White Paper on Virtual Network Operators (Vnos) in India Contents
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MAY 2018 WHITE PAPER ON VIRTUAL NETWORK OPERATORS (VNOs) In India Contents Executive Summary ....................................................................3 Background ................................................................................6 Who is a VNO?............................................................................7 Need for VNOs ............................................................................7 Business Potential for VNOs in Indian Telecom Market .............9 Is VNO a Competitor to Network Operator or Not? .................10 Regulatory and Licensing Framework of VNOs in India ............10 Need for review of existing VNO Licensing Framework ...........12 VNOs Experience in Other Global Markets ..............................18 Way Forward ............................................................................19 2 Executive Summary The time is opportune for VNO model to become and support of the infrastructure providers, a business reality in the Indian telecom landscape telecommunication suppliers/operators for providing given the market conditions as well as regulatory telecom services to end users/customers. VNOs/ environment. The last two years have seen massive MVNOs have a lot of potential in terms of providing consolidation in the telecom market with the customized products for highly penetrated markets, number of operators coming down to about 5-6 in improving penetration in rural areas and Tier2 and various circles and ushering in of a data revolution Tier 3 cities, M2M and Cloud play and a pivotal role and huge uptake in data based services. In such in Digital India and Smart Cities. a scenario, VNOs will be essential for ensuring existence of adequate competition in the market The Department of Telecommunications (DoT) as well as making telecom service more affordable. has opened up the sector for VNOs and issued The VNOs are capable of unleashing a new telecom guidelines for the grant of UL (VNO) vide its letter revolution in the Indian telecom industry and dated 31st May 2016. There are several clauses in taking it to the next level of growth, catalyzing the Unified License - VNO which are directly taken government’s digital initiatives. from the Unified license awarded to TSPs. Most of such license clauses are either not applicable A Virtual Network Operator (VNO) including Mobile or not relevant to VNOs at that magnitude. Some Virtual Network Operator (MVNO) is a Service of the license clauses which entail review and Delivery Operator who does not necessarily own modification urgently for take-off of VNO model in the underlying network(s) but relies on the network the telecom space are pertaining to: S.No. Guideline/License Condition Proposed Change 1. VNOs parenting to multiple NSOs: VNOs are allowed VNOs should be allowed to have agreements to have agreements with more than one NSO for all with more than one NSO for Access Services. services other than Access services and such services which need numbering and unique identity of the This restriction of 10% or more equity cross customers. In UL(VNO) the provision for restriction of holding will not be applicable in case of VNOs 10% or more equity cross holding will be applicable parented to multiple NSO and same should between (i) a VNO and another NSO(other than VNO’s be left to the market dynamics to prevent parent NSO) and (ii) between a VNO and another VNO cartelization and distort the competition. authorized to provide access services using the access spectrum of NSO(s) in the same service area. 3 White Paper On Virtual Network Operators (VNOs) In India 2. Mutual Agreement between NSO and VNO for offering The commercially driven agreement between Access Services: VNO and NSO should come under the ambit of licensing framework to avoid any kind of Clause 1.3 It would not be mandatory for a NSO to delay in access of network and protect VNOs provide time bound access to its VNO, rather, it would from NSOs misusing their economic powers be left to the mutual agreement between a NSO and a by way of seeking unaffordable wholesale VNO. rates and / or unwilling to provide necessary Infrastructure resources essential of VNOs to Clause 27.1 The Licensee shall operate and maintain offer their services to the customers. the licensed Network conforming to Quality of Service standards to be mutually agreed with NSO in respect of For this purpose, Licensor should mandate Network. NSOs to provide time bound access of network at a regulated wholesale rate. Clause 27.2. The network resources including the cost of upgrading/ modifying interconnecting networks to The wholesale rate should have ceiling akin meet the service requirements of the LICENSEE will to the IUC charges regulated under the IUC be mutually negotiated with NSO keeping in view the regulations by TRAI. The ceiling can be fixed orders and regulations issued by the TRAI from time to by TRAI basis public consultation. time. In view of above, the introduction of suitable Clause 32.1 The terms and conditions of sharing of clause in the agreement between VNO infrastructure between the NSO(s) and VNO shall be and NSO may have to be mandated for left to the market i.e. on the basis of mutually accepted safeguarding the subscribers in the event of terms and conditions between the NSO(s) and the VNO. failure of the agreement. Clause 32.2 Sharing of Active infrastructure amongst Service Providers based on the mutual agreements entered amongst them is permitted. Clause 33.2 The Acceptance Testing for each and every interface with any NSO may be carried out by mutual arrangements between the LICENSEE and the NSO involved. 3. Duration of the License: Clause 3.1 The duration of the The License validity period of UL – VNO License of a VNO shall be fixed as 10 years extendable should be of 20 years as prescribed in UL further for 10 years at a time by the licensor unless independent to validity period of parented revoked earlier for reasons as specified elsewhere in NSO(s). the document. The agreement of a VNO with a NSO will terminate with the expiry of the license of either party. 4. Financial Penalty: Clause The financial penalty for UL – VNO applicable for the violation which are their beyond the 10.1 (i) The Licensor may impose a financial penalty not control should be removed. exceeding the amount shown in Annexure-V for each service as per applicable service area per occasion for violation of terms and conditions of license agreement. 5. Exit from Business by VNO: Clause 10.3(ii) For the An option should be available for VNO to services other than mobile, all customers of VNO will migrate its mobile consumers to parented be migrated to any of the tariff plan of the parent NSO(s) on the same tariff plan and terms & NSO without any extra charges e.g. upfront/activation conditions under intimation to the consumers. charges. The mobile services customers of the VNO can port their mobile numbers, using MNP facility, to the service providers of their choice. 6. Way Leave: Clause 14.1 The Licensee Company shall The below portion should be deleted from make, if required, its own arrangements for Right of Way clause 14.1 – (ROW). However, non-availability of the ROW or delay in getting permission / clearance from any agency shall not “However, non-availability of the ROW or be construed or taken as a reason for non-fulfilment of delay in getting permission... this License or the Roll-out obligations, if any and shall not be taken as conditions of spectrum allotment”. a valid excuse for not carrying any obligations imposed by the terms of this License or conditions of spectrum allotment. 4 7. Entry Fee: Clause 18.1 - A one-time non-refundable For the UL (VNO-All Services), entry fee Entry Fee for each authorized Service shall be paid as should be minimal. per Annexure-II. The total amount of Entry fee shall be the cumulative Entry Fee of each authorization subject to a maximum of Rs. 7.5 Crore (Rupees Seven crores and fifty lakh only) 8. SUC & LF: Clause 18.2.1 An annual License fee & The network sharing charges, LF and SUC paid Spectrum Usage charges (SUC) as a percentage of by MVNO to MNO should be allowed under Adjusted Gross Revenue (AGR) shall be paid by the pass through charges to avoid double levy. Licensee service-area wise, for each authorized service Further, SUC incl. USOF should be reduced to separately as per the procedure prescribed in applicable 3% with a glide path to 1%. chapter of UL (VNO) from the effective date of the respective authorization. 9. Deployment of RET: Clause 24.2 - The Licensee shall Energy efficiency (rather than RET) should adopt Renewable Energy Technologies (RETs) for be the focus to achieve reduction in carbon powering the Telecom Network, deploy energy efficient emission. This clause should be removed equipment and reduce the carbon footprint as per from the UL-VNO license. prevailing directions. 10. FDI under the Automatic Route: Only 49% is allowed As part of ease of doing business, automatic under the automatic FDI approval route route FDI approval should be up to 100%. In order to facilitate growth for VNOs in Indian discriminatory and competitively neutral manner. telecom market, Government should ensure The new revolutionary VNO business model will that the suggested amendments in the existing induce fresh kind of enthusiasm in the industry as licensing and regulatory framework should be it will remove the barriers operators face in many carried out at the earliest in a transparent, non- of the telecom circles. 5 White Paper On Virtual Network Operators (VNOs) In India BACKGROUND Virtual Network Operators (VNOs) have evolved globally to create flexible, technology- neutral innovative services and applications providing value addition and differentiation using the basic and bearer services provided by traditional telcos. And now, the time is opportune for VNO model to become a business reality in the Indian telecom landscape given the market conditions as well as regulatory environment.