Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
Recently authorized by Anatel, the Brazilian Telecommunications Government Agency, the two pioneer mobile virtual network operators (MVNOs), Porto Seguro Telecomunicações LTDA and Sermatel Comércio e Serviços de Telecomunicações LTDA (Datora), will face some challenges to meet obligations established by the current regulation. MVNOs are mobile communications service providers that do not have radiofrequency spectrum licenses.
The parameters depicted here can impact significantly the success of a MVNO and are mainly determined by the Brazilian MVNO regulatory model, approved by in the Anatel’s Resolution 550, which allows two kinds of virtual service providers: the credentialed MVNO model and the authorized MVNO model. One detail to pinpoint is that for Brazil, mobile virtual network aggregators and enablers (MVNAs and MVNEs, respectively) are treated identically to authorized MVNOs. The IT and telecom infrastructure chain is irrelevant for Brazilian models, but the fact is that the strict regulation will result in mandatory costs, and the customer certainly will pay for it.
Like brand reseller MVNOs that are allowed by the Brazilian regulation to own infrastructure, credentialed MVNOs currently meets the tributary uncertain of being characterized as a telecommunications service provider in face of the state’s tax legislation and consequently pay from 25% to 35% (depending on the Brazilian state) in taxes, decreasing profit margins substantially. While this doubt remains, few companies are feeling inclined to take the risks.
Authorized MVNOs, such as the insurance company Porto Seguro or like the wireline service provider Sermatel (Datora), will have to surpass some different obstacles in their path. As the service providers they really are, the set of regulation for traditional mobile operators with spectrum licenses applies almost entirely. Bearing in mind two of the regulation sensitive topics that can impact the return on investment, namely the relationship sectors and the key performance indicators, how can they challenge the Brazilian virtual mobile service providers?
Relationship sectors, as defined in the Brazilian mobile communication services regulation approved by Resolution 477, are costumer care stands where personal assistance to the population is mandatory. In relationship sectors, the service provider needs to attend information demands, clarify doubts from the population, and receive customer complaints and service requests from its own subscribers. The regulation allots to the authorized MVNO one relationship sector at each microregion or one per each 400,000 inhabitants in the authorization area. Of course, the implementation and operation of the relationship sectors requires a lot of capital and operating expenditures from the MVNOs.
Anatel’s key performance indicators is another complicated compulsory clause for authorized MVNOs. Besides the information about service quality they need to periodically provide to Anatel, there are targets to achieve, attesting that the MVNOs’ services have the minimum quality standards for their customer.
With the new quality rules for mobile services in Brazil, five quality aspects need to be fulfilled. The first one is the consumer reaction is expressed by indicators about complaints and about call completion rates to the call centers. The second aspect is the network performance indicators, including voice and message services. The third feature is new and related to the data connection performance KPIs. The fourth issue is concerned with user response, and the last one regards the comparative indexes, including opinion surveys and perceived consumer quality. Investments and costs are going to rise for traditional service providers — imagine the expense for small MVNOs launching their commercial operation.
Well, we also have good news. For the relationship sectors, the ownership over this customer care point of presence is not mandatory, so it can be outsourced to the MNO or to other companies. This is also true for the enablers and aggregators, wholesale MVNOS which do not relates with the final customer (MVNEs and MVNAs).
Regarding the KPI, the new quality regulation, published Oct. 28, also establishes that small carriers can be exempt from quality obligations until they reach 50,000 subscribers; this also applies to MVNOs. Furthermore, the network-sharing contract between the MVNO and its mother service provider, the Mobile Network Operator, that needs to be signed before the publication of the MVNO authorization, could comply the collection, calculation and aggregation of most of these KPI, leaving to the MVNO the only obligatory responsibility: The presentation for the regulatory body. This subcontract of KPI supply reduces MVNOs’ investments and operational costs to act in accordance with Brazilian regulation.
Maria Luiza Kunert is a Brazilian telecommunications executive with almost 20 years in the wireless market. Kunert, who has a degree in electronics engineering, has worked for network infrastructure vendors such as Ericsson and NEC and for service providers such as Vivo. Since 2009, she has worked as regulation adviser for Anatel, the Brazilian telecommunications government agency.
