Welcome VNOs! Get Ready for Coopetition

At the “VNO - Heralding a New Era’, roundtable organized recently by VNO Forum and Voice&Data magazine, stakeholders brainstormed on what would catalyze growth and healthy competition in the VNO sector.

It was way back in 1996, when private players were allowed to enter into the telecom arena along with apprehensions about the way forward, with regulatory and business viability challenges surmounting them. Today, the virtual network operators (VNOs) are at the same cusp when their future is vague, but not bleak indeed.

The history of VNOs goes back to the 1990s, when the concept was first developed in Western Europe. They actually buy bandwidth in wholesale from the licensed telecom operators and then repackage it in the form of voice calls, data packs, etc, to the consumers under their own brand.
In India, VNOs first found mention in the NTP-2012, and earlier this year, the Telecom Commission of India, the top policy making body in the Department of Telecom, paved the way for MVNOs to set up operations in the country.

The Commission approved TRAI's recommendation for VNOs although with some modification. Following that more than 70 applications were received for the VNO licenses and some of the applicants applying for pan-India permit are Datawind, Netraj Technology, Ometa Net Private Ltd, Sistemos Information Technology, Adpay Mobile Payment India, Powernet Communications, Tashee Buildcon, AK Edu Technologies, Intech Infratel and Varoaan Services, among others.

At a recent VNO Forum event—‘Heralding a New Era’, organized by Voice&Data, sponsored by XIUS and Ericsson, industry stakeholders came under one roof to brainstorm the future of VNOs in India that would catalyze growth and healthy competition in Indian telecom sector.

Mentioning about the $4-billion market opportunity the sector provides, Amitabh Singhal, President, VNO Forum, spoke about the ideas to promote and assist in the development of the VNO services at the event. Although, there are several regulatory and policy related challenges such as Unified License guidelines, license fees, Spectrum Usage Charges, among others.

Why VNOs?

Umang Das, Vice Chairman, TAIPA stated that with Digital India and Smart cities concepts gradually gaining momentum in India, VNOs hold a vast potential to bridge the yawning digital divide in the country by providing low-cost services, these concepts not only develop a viable business opportunity for them but can also benefit the consumers.

In fact, VNOs can play a crucial role in making government’s Digital India initiative a success by reaching out to the nook and corner of the country with affordable services. VNOs generally buy the unutilized spectrum and network from the operators and resell it, giving it greater utility with niche service offerings.

“The sector today provides a multi-billion dollar market opportunity, of product diversification. If you look at the model of discounts, bulk data and minutes can be purchased and sold, the market could be huge,” said J S Deepak, Telecom Secretary, Govt of India, at the event. He further emphasised that the network elements of BSNL and MTNL are going to be well utilized with this.

Deepak also added that VNOs are a great way to innovate and there’s a place even for a discount, “while we may proudly proclaim that we have 1 billion plus subscribers, but if we factor in the multiple connections only 60% of population is connected and in the rural areas, the situation is even worse where there are barriers of digital literacy, language, the price being low… is a problem in low per capita income country.”

While VNOs or telecom service resellers are allowed to set up mobile towers and other elements in network required for providing services, but they are not allowed to ink deals to interconnect infrastructure laid by it with other telcos.

Anupam Shrivastava, CMD-BSNL said that VNOs enable telecom service providers to utilize network capacity and share active as well as passive infrastructure in the new $4-billion market opportunity. And hence, this way they can also leverage the telcos to increase their efficiency and capacity utilization.

Allowing VNOs means more choices for the customers at low-rates and with the help of VNOs the problem of accessing the last mile could be resolved to a great extent. Keeping in view the advent of 4G and hardly any innovation that has taken place in this arena, VNOs can come out with innovative data packages. So far, to date the telcos have unveiled voice calling innovative packages and there’s a lot of headroom to include data innovative packages as well. If they partner with multiple operators, they are also allowed to offer voice call service of one telco and data service of another telco.

In India, BSNL and MTNL, which are grappling with their losses and huge manpower costs, are the major telcos willing to extend their infrastructure and capacity to share with VNOs. With these capabilities, VNOs can target $120 million taxi hauling services in India, 200 million agriculture pump sets, 248 million electricity meters, 16 million monthly air travelers, smart cities projects instilled by the Government of India and the huge opportunity that daily entertainment and m-health have in store for the VNO segment, opined Sridhar Lanka, CTO of XIUS.

The Era of Coopetition

It is not feasible for the telecom service providers to understand their customers at a granular level and customize packages as per customers’ requirements and this is where VNOs can play an imperative role by understanding their customers’ needs.

Telcos also find it difficult to enter every nook and corner of the country or say, the hilly terrains, where again the VNOs can play a crucial role and reach out to a range of customers with a gamut of product line.

This will reduce cost of ownership on telecom companies to provide telecom services at more affordable rates," said Satya N Gupta, Country MD, Bluetown.

According to Anil Jain, CGM, (NCNGN), BSNL, “At times, telcos are not able to comprehend customer requirements or needs and cannot offer products to service such requirements. So, it is a very good move where TSP will concentrate on quality of the network and provide the best services to the VNOs. And there’s no restriction stating that only one VNO can start in one area and the operator will not be able to operate in that one service area.”

However, there’s a need of cooperative cooperation between the VNOs and the telcos, but pricing of services is a major bone of contention. According to Sunil Kumar, Director, MTNL, “VNOs have innovative ideas and we have a lot of capacity in landline, a lot of capacity in fibre, what we can do is we can segregate the work and then share the cost according to the work per se.”

However, not only pricing, but there are multiple challenges which are hindering the road for VNOs in India such as unified license, which is required for the entry of a VNO into the market and fees for the same have been kept exorbitantly high, spectrum usage charge, mobile number portability options among others.

At the same time, as the Indian market is heading towards consolidation in the telecom space, the pertinent challenge for the VNOs, is the fact that many of the top telcos do not have spare spectrum to share and keeping in view the business viability challenges, to provide the last mile connectivity, the VNOs have to compromise with low-paying subscribers.

However, mentioning about the immense benefits the customer is supposed to get, Brajesh Jain, Advisor, Citycom Networks: said, “Customer is the king at the end of the day and through increased cooperation, we can have a win-win situation for the telcos as well as for the VNOs.”

Although there are growth challenges for the telecom sector, it is high time, we need to come out of the traditional era and enter the new phase where there’s immense room for coopetition. This VNO forum saw the presence of about 150 delegates. The next Forum meet is slated for November, later this year.