The Communications Commission's Licensing Framework for the Establishment of Mobile Virtual Network Operators in Nigeria: a review

Monday 20 June 2022

Rotimi Akapo

Advocaat Law Practice, Lagos

rotimi.akapo@advocaat-law.com

Introduction

ln an increasingly digital world and fragmented telecommunications (telecom) industry, mobile virtual network operators (MVNOs) are on the rise, introducing new technology and offering value through the support of existing mobile network operators (MNOs).

The Nigerian Communications Commission (NCC), the primary regulator for the telecom industry in the country, recently released the Licensing Framework for the Establishment of Mobile Virtual Network Operators in Nigeria (the ‘Framework’).

The primary objectives of the Framework are to:

  • provide guidelines for MVNO operations in Nigeria;
  • ensure that all stakeholders are properly catered for and protected; and
  • allow MVNOs to contribute to the availability and expansion of quality mobile coverage through redundant capacity utilisation, infrastructure sharing, national roaming and other telecom elements.

MVNO defined

An MVNO is a telecom operator whose services and products are provided on the back of the capacity of a fully licensed mobile telecom service provider or MNO. Paragraph 4.1 of the Framework describes an MVNO as follows:

‘the MVNO reaches a "Wholesale Agreement" or "Revenue Sharing Agreement" with the telecommunications company (Telco) and delivers its services after bulk purchasing resources from the Telco. The defining difference between an MVNO and an MNO is the simple fact that an MVNO has no ownership whatsoever of spectrum elements, irrespective of its operational model.’

In short, the MVNO does not own any spectrum frequency. It instead provides several telecom services by entering into a contract with an MNO that already has a radio frequency spectrum. Depending on the nature of the contract and its capacity, an MVNO may provide any or all of the following services:

  • sell SIM cards and distribution channels, register subscribers, sell and distribute devices;
  • develop an efficient tariff structure, ensuring adequate and accurate billing systems;
  • offer customer relationship management systems, catering to customers’ needs and resolving issues and disputes;
  • application and value-added services, ensuring proper SIM management;
  • operations, meeting quality of service key performance indicators with regards to value-­added and related services;
  • international data and voice services;
  • ensure devices and facilities meet the technical standards set by the NCC; and
  • network access, ensuring quality delivery of mobile telecom services to end users, frequency standards are met for spectrum access, etc.

The Framework provides for a four-tier system, while a fifth-tier unified virtual operator may decide the level of service it desires to offer from tiers 1 to 4. This permits a tier 5 operator freedom of choice to deploy its services in the way it deems fit as long as it has a valid licence.

Tier 1: Services virtual operator

An MVNO under this tier may offer services to its customers without owning any switching or intelligent network infrastructure and does not control numbering resources. The host network provides wholesale capacity to it for delivery of its products and services.

The main differentiator is valued-added services, as they rely on a revenue-sharing model for calls as the pricing infrastructure is strongly tied to that of the host network. The licence subsumes a value-added service provider’s licence and applicable conditions within this licence must be adhered to while providing value-added services.

An MVNO under this tier may run its own short message service centre, distribute and own its own content, as well as offer basic network services, such as voicemail.

The MVNO is free to operate in at least one of the following areas: operate under its own brand; use its own sales and distribution channels; manage device and phone sales; provide limited tariff control; host a customer relationship management platform; provide its own content/applications; host and distribute valued-added services; provide a short message service centre for SMS.

The licence fee is NGN 30m ($71,861).

Tier 2: Simple facilities virtual operator

An MVNO under this tier does not have core switching and interconnect capabilities, but may set up its own intelligent network to provide such services to its customers. If desired, the MVNO may own more of the customer segment than tier 1 operators, with the capacity to establish its own home subscriber register or authentication centre, equipment identity register, and home location register.

An MVNO’s capacity to control its own tariff structure and packages to a high degree allows it to generate its own revenue through traffic from its own customers, but it relies on a shared revenue structure with the host for inbound calls.

In addition to tier 1 areas, an MVNO under this tier may participate in at least one of the following areas: own and issue its SIM; own and operate its own intelligent network; and own and operate a home subscriber register or authentication centre, equipment identity register, and home location register.

The license fee is NGN 65m ($155,699).

