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Trai Recommends Separate Licence for Virtual Network Operators

traiIndia’s telecom regulator recommended bringing virtual network operators — companies that provide telecom services without owning spectrum or network infrastructure – within a licensing framework and allow them to offer voice, data and video services.

Having such a policy will open the doors of the sector to new players and offer more choices to consumers.

The Telecom Regulatory Authority of India (Trai) recommended that a separate category of unified license be created for virtual network operators (VNOs). It suggested levying an entry fee of Rs 7.5 crore on those who want to offer all services.

For those who don’t want to offer all the services, the fee should range from Rs 15 lakh for national-level Internet services to Rs 1.25 crore for a long-distance telecom license, it said. Trai made the recommendations to the Department of Telecommunications, which makes the final decision.

VNOs rely on the network of other telecom companies to provide services to consumers. Typically, a VNO buys bulk talktime and bandwidth from an operator and then sells it to the users. It can provide any or all the services that are being provided by the network operator.

“The authority has taken a pragmatic view and adopted a futuristic approach, keeping in mind various government policies and programmes, and without introducing any major or disruptive changes to the existing licensing regime for telecom operators,” the regulator said. Analysts said recommendations were progressive as there was still scope for market coverage, which currently stands at 75%.

“This is an opportunity for the consumer-facing business in the telecom and other sectors to leverage existing infrastructure and expand faster,” said Prashant Singhal, global telecom practice head at consulting firm EY. “It’s a win-win situation for both – the telco will get faster and broader access to customers without spending on branding or marketing, while the VNO will get access to infrastructure without significant investments.”

Trai has recommended 10-year validity for the licenses, which could be reviewed after three to four years depending on the technological development and experience gathered. Local cable operators and multi-service providers who may want to offer broadband services will have to obtain a VNO license.

VNOs should be allowed to set up their own network equipment where interconnection isn’t required with a national operator, it said. The regulator wants to leave the terms and conditions on sharing network infrastructure to market forces.

To ensure that revenue to the government doesn’t get leaked, Trai said VNOs must pay government license fee and spectrum usage charge on the same rates as paid by telecom operators. Telecom operators pay a portion of their adjusted gross revenue as these fees.

There should be no cap on the number of VNO licensees in a single service area, it said. A national telecom network operator can have as many VNO agreements as there is efficient utilization of its network.

The regulator said VNOs should not be asked to provide performance bank guarantees or subjected to rollout conditions as they do not own any network. Customer verification and number activation shall be the responsibility of a VNO for its customers, Trai said.

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