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Case for MVNOs: Optimising network utilisation

May 17, 2019
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By R.K. Upadhyay, Director General, Virtual Network Operators Association of India

A mobile virtual network operator (MVNO) is a mobile operator that does not own the radio spectrum but has access to the radio networks of a mobile network operator (MNO). An MVNO, however, can build parts of the network not requiring the use of radio spectrum, like intelligent networks. As per the guidelines for the grant of unified licences for VNOs (UL-VNOs) issued by the Department of Telecommunications (DoT) in 2016, “One of the strategies for seamless delivery of converged services is to move towards a unified licence regime and facilitate delinking of licence of networks from delivery of services so that telecom service providers can utilise their networks and spectrum efficiently, by sharing active and passive infrastructure and also to facilitate resale at service level by introduction of VNOs.”

Thus, an MVNO provides services under its brand name by “sourcing of services from the pool of telecom resources of the host MNO”, thereby improving the utilisation factor of the MNO’s existing infrastructure, both active and passive.

The MVNO policy offers an opportunity to new players to enter the mobile service provider segment/market without substantial infrastructure investment. It not only facilitates effective utilisation of the network capacity of an MNO but also promotes competition and offers a diverse range of services. This has become all the more important post consolidation in the Indian MNO segment.

Amongst the various factors that impact the existence and operations of MVNOs, regulations are key. Through licensing, a regulatory agency can control market entry into the telecom service sector. A regulated price for market access could also influence the MVNO’s cost. Licence fee, spectrum usage charges and entry fee have a direct bearing on the cost structure of an MVNO’s operations. The profit margins being very low, costs play a critical role in the success of MVNO operations.

Benefits of MVNOs

The proliferation and effective operation of MVNOs is beneficial to consumers, MNOs as well as the government. MVNOs have the ability to provide customised services for niche segments and can offer tailor-made discounts and special plans for migrants, tourists, retail businesses, international travellers and the M2M segment. Further, partnering with MVNOs can result in revenue enhancement for MNOs through optimal utilisation of network resources, optimisation of operational expenditure and realisation of economies of scale. The MVNO subscriber base would increase government revenues owing to an increase in the adjusted gross revenue but, more importantly, it will facilitate better penetration of mobile services in unserved and underserved areas.

MVNOs and Digital India

The Digital India programme has an ambitious vision of the digitalisation of government services. It envisages the provision of digital infrastructure as a utility to every citizen. The twin aspects of accessibility and affordability of telecom services are imperative for this. The National Digital Communications Policy, 2018 also mentions “Connect India” as one of its missions, which relates to the creation of a robust digital communications infrastructure and the promotion of broadband for all as a tool for socio-economic development while ensuring service quality and environmental sustainability.

The introduction of VNOs/MVNOs is an effective way of achieving these goals due to their ability to sell the services of an existing MNO beyond its marketing reach.

Mandating MNOs to host MVNOs

The Indian telecom service sector has seen massive consolidation recently. Post consolidation, only four pan-Indian MNOs have been left in the fray (compared to 12 a couple of years ago). Once this disruption caused due to the new entrant settles down, effective competition may suddenly reduce. In such a scenario, the possibility of cartelisation in the future by the big players cannot be ruled out. To counter such a possibility, it would be desirable to promote VNOs.

In the National Telecom Policy, 2012, the government envisaged a healthy competitive market and the provision of telecom services at affordable prices for all customers. In line with this vision, the Telecom Regulatory Authority of India (TRAI) had issued recommendations in May 2015 for the introduction of MVNOs in the Indian telecom market. DoT had accepted these and issued guidelines for UL-VNOs in May 2016.

In hindsight, it can be conveniently said that the move has been a progressive and forward-looking one. However, the reluctance on the part of MNOs to host MVNOs is evident even three years after the release of the guidelines. This situation needs effective policy intervention by TRAI and DoT. One such intervention could be mandating a certain network capacity to be reserved by MNOs for hosting MVNOs, especially at the time of permitting mergers and acquisitions, as has been done in many European markets.

MVNOs are performing well even in mature markets the world over. With suitable policy support to this nascent sector, there is no reason why MVNOs cannot succeed in the Indian market as well. s

(The author is a retired ITS officer and former chairman and managing director of BSNL and TCIL)

 
 
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