India’s Telecom Market to Soon Get Virtual Network Operators
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It seems that the Telecom Regulatory Authority of India (TRAI) and the Department of Telecom (DoT) are all pumped up with their workings, so much so, that all the activity in the telecom market just refuses to die down. Barely a week after DoT released the guidelines for the auction of 3G spectrum in India, allowing even international players to participate, TRAI has now released guideline recommendations for allowing Mobile Virtual Network Operators (MVNOs) in the Indian Telecom Market.
What this means is any telecom company can now start offering their own services through a virtual network, without having to invest crores of rupees for setting up the infrastructure and acquiring the license for the same. This is welcome news for all the small companies and the international players, who would like to eat parts of the growing Indian telecom industry pie. India’s wireless subscriber count recently hit the 280 million mark, with around 9 million subscribers being added in June 2008.
MVNOs do not own any physical network infrastructure and do not have any spectrum directly assigned to them. MVNOs operate by creating their own virtual network using spectrum and infrastructure of the parent company. However, this network is completely different from the parent company. The MVNOs buy talktime from their parent company in bulk and the same is resold under a different brand name. Presently, some of the major mobile network providers in the country are Airtel, Vodafone, Idea, Spice, BPL, BSNL, MTNL and others. Large parts of the country, unlike the metros, have unused or underutilized spectrum. This spectrum can be put to use for these MVNOs.
According to the guidelines released by TRAI, one parent company can have multiple MVNOs operating under its roof. However, one particular MVNO can have only one parent company and can operate in a single telecom circle only. Bilateral agreements between the two companies will be decided on their own, as TRAI has not laid down any guidelines for the same. Although there is no auction, an entry fee of Rs. 5 crores will have to paid by each MVNO. Seeing that the lack of spectrum availability has already marred the 3G auction, I do not see any MVNO covering a large area or the metros. Most MVNOs will target the districts or rural sectors, owing to the spectrum availability and the usage characteristics.
By allowing MVNOs to operate freely in the country, TRAI is trying to improve the quality of service presently offered by the major service providers. Two of the major providers in the country, Airtel and Vodafone cater to 69 million and 49 million customers respectively. With the roll out of MVNOs, the widening gap between the service provider and the customer will be greatly reduced. The roll-out may also trigger tighter competition, thereby affecting the prices for the consumer.
Nipendra Mishtra, TRAI’s Chairman, says that:
In the very scheme of things, this has to be seen as a small model and beautiful model and will flourish if the subscriber sees MVNO as a closer relationship compared to the main parent company.
The Department of Telecom (DoT) is expected to study and finalize these guidelines in two to three months. This, along with the upcoming auction for the additional spectrum for 3G services is sure to create a wave of excitement both in the hearts of telecom operators and the consumers. How each of them is benefited, we’ll have to wait and see.
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The Indian telecom industry is ruled by a few big players. A move like this would certainly allow smaller companies to enter the market.
I believe that this is a watershed development in the Indian Telecom Industry - which will lead not only to possibly even lower prices for the Indian consumer, but also the launch of several operators focused on delivering tailored services to specific demographics. Check out my post on this topic here: http://www.moneyvidya.com/blog/?p=171
Gautam Kshatriya