17th December 2017
Brazil is one of the largest mobile telecom markets in Latin America, and the total mobile services revenue is approximately US$ 20 billion.
The Regulatory authority in Brazil (Anatel) offers two types of MVNO licenses Authorized and Accredited.
The largest MVNO in Brazil is PORTO SEGURO CONECTA, which belongs to the group PORTO SEGURO. This MVNO started its operations in the year 2012. PORTO SEGURO CONCECTA uses Telecom Italia (TIM) infrastructure to provide M2M automotive tracking services to its parent company, the Brazilian insurance giant Porto Seguro. Porto Seguro Conecta currently has 517,582 customers (June 2017) throughout Brazil.
The first company to start its MVNO operation in Brazil was DATORA TELECOM. Datora Telecom operated as a Mobile Virtual Network Aggregator, or an enabler company for new players entering the market as Accredited, data wholesale and M2M connection services.
Some companies have evinced an interest in entering the Brazilian MVNO market and are at different stages of starting their activity in the country.
These are some of the well-known MVNOs in Brazil.
Surf telecom is the notable MVNA in Brazil, Plintron has partnered with Surf telecom to launch MVNO businesses.
Magazine Luiza - Surf Telecom will also be providing platform and support services for the upcoming MVNO from Magazine Luiza. Magazine Luiza is one of the largest Brazilian retailers, having headquarters in the city of Franca, in the state of São Paulo. It has more than 800 stores located in 16 states of the country and a strong e-commerce operation.
In recent years, many MVNOs have been launched in Brazil, and there has been a very sharp increase in the MVNO customer base as well. The MVNO market in Brazil is expected to flourish in the coming years. Brazil has the potential to become the biggest MVNO market in Latin America.
10th November 2017
The Mobile Virtual Network Operators are classified on the basis of how the value chain is structured between the host telecom operator (the MNO), the MVNO and the MVNA or MVNE, if present.
There are three main business models. They are-
Branded Reseller – This is the lightest MVNO business model, where the MVNO just provides its brand and sometimes its distribution channels to the MVNO operation. The MNO provides the rest of business, from access network to the definition of the mobile service offer for the MVNO customers. This is the model that requires the lowest investment for a new venture, therefore this model is very fast to implement. The major issue with this model is that the new MVNO venture has very limited control in the operation. Branded Reseller models are often adopted by brands, whose core business is also in telecommunications, or by MVNO businesses, who prefer to let the host telecom operator manage most of the aspects of the daily operations and business.
Full-MVNO – This model is the most complete venture for a new MVNO. The MNO just provides the access network infrastructure and sometimes part of the core network only. The MVNO provides the rest of the value chain. This MVNO business model is adopted by telecom players that could gain synergies from their current business operation. Full MVNOs usually partner with a MVNE to manage the network operations and technology and often with a MVNA who can provide the MVNO operations with wholesale access and capacity. MVNEs are third party providers focused on provision of infrastructure and support services that facilitate the launch of MVNO operations. An MVNE can be positioned between a host MNO and MVNO venture to provide services ranging from value added services, Business Support Systems and operations. Mobile Virtual Network Aggregators (MVNA) provide all services of a MVNE and in addition - they aggregate network capacity and access from one or different host MNOs, for resale to MVNO brands.. MVNE models range from telco-in a-box offering where the MVNE just offers core network, value added services and back office services to a full MVNE.
Light-MVNO – This model is an intermediate between a branded reseller and a full MVNO. This model allows new ventures to take control of the marketing and sales areas and in some cases, increase the level of control over the back office processes and value added services definition and operations.
Depending upon Business Requirement, Regulation, Industry and available Investments –aspiring MVNO businesses select a suitable operating model, to launch.
30th October 2017
Persisting Gap in universal mobile coverage
Globally the MVNO industry plays a key role in ensuring that mobile services remain affordable even to the poorest sections of the society and to customers in unconnected areas. MVNOs are usually able to serve customers at lower costs, compared to the MNOs, and it is often possible for VNOs to profitably acquire and serve customers even in remote areas, or who remain unconnected today, because they are unable to afford to purchase Talktime and data.
As of 31st July 2017 – As per Telecom Subscription Data in India
380m Indians in Rural areas are still unable to avail mobile connectivity – mostly because of lack of affordability.
