Department of Telecom issues licensing regime Virtual Network Operators

The Department of Telecommunications (DoT) has prescribed the framework for the operation of the Virtual Network Operators (VNOs) in India. The DoT has
issued the guidelines for grant of Unified License for VNO (UL (VNO)) on May 31, 2016, in furtherance to the recommendations of the Telecom Regulatory Authority
of India (TRAI) earlier this year.

The regime for VNOs envisages the situation, where the telecom services can be delivered by an operator, whereas the network can be owned by another operator.
A VNO is treated as extension of Network Service Operators (NSOs) or Telecom Service Provider (TSPs).

An entity which proposes to operate as a VNO is required to obtain the VNO license, on executing the license agreement with the DoT. The UL (VNO) can be
obtained for various services, such as access service, internet service, national long distance service and international long distance service, among other services.
The applicant may apply for any number of services for the prescribed service areas or may also apply for all services on a pan-India basis. The UL (VNO) shall be
issued on non-exclusive basis. The term of the UL (VNO) shall be ten years. However, any subsequently authorized services shall be valid only for the remaining
period of the UL (VNO).

The guidelines have prescribed the detailed financial conditions for UL (VNO). An entry fee for each service authorization and service area has to be paid prior to
signing of the UL (VNO). Additionally, an annual license fee and spectrum usage charges (SUC) have to be paid, as a percentage of the adjusted gross revenue.

Further, in line with the Unified License for telecom service, the UL (VNO) also prescribes that certain managerial positions held by foreign nationals are required to
be security vetted by Ministry of Home Affairs.

In terms of the guidelines, since no spectrum would be assigned to a VNO, a VNO is required have a mutual agreement with NSOs for entering into a network. While,
a VNO may be issued a pan-India or service area wise license, however, a VNO would only be able to service an area within the service area of the NSO, with which
an arrangement has been executed. There is no restriction on the number of VNOs that a NSO can parent. There is no mandate to an NSO for providing time bound
access to its VNO and is left to mutual agreement between them. DoT/TRAI has the right to intervene in the matter as and when required to protect the interest of
consumers and telecom sector.

VNOs are allowed to have agreements with more than one NSO for services except access services and other services requiring numbering and unique identity of
the customers. The numbering range to a VNO would be allocated by an NSO, which have been obtained from the DoT. The VNO can utilize the network codes of
the parent NSO for the purpose of routing calls. However, the customer verification and the number activation are the responsibilities of the VNO.
A VNO shall be allowed its own delivery platforms in respect of customer service, billing and value added service. VNOs have been permitted to set up their own
network equipment, such as Base Transceiver System (BTS), Base Station Controller (BSC), Mobile Switching Centre (MSC) Remote Switching Unit (RSU), Digital
Subscriber Lines Access Multiplexer (DSLAM), Local Area Network (LAN) switches. However, VNOs shall not be allowed to own or install equipment of core
infrastructure, including Gateway Mobile Switching Centre (GMSC), Soft Switches and Trunk Automatic Exchange (TAX). Further, a VNO is not permitted to install
equipment interconnecting any other NSOs network.

With respect to interception and monitoring, in case the equipment capable of interception is with VNO, the obligation to fulfill the requirement of the Law Enforcement
Agencies (LEA) for interception would be the responsibility of VNO.

The guidelines specifically provide that there shall be no direct or indirect beneficial interest between two VNOs in the same service area and also between a VNO
and a NSO, other than the parent NSO.

The DoT has a right to take over service, equipment and network or to revoke, suspend or terminate the whole of part of network in the interest of national security
and in case of emergency. The guidelines also prescribe that the DoT may review the presently prescribed duration of ten years, on the basis of the technological
developments and experience gathered in the next three to four years.

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