Virgin Mobile, which uses its branding to sell services directly to airline customers in the UK, recently combined with Tata Teleservices in India to target the youth segment. The subsequent controversy, with Indian competitors arguing that the deal was against rules, was resolved as it was a franchise, not the mobile virtual network operator (MVNO) model.
But MVNOs must be welcomed. They offer niche, tailored service packages to suit your data and voice needs— just what the doctor ordered for the demanding yet price- conscious Indian customer. A key question now is whether this should be mandatory—as a consultation paper released on Monday by telecom regulator Trai asks. We say: let the market decide. Facilitate (ease entry barriers) and regulate, but don’t mandate.
Illustration: Jayachandran/ Mint
MVNOs are a globally growing market phenomenon that have enhanced competition and delivered a wide range of services on the mobile platform—at efficient prices as they don’t need to make all the huge investments in infrastructure and spectrum that regular operators do. They use existing networks and buy airtime in bulk to sell both skeletal and premium content-driven services on the strength of their customer orientation and strong branding. So, it’s largely about core competencies meeting customer expectations in urban India.
Since the department of telecommunications (DoT) asked Trai to take up the matter in March, existing players —all own networks and are termed mobile network operators, or MNOs—have publicly doubted the viability of the model in India. Their arguments range from that the market should first see consolidation before allowing more service providers, to likely pressures on already low margins, and limitations in sharing scarce spectrum with MVNOs.
It would be interesting to see how such players view their business plans when MVNOs do come in. As Trai says, that will be a natural progression towards enhancing free-market principles and the efficient use of existing infrastructure. Trai then asks: Should opening networks for MVNOs be mandated, as some countries do, or do MNOs have enough incentive to lease out their spare capacities? It rightly answers: MNOs will voluntarily do so if the services offered by the prospective MVNOs are sufficiently differentiated—with a high degree of product differentiation, the revenue effects outweigh the competition (or cannibalization) effects.
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