Virtual network operators (VNOs) have ev­ol­ved globally to create flexible, technology neutral innovative services and applications providing value addition and differentiation using the basic and bearer services provided by traditional telcos. With the reduction in the number of core telecom operators, VNOs will be essential for ensuring adequate competition in the market as well as making telecom services more affordable.

This has become more important in the context of the penetration and adoption of broadband services, which is imperative to achieve social inclusion goals. With infrastructure sharing being a central feature in the VNO model, the service is likely to address some of the major concerns faced by the telecom industry in India. The major benefits of this business model are:

  • The network service operator (NSO) can optimise its resources by letting a VNO utilise them to deliver services in new markets. The NSO will earn a recurring income from the VNO for utilising these resources.
  • The reseller model creates opportunities for new entrants or helps widen the scope of services offered by ex­isting players.
  • The delivery of new telecom services under the in­­frastructure sharing mo­del will reduce the cost of service delivery. This will benefit end-customers, who will be able to enjoy services at the most competitive prices.

Need for VNOs

Bridging the urban-rural divide

Despite the availability of telecom infrastructure on such a large scale, there is still a wide digital gap between urban and rural India. As per the Telecom Regulatory Au­thority of India (TRAI), India had only 340 million broadband connections as of October 31, 2017, and that too with the current broadband download speed definition of 512 kbps. Therefore, VNOs will be instrumental in narrowing the digital divide between urban and rural areas and will increase broadband penetration and adoption of broadband services.

Promoting competition

VNOs will be essential for ensuring adequate competition in the market as well as making telecom services more affordable. This has become more important in the context of the penetration of broadband services, which is imperative to achieve the goals of social inclusion. The entry of VNOs will also enable faster proliferation of new, innovative services at more competitive tariffs.

Serving underserved and unconnected areas

VNOs are best suited to serve in areas where basic telecom connectivity, internet and broadband services are most needed. They are capable of serving niche segm­ents, underserved and unconnected areas with the support of their parent NSOs, be­coming a key revenue stream for the NSO in the process. VNOs are likely to invest in less competitive areas where telecom service providers (TSPs) have not yet ventured due to a perceived lack of business.

Additional revenue stream for the government

With the ability to roll out services faster and in a differentiated manner, VNOs will open additional revenue streams for the exchequer. Therefore, it is imperative for the government to have a true “light touch” licensing and regulatory framework for the growth of VNOs.

The way forward

In order to facilitate growth for VNOs, the government needs to keep updating the licensing and regulatory framework in line with the structural changes taking place in the market. This will assure the new entrants in the market that their investments will be duly protected and they can compete on a fair and equitable basis. The VNO business model will en­courage enthusiasm in the industry by removing the barriers that operators face in many telecom circles. The proliferation of VNOs will help the government in addressing connectivity issues in rural areas. So overall, it is an opportune time for the growth of VNOs in the Indian telecom market.

Based on a white paper, “VNOs in India”, by the Broadband India Forum