The Telecom Commission earlier last week decided to allow virtual network operators, or VNOs. Now, it will be possible for a company without a telecom licence to offer fixed-line or mobile services. All it needs to do is buy airtime in bulk from incumbents, and then retail it to subscribers. After spectrum sharing and trading, this was another dose of liberalisation that needed to be carried out. The move aims to give more choices to subscribers, and is market-friendly. This is also expected to benefit those telecom companies which have idle networks. Instead of entering into negotiations with a rival, they can sell bandwidth to a virtual network operator. So it broadens the market for airwaves, which needs to be welcomed. The top three telecom companies, Bharti Airtel, Vodafone and Idea Cellular, have no excess capacity and are therefore unlikely to gain from this reform. However, state-owned MTNL and BSNL, which are mired in losses, could gain from the move because it gives them another avenue to monetise their idle bandwidth.
Virtual network operators are usually tech- and marketing-savvy companies which operate in niche segments of the market. Because they are asset-light, their tariffs are often low. Virgin Mobile, Tracfone and TalkMob are some of the top VNOs in the world. The moot point is: Will they be attracted to India, especially when the market is already overcrowded with seven to eight players in each circle? Mobile phone density in urban markets has crossed 100 per cent. Yes, the rural markets offer an opportunity, but those are typically low-paying subscribers. Also, the cost of reaching services to villages is high. Moreover, the industry has gone into consolidation mode, as most have realised that India is a tough market: tariffs are amongst the lowest in the world, while spectrum is expensive. This has led many to contend that the policy has come a bit late in the day.
However, it does open up exciting possibilities for a host of new players to offer niche services. Top retailers and banks could come up with a service for their customers; cable operators could leverage the new set of rules to offer broadband at home. It is also likely to benefit telecom companies in another way. To begin with, all of them had housed their telecom infrastructure, spectrum and subscribers in one company. In the next phase, most of them took infrastructure out and parked it in a separate company, which gave them the opportunity to monetise it. Now, with VNOs allowed, a company could separate its spectrum and customers and house them in different companies, and sell the entire spectrum. It could then purchase bandwidth from others, and become a virtual network operator. This gives companies another option to raise funds. Loop Telecom was left with just customers after its spectrum for the Mumbai circle was bought over by Bharti Airtel in auction last year. Its bid to sell the customers, too, to Bharti Airtel got stuck because of lack of clarity on the issue. With virtual private networks allowed, a company like Loop could continue to service its subscribers - its business continuity would be maintained.
