Mobile_phone_tower_in_the_haor_area (1)

The Telecom Regulatory Authority of India (TRAI) has issued a recommendation for the creation of Virtual Network Operators (VNOs) in the telecom industry. TRAI mentioned that VNOs will not require performance bank guarantees or subjected to rollout conditions since they did not own the network. However, the VNO will be responsible for customer verification and number activation of its customers.

VNOs provide network services to users through a leased underlying network of a Network Service Operator (NSO), which they get at wholesale rates from telcos. They also work as a reseller for telcos, billing directly to its customers without operating technical facilities or tech support, relying on infrastructure providers for both. VNOs buy talktime and bandwidth in bulk to sell it to its users.

The paper (pdf) suggests that the VNO will offer all telecom services under new licenses for a fixed period of 10 years, extendable for another 10 years at a time by the licensor. In case technological developments took place, the license could be reviewed after 3-4 years. TRAI said that it recommends VNOs to provide services of more than one operator (broadband included) and create their own service delivery platform for customer service, billing and value additions.

TRAI also said that there should be no cap on the number of VNOs who could operate in a given service area. The infrastructure sharing between NSOs and VNOs should be left to the market and that services access for sale should be in mutual agreement between both the bodies. Despite this, TRAI or the Department of Telecom will have the right to intervene, when required, in the matter to protect consumer interests.

The suggested entry fee for VNOs who want to offer all services is at Rs 7.5 crore. VNOs who don’t want to offer all services will have to shell out Rs 15 lakh for national level Internet services to Rs 1.25 crore for long distance telecom license. This will be at par with license fees and spectrum usage charges that telcos have paid. Telcos typically pay a certain portion of of their adjusted gross revenues as the fees.

These recommendations will now introduce major or disruptive changes for telcos. It suggests that VNOs will be likely to invest in areas which are less competitive such as “C” class towns or villages where broadband penetration will increase. It lists use cases for small entrepreneurs to become VNOs by providing services to multiple villages in some blocks. It goes to add that Digital India aims at creating infrastructure which will include public wifi hotspots and wifi in 2.5 lakh schools and all universities, which could be provided for through VNOs.

Image Credit: Wikipedia user Balaram Mahalder