Tier 3: Core facilities virtual operator

The Tier 3 MVNO may launch and operate a full core network with switching and interconnect capabilities. While it relies on its host to provide radio access capacity at wholesale level to deliver its products and services to its customers, it generates revenue from both outbound and inbound calls, which gives it full control over its tariff structure. It may also engage in interconnect agreements with other network providers.

An MVNO under this tier is encouraged to target underserved and unserved areas, with subsidised mandates to operate in those areas. The NCC permits an MVNO under this tier to engage in ‘Shared Rural Coverage Agreements’ with its host, which must align with the active infrastructure sharing regulations and guidelines set out by the NCC. Subject to its region of operations, it may co-own and co-manage radio access network elements to provide coverage for underserved and unserved regions of the market

ln addition to Tier 2 areas, an MVNO under this tier may manage at least one of the following areas of core network elements, with switching and interconnections including:

  • an IP multimedia subsystem;
  • mobile switching centre and gateway mobile switching centre;
  • PGSN/Packet Data Network Gateway;
  • serving GPRS support nodes/serving gateway; and
  • mobility management entity.

The licence fee is NGN 100m ($239,536).

Tier 4: Virtual aggregator/enabler

An MVNO under this tier is responsible for aggregating services and/or enabling other virtual operators’ services within the market. It acts as a middleman between the host and multiple MVNOs. It purchases bulk capacity from licensed MNOs and resells to other MVNOs, therefore streamlining the process of negotiating capacity agreements with MNOs.

An MVNO under this tier may determine what level of the value chain it wishes to aggregate. This means that an aggregator can rely on its host for switching and interconnect purposes but control its intelligent networks and content delivery platforms. It is therefore only capable of aggregating virtual operators from tier 2. This enables tier 2 MVNOs to focus on sales, marketing and distribution while it provides a platform on which the tier 2 MVNOs may ‘outsource’ the heavy lifting of business/operations support system processes.

Tier 4 MVNOs are permitted to directly engage customers within an underserved and unserved region through a ‘Shared Rural Coverage Agreement’ with a licensed spectrum owner. Within congested and urban markets, they may only perform the role of aggregation and enabling of tier 2 MVNOs.

The aggregator/enabler is permitted to: install capacity to serve its aggregation/enabling platform as it deems fit; and perform the role of a tier 3 core facilities virtual operator where the region being served is underserved or unserved. A licensee with aggregating permissions may obtain a value-added services aggregators licence.

The licence fee is NGN 150m ($359,304).

Tier 5: Unified virtual operator

An operator in this tier may decide the level of service it wishes to offer, ranging across tiers 1 to 4. lt has the freedom to deploy its services in the way it deems fit, as long as it has a valid licence in line with the Framework and applicable laws and regulations.

The licence fee is NGN 250m ($598,841).

Licencing stipulations

The administrative award of a licence will be made upon application and completion of the requirements stipulated in clauses 6.3(b) and (c) of the Framework. The licence is valid for a period of ten years, with an option to renew for the same term upon the request of the licensee not later than 12 months before the current licence tenure expires. The licensee must ensure that its services are rolled out within twelve months of obtaining its licence.

The licence may be revoked or suspended if the licensee violates the MVNO agreement between itself and the MNO or violates any of the conditions stated in the Framework. The licence may be revoked if the licensee operates beyond the scope of the tier in respect of which it obtained its licence.

An MVNO must enter into a commercial wholesale agreement with a host network operator, which is to be filed with the NCC prior to the application for an MVNO licence. Any negotiation of the agreement is to be completed within a period of 120 days from the commencement of negotiations. Where the MVNO and the MNO fail to come to an agreement within the stipulated timeline, the NCC reserves the right to mediate in line with the current provisions in the regulatory statutes.

A service agreement detailing the terms and conditions for provision of services to the customer must be submitted to the NCC within 75 days following commercial launch. AII services to be provided by the MVNO and MNO must be clearly defined in the MVNO agreement

Licensees are to comply with the provisions of: the National Communications Act, 2003; the Licensing Regulation, 2019; the Numbering Plan Regulations; Infrastructure Sharing and Collocation Guidelines; Type Approval Regulations and Guidelines; Consumer Code of Practice and