The Telecom Regulatory Authority of India (TRAI) has issued recommendations on the introduction of virtual network operators (VNOs) into the Indian telecoms market. The regulator acknowledged that whilst VNOs could drive up penetration, minimise the digital divide, and increase competition, in some areas their arrival could prove more disruptive than beneficial. As such, the TRAI has recommended that a licensing framework for VNOs be drawn up to facilitate their introduction, adding that it: ‘is of the opinion that it’s best left to the market forces to determine the optimum business model with regards to VNOs.’ The watchdog is reluctant to use its powers to crowbar VNOs into the market, and has proposed that VNOs should begin operations only through ‘mutual agreement’ with network service operators (NSOs), commenting in a statement that: ‘The terms and conditions of sharing the infrastructure between the NSO and VNO are left to the market to determine.’
The regulator also made it clear that VNOs should not be limited to the mobile segment, suggesting a broader remit, including wireline and broadband networks and stretching to include the installation and operation of their own last-mile infrastructure. ‘In the converging digital environment, where the boundaries between voice, data and video are blurring,’ the TRAI noted, ‘it would be unnecessarily restrictive to confine the services of VNOs to any particular service segment.’ Under the regulator’s proposals, a separate category of licence would be introduced for VNOs, with permissions lasting for ten years and renewable for ten years at a time. Further, there should be no restriction on the number of VNOs per licensing area and VNOs should be permitted to set up their own network equipment, provided there is no requirement of interconnection with other NSOs.
In its recommendations, the TRAI outlined several areas where the introduction of VNOs could provide a net benefit, noting that the wireline segment is dominated by state-owned telcos Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Nigam Telephone Ltd (MTNL) – both of which said they had unutilised capacity on their networks and were open to sharing access to their infrastructure – whilst of the 443 licensed internet service providers (ISPs), the top ten operators had a combined market share of 98%. As a result of the limitations of competition in these sectors, the rural/urban digital divide remained stark, with teledensity in cities reaching 149% at end-February 2015, compared to 47% in the countryside. Advocates for the introduction of VNOs told the TRAI as part of the consultation process that ‘VNOs are likely to invest in less competitive areas where NSO have not ventured,’ which would, in turn ‘increase the rural teledensity and broadband penetration in such areas.’