Taking a step towards more efficient use of the existing telecommunications infrastructure, the Telecom Regulatory Authority of India (TRAI) has released recommendations for the entry of mobile virtual network operators (MVNOs).
Defining an MVNO as a licensee in a particular service area, without any spectrum but one that can provide wireless (mobile) access services to its customers through an agreement with a licensed access provider, TRAI recommends that MVNOs should be allowed to operate in the Indian telecom market as distinct service providers with their own licensing and regulatory framework. Further, they should be issued licences under the Indian Telegraph Act.
Since MVNOs will not have spectrum, they should not be permitted to set up radio access networks (RANs)/base station subsystems (BSSs). However, they should be free to choose their business model.
Keeping in view the Indian telecom market, the authority recommends that the commercial model determining the relationship between a mobile network operator (MNO) and an MVNO should be driven by market forces. While the licensed service area of the MVNO should be the same as that of the parent MNO, the MVNO could offer services anywhere within the circle of the parent MNO as specified in the agreement between the MNO and the MVNO.
Separate licences for each service area will be required and will be valid for 20 years. However, the validity of the MVNO licence will depend upon the validity of the licence of the parent MNO; this implies that the MVNO licence will get terminated if the parent MNO’s licence is terminated or ceases to exist.
Taking the eligibility conditions for universal access service licences into account while recommending the eligibility criteria for MVNOs, TRAI recommends that an Indian company that has 10 per cent of the net worth specified for the MNO (Rs 100 million for metros and Category A circles, Rs 50 million for Category B and Rs 30 million for Category C circles) and paid-up capital equivalent to 10 per cent of the prescribed net worth for the MVNO, is eligible for the licence.
Licences would be issued after a letter of intent (LoI) has been issued to the MVNO by the licensor and the entry fee and bank guarantees have been submitted by the MVNO. The MVNO would also enter into an agreement with the MNO and submit the same to the licensor within a period of one month from the date the LoI has been issued. While the financial bank guarantee (FBG) should be equivalent to two quarters’ licence fee, with the amount of the FBG for the first year fixed at 5 per cent of the MNO’s FBG, the performance bank guarantee (PBG) would be 5 per cent of the MNO’s PBG.
While no limit has been recommended for the number of MVNOs attached to an MNO, an MVNO cannot get attached to more than one MNO in the same service area. Moreover, MVNOs would have no rollout obligations.
For spectrum usage charges, TRAI has recommended that the MNO should pay spectrum charges on the revenue of the MVNO or on all payments made by the MVNO to the MNO, whichever is higher. For the purpose of spectrum allotment, the MVNO’s subscribers should be added to the MNO’s subscriber base wherever a subscriber-based criterion is applicable.
TRAI has also suggested that the allocation of numbers, number portability, interconnection with other service providers and roaming be provided to an MVNO by the parent MNO.
Keeping entry barriers for MVNOs low, the regulator has recommended that the entry fee imposed on MVNOs should be nominal and has suggested that it should be 10 per cent of an MNO’s entry fee, subject to a maximum of Rs 50 million for metros and Category A circles, Rs 30 million for Category B and Rs 10 million for Category C circles. However, the annual licence fees would be the same as that for the MNO.
Harmonising the foreign direct investment (FDI) limit, TRAI has recommended that FDI up to 74 per cent may be permitted in an MVNO.
With the Department of Telecommunications expected to release final guidelines on MVNOs this year, thereby paving the way for their entry, mobile telephony in the country will become more competitive, giving users the benefit of lower tariffs.
