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DoT approves entry of VNOs in India with Rs 7.5 crore as overall entry fee

cell tower The Department of Telecommunication (DoT) has approved the entry of Virtual Network Operators (VNOs) in India, which will allow them to buy spectrum or infrastructure from existing telcos to provide service under its own brand, reports Economic Times. The DoT said on Monday that it had approved VNO entry into India under the Unified License agreement, with an entry fee of Rs 7.5 Crore for players looking to offer ‘all services’ including internet, and voice.

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—as suggested by the TRAI through a recommendation paper released on May 2015.

VNO Explained: With the DoT nod in place, VNOs will be able to 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. In reality, VNOs can buy talktime and bandwidth in bulk to sell it to its users.

TRAI recommendation of VNO services: In May last year, The Telecom Regulatory Authority of India (TRAI) had issued a recommendation for the creation of Virtual Network Operators (VNOs) in the telecom industry. At that time, TRAI stated that:

-VNOs need to be introduced through a proper “licensing framework” in the country.

-VNOs that wish to introduce services should be allowed to frame their own set of infrastructure sharing agreement after consulting with their corresponding NSOs.

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– TRAI or the Department of Telecom should have the right to intervene, when required, in the matter to protect consumer interests.

– VNOs would 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.

Note that in July 2014, India’s DoT 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)”.

Global VNO outlook 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. Considering the costly spectrum prices riddled with the increasing problem of call drops across the country, introducing VNO in India could change the telecom level playing field in India. Additionally, the report points out that a MVNOs account for 36 million (1 in 10) U.S. wireless subscriptions—doubling since 2009.

While, according to GSMA Intelligence there were 943 MVNOs and 255 MNO sub-brands, as of May 2014. This represented a total of almost 1,200 mobile service providers worldwide hosted by MNOs and MVNOs—up from 1,036 in 2012. Europe holds more than two thirds of global MVNOs with 579 operators, followed by the America with 128 operators, and Asia with 79 operators , added the report.

MediaNama’s Take: With high spectrum pricing forcing most telecom operators to increase tariff, VNOs sharing spectrum with private players seems to be doubtful. Probably the only opening that VNOs could look into is with the state run BSNL that has shown active interests in spectrum sharing and other roaming deals with private telcos in the country.

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Image Credit: Flickr user Michael Dorausch under CC BY-SA 2.0

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