Given the number of telecom players India has, and how widespread their networks are, the chances of too many mobile virtual network operators (MVNOs) entering the market are quite poor to begin with. Even so, it is an experiment worth trying, especially since the public sector MTNL and BSNL have lots of spare capacity which MVNOs could help sell. Since MVNOs basically buy bulk bandwidth from big telcos and then retail it, an MVNO policy could also help spread the internet better in areas where large firms are typically not interested in—that is, it could help further Digital India in villages and small towns. Globally, MVNOs have been linked to top retail brands like Walmart and Tesco and airlines like Virgin and Tiger Air—in most such cases, the MVNO also serves as a brand-enhancing exercise.
The problem with the MVNO policy that has been announced, however, is that the costs are prohibitive. The entry fees of R7.5 crore being sought for a 10-year period, for instance, makes this as expensive as a full-blown telecom licence while globally, the rates for MVNOs are near negligible. It doesn’t help that the government plans to charge licence/spectrum charges from both the telco and the MVNO—so if MTNL sells R100 of bandwidth to an MVNO for R80 and the MVNO is able to hock this for R90 at the retail level, the charges will be levied at R80 for MTNL and R90 for the MVNO, making the exercise prohibitive. The reason for this is the fear that were MVNOs to be charged a lower rate, larger telcos may use this loophole to pay the government lower revenues. This, however, is far-fetched since big telcos are unlikely to shift revenues to MVNOs as this will hurt their market capitalisation more. If the government wants MVNOs, it needs to be more realistic.