL wants there to be “performance bonds” between the MVNO and held by the regulator, to be redeemend in case an MVNO fails. Telecom consultant Mahesh Uppal also believes that consumer service liabilities should be with the MVNO.
My take – it should be the customers problem, not the telecom operators. If customers buy into a service, and the company goes bankrupt, the onus should not be on anyone to bail them out.

Get Your Own Numbers
Numbers are rationed to telecom operators based on their subscriber base. With the onset of MVNOs, the requirement for numbers will increase. Thus most operators (TTSL, Reliance, Airtel) are of the opinion that TRAI should address the issue of numbering, and allocate more numbers. However, once an MVNO takes certain numbers – the telcos believe that for them it is 100 percent utilization of numbers, and more should be allocated should the need arise. How the MVNOs use them, is their concern. At the same time, telcos want a separate mobile network code for MVNOs, to distinguish them from telco subscribers.

But why this change of stance? Why are mobile operators now keen on MVNOs, where some of them opposed the move when Virgin tied up with TTSL?
My take is that in a market where Average Revenue Per User (ARPU) is continuously declining, MVNOs will have to pay telco at least the existing APRU for that area, if not more. This safeguards the telcos interest. With a large number of MVNOs operating in a service area, a telco can actually transfer his job of maintaining ARPUs and growing the market on to another entity. Like in case of MVAS, they’re probably hoping that more and more players will take the risk where the operator chose not to, and the operator benefits from that risk-taking. What do you think?

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