How Effective are the VNO Guidelines?
I was going through the recent VNO (Virtual Network Operator) guidelines issued by DoT on 31st May 2016. The guideline is structured almost on lines similar to the existing UL (Unified License) except the following.
a) VNOs are not allowed to install equipment to interconnect with other Network Service Operators (NSOs).
b) VNOs will not have any rights on numbering resources from DoT, and will be dependent on the NSOs to make these available.
c) VNOs can partner with only one NSO for access services and such services which need numbering and unique identity of the customer.
d) VNOs can partner with more than one NSO if condition (c) is not applicable.
e) VNOs will not be assigned any spectrum.
f) Agreements between VNOs and NSOs will be market driven, and DoT will normally not interfere.
Apart from many conditions that are similar to that of a conventional UL (fixed entry fee, legal interception, CAF verification) the most important one is the payment of License fee and spectrum fees at the same rate which is applicable to the parent NSO. Though one can appreciate the intent of keeping the rates at par so as to prevent arbitrage, but given that the present AGR regime will NOT consider payments from VNOs to NSOs as a pass through (allowing deductions while calculating AGR) and therefore it will only increase the overall cost of operations. As per the current rules, the VNO will have to pay LF and SUC on the revenues it generates and then the NSO will have to pay LF and SUC on the share of revenues that it receives from the VNO. Since the VNOs have been envisaged as extending networks to remote areas where conventional operators find it unviable but will the double payment of LF and SUC on same revenues at the same rate not make the operations of a VNO more unviable?
In order to reduce the impact of double payment on LF and SUC, a VNO has to play a more active role in terms owning infrastructure etc, and simply cannot just act as a marketing partner, as in this case the NSO's share of VNO's revenue will increase significantly and so will the impact of this double payment. I will like to explain this with an example. Let's say VNO collects a revenue of Rs 100/- from the customers. It pays an LF and SUC @ 13%. Out of Rs 87/- left, it keeps Rs 10/- (for services rendered) and hands over Rs 77/- to the NSO. Then the NSO pays Rs 10/- as LF and SUC (13% of 77). The total fees paid on account of LF and SUC on the same revenue of Rs 100/- is Rs 23/- (Rs 13/- paid by VNO + Rs 10 paid by NSO). Thus, the payment on account of LF and SUC translates to 23% (77% more than the absolute value of LF and SUC if levied only once).
Double charging of LF and SUC can be mitigated to some extent by VNO paying for the "access network infrastructure" directly to a tower company, as the tower companies currently do not have to pay LF and SUC. This, however, will largely dependent upon the tower company's willingness to roll out in these remote areas as its revenue stream will be challenged by low ARPU consumers and the increased cost of operation. And if they do, why will an operator dependent upon a VNO to roll out service when it has a much larger scale to procure equipment at a lower cost, and can also avoid double charging of LF and SUC?
Though the VNO rules have increased the operator's flexibility to segment its business to one more dimension for the purpose trading, but will it actually help is extending services to unchartered territories? Only time will tell!!.
(Views expressed are of my own and do not reflect that of my employer)
Head - Policy & Strategy,Apple Ex-AT&T,Tatas,Reliance
8 年Agree Parag. Government emphasis has also been on infrastructure sharing so no point duplicating infrastructure where it is not needed. Therefore the AGR definition should permit deduction of bandwidth charges as cost paid to NSO. This will help eliminate double taxation or so called cascade impact which will impact operator sustainability and consumer affordability both are important.
Parag Bhai rightly put this will not work for MVNOs or VNOs for access services for reason of double taxation of license fee/SUC and restriction of parenting to more than one NSO...
Nishith Desai Associates
8 年Parag, good analysis. Let us catch up at a convenient time
Building a billion usd enterprise supporting 10k employees. Connect,Communicate ,Collaborate better leveraging AI.Offering UCaaS,CCaaS,SIP Trunking,Auto Dialer and Inbound solutions to Enterprise/BPOs/ISPs/VSPs globally.
8 年i am not convinced on the VNO model in indian market at least in existing scenario.There is no space for VNOs if you look at the voice and data rates among the lowest globally. The IPLC resales fiasco and no one really picking up the resale license ,DOT yet again is doing the same fiasco under the garb of assuming that this will help in increasing competition and expansion of the markets,especially to the tier-3 cities and vllages. Nothing the OT/Trai Do makes sense.Look at the net neutrality, they left private networks out of it and yet they dont know what to do with it if large network holders want to create differentiating servcies for data speeds/usages etc.The large operator has spent billions and has right to sell what he they wish to sell in their private network.. The WAY DOT took VPN out of reach for all ISPs(majority) was really Bizarre at least Nationa VPNs should have been allowed.
Naveen, As mentioned in my earlier comments, the rationale of allowing pass through is that the operator collecting money from the customer is seen as collecting it on behalf of the other operator who cannot do so due to physical and Adminstrative constraints. Now, if you extent this logic bandwidth charges should also not be allowed pass through, but they are allowing that, so they should allow other changes also then. I do not see the consistency here. The other logic is that if charges are allowed as pass through the operators would not make their own investment (see last TRAI recommendation on this topic), but why should DOT care? As the have roll out obligation in the contract and it should be a business decision of the operator to decrease cost and make services affordable. That is why the current AGR regime needs major overhauling!!