Similarly even in urban India, despite the teledensity of 168.2%, there are lakhs of urban poor who are unable to afford mobile connections, and it is seen that there are at least 500m potential customers in rural India still outside the ambit of mobile connectivity.
Global Scenario and Case Study
USA LIFELINE PROGRAM
Any American who is part of any of the below government schemes are eligible for a lifeline sponsored connection.
The program aims at providing one connection per eligible household
Potential Role of USO fund for similar program in India
DoT (Department of Telecommuncations) has been collecting a percentage of revenue from all licensed telecom operators in India, and has been using this fund to further various communication inclusion initiatives of the government.
Some of the key projects funded are –
Similar to other countries – the USO Fund can potentially be used for funding the cost of budget smartphones and a simple basic monthly subscription plan. This need can be addressed through VNOs.
7th October 2017
In 2013, The European Telecommunication Commission proposed to abolish all roaming charges within the European Economic Area (EEA) and abolish roaming charges. This was decided to be implemented in a phased manner.
From May 2016 – a maximum surcharge for roaming services was imposed (which may be levied by the operators in addition to domestic charges.) This replaced the earlier system of price caps. From June 2017 - the roaming surcharges were completely removed and all operators were asked to subject to “Roam Like At Home” (RLAH) tariffs – i.e the charges for Voice calling, SMS and Data while roaming were exactly the same as levied while at home. To curb abuse and excessive cross-border usage of SIMs – a fair usage policy was mandated.
Alongside this, the wholesale prices paid by operators to each other, for allowing subscribers to roam on the networks of other operators were also capped. However since mobile operators still have to pay for wholesale charges when subscribers are roaming on other EEA networks –while no longer being allowed to pass this cost on to their customers –several operators have reported financial and operating pressures. The voice and data traffic in roaming scenario has sharply increased – since there is no longer any premium pricing on roaming usage.
In response some operators have increased their subscription prices. Some of the first operators to react were in the Scandinavian Countries, where the proportion of voice and data usage in roaming was already high, and increased further with RLAH. Operators increased prices in Norway, Sweden and Denmark or removed roaming capabilities altogether on several low-priced packages. Customers were then required to additionally purchase a roaming pack to avail roaming facility. Telenor’s businesses in Sweden and Norway reported multifold increase in data traffic in roaming.
Other Operators are approaching their regulators with requests to be allowed to continue to impose surcharges. The regulation allows exemptions if they can credibly substantiate to the national regulators that they are unable to recover their “actual or projected costs” of providing roaming services on RLAH basis.
Some operators responded by ‘throttling’ or degrading the data speeds temporarily in an attempt to reduce the data usage by their subscribers while roaming. Few others like O2 Germany required the customers to “opt-in” to the RLAH tariffs, by sending an SMS. However the European Commission has held this as misleading and unnecessary.
MVNOs have protested that while customers are now paying the same rates in home and roaming, the telecom operators including MVNOs are still required to pay wholesale rates to their telecom roaming partners. The association of MVNOs- MVNO Europe- has pointed out that MVNOs will end up seeking derogations from RLAH and still applying surcharges for roaming.
Though it is still very early to study the impact of the RLAH in detail – the measure has seen very enthusiastic adoption from customer. The multifold increase in consumption of data and voice on roaming is testament to that. International roaming in Europe was always held to be expensive historically, and hence RLAH is viewed very favorably by the subscribers.
On the operator side – most operators have welcomed RLAH implementation as a customer friendly move. The provision of adequate safeguards for derogations and exemptions, as well as allowing the flexibility to reconfigure their customer tariff offerings individually to minimize the impact on their profitability ensures that the operators will be impacted in the short term, but are likely to benefit in the longer term – through higher usage, and lower wholesale pricing.
16th September 2017
Currently all telecom operators in India pay each other 14 paise (around 0.2 US cents) for all inter operator mobile to mobile calls. This was fixed by the Indian regulator ‘TRAI’ post consultation with operators.
The latest entrant to the Indian telecom industry – Reliance Jio- has been pushing for movement to a “bill-and-keep” regime, and abolishing of interconnection charges (“IUC.”) Reliance Jio alleges that the other incumbent operators have been levying unfairly high interconnection charges on it, and on each other. It claims that all the operators have seen sharp increase in call volumes and traffic, and hence it is time for India to move to a zero interconnection charges regime.
