India guidelines for virtual network operators

Jio 4G network
India Government has released license guidelines for opening the domestic telecom market for Virtual Network Operators (VNO).

“After considering the recommendations of TRAI on VNO, the government has decided to grant Unified License VNO (UL VNO),” said the telecom department in its guidelines.

VNOs will be treated as extension of Network Service Operator or telecom service providers and they would not be allowed to install equipment interconnecting with the network of other NSOs.

VNOs shall be allowed to create their own service deliver platforms in respect of customer service, billing and value added service.

A one-time non-refundable entry fee for authorisation of each service and service area shall be payable before signing of license agreement and thereafter for each additional authorisation. The total amount of entry fee shall be subject to a maximum of Rs 7.5 crore.

VNO guidelines

# It should be an Indian company
# Paid-up capital of Rs 10 crore
# VNOs will be allowed to set up their own telecom network infrastructure
# VNOs will not be allowed to set up core telecom infrastructure
# VNOs can create own service delivery platforms
# No restriction on the number of VNO license in a service area
# VNOs can associate with multiple telecoms
# Telecoms cannot offer spectrum to VNOs

Will VNO work?

TRAI feels that VNOs can assist the India government to achieve 100 percent mobile coverage in rural areas by 2020.

As per February, 2015 figures urban tele-density has reached about 149 percent while rural tele-density was 47 percent.

Against a target of achieving 175 million broadband connections by 2017, India has 85.74 million connections in December, 2014 with current broadband download speed of 512 kbps.

Some telecoms opined that introduction of VNO will lead to faster penetration of telecom services besides encouraging lower rates and introduction of new and innovative services including machine-to-machine (M2M) communication services.

TRAI says VNOs are likely to make investment in less competitive areas (like ‘C’ class towns / villages) where NSOs have not ventured. This will increase the rural tele-density and broadband penetration in such areas.

Some telecoms feel that VNOs will not provide any additional benefits such as new services or more affordable tariffs to customers in a sustainable manner. Investment disincentives created as a result of VNOs entry will hamper the growth of network infrastructure which is critical for achieving national goals.

To achieve 100 percent rural wireless tele-density by 2020, Indian telecom sector needs incremental Capex of Rs 80,000-90,000 crore. In India most of the telecoms follow the Opex model, where capacity is scaled up dynamically based on demand. Since VNOs’ existence require sufficient leasable infrastructure, until there is surplus infrastructure set up by existing telecoms there is no rationale for introduction of VNOs.