The competing incumbent operators including Airtel, Vodafone and Idea Cellular, claim that even the current charge of 14 paise, is insufficient to cover the actual costs of carrying voice traffic on their networks, and make a case to increase this to approximately 0.3 US cents per minute. They argue that lowering of interconnection charges will only increase the financial stress on the sector, and unfairly favor newer operators like Reliance Jio, whose traffic to their networks is much higher, than the traffic from their networks to Reliance Jio. The regulator has heard out claims from both sides, and is expected to pass a ruling in the next few days. Most analysts and commentators expect that the Interconnection charges may be reduced from 14p to approximately 7p (0.1 US cent) as a short term measure, and then progressively reduced to zero over the next few years.
Reliance Jio is the only Indian telecom operator with an all IP network- and is currently offering highly discounted voice calls and data to its customers. It has captured more than 120 million customers within a year of launch and severely denting the revenue and profits of the incumbent operators. This has led to turmoil in the sector, with most players already heavily indebted because of high investments in spectrum purchase and network rollouts in 4G and 3G.
In the midst of all this, the Indian MVNO industry is also gearing up for launch of India’s very first few MVNOs. Prospective MVNOs in India are keenly watching the developments as any changes in the interconnection charges will directly impact the viability and profitability of the MVNO sector as a whole. With the first few wholesale purchase agreements being signed off, the MVNO industry is at an inflexion point, and clarity on the interconnection rates will help the industry become viable and stable.
The International Telecommunications Union (ITU) has stated that interconnection rate policy should be fixed with a view to maximizing economic welfare. It is clear that Indians have enthusiastically embraced high speed broadband data access – leading to India’s per capita data consumption increasing sharply each quarter for the last 4 quarters. This has led to significant social benefits for India’s by “democratizing” access to high speed internet, and a wide variety of facilities through the mobile- spanning m-education, m-health, m-banking, travel and transport, m-payments etc. This widespread use of mobile communication technology to achieve gains in social objectives has been a cornerstone of the present Indian government’s ‘Digital India’ drive. Hence there is a need to keep costs (to end customer) as low as possible while at the same time, ensuring that the industry remains viable and there are incentives available to telecom operators to continue making CAPEX investments.
27th August 2017
In 2014, the Mexican government under President Enrique Pena Nieto passed a new Telecommunications and Broadcasting Law (called the “TBL”) with the goal of increasing competition in the telecommunications (and broadcasting) sectors. The “TBL” was widely viewed as a measure to curb the dominant position of Telcel - Mexico’s incumbent telecommunications player with a market share of more than 60%.
The key measures under the “TBL” were-
Telcel was obliged to provide interconnection on a non-discriminatory basis, unbundle its fixed local loop; share passive infrastructure, host and support MVNOs, sign roaming agreements with competitors, and most importantly – be subject to asymmetric interconnection and mobile termination rates.
Under TBL – Telcel was designated as a ‘preponderant’ operator, and hence it was STOPPED from levying IUC charges on the other operators. However other operators (Telefonica, AT&T and MVNOs etc were still allowed to bill Telcel.) This ruling was contested in court by Telcel citing that FREE termination impacted "cost recovery, economic stability and financial balance” of Telcel.
The Mexican Supreme Court of Justice, granted an injunction to Telcel against the prohibition on Telcel to charge other carriers for termination services on its network. The Supreme Court has asked the IFT to determine the interconnection rate that other telecom operators need to pay Telcel, and impose it from January 1, 2018. However the other operators needn’t pay IUC charges to Telcel retrospectively. The IFT is yet to determine the IUC rate for Telcel.
World-over asymmetric IUC is widely accepted as a tool, leveraged by regulators and governments to curb market dominance of large incumbent operators. Several countries have implemented this, to reduce the entry-barriers to the telecom business, as well as improve viability of MVNOs present in that market. Several markets have seen the rise of MVNOs as a result of regulators stepping in, and promoting free and fair competition by imposing asymmetric IUC on incumbent operators (alongside terms to compulsorily host MVNOs etc)
With the imminent launch of the wholesale network ‘Red Compartida’ – The Mexican market will become much more competitive as the other telecom operators as well as several existing and new MVNOs can launch OR expand their coverage through it. Telcel and Telefonica already are hosting MVNOs, and are likely to host even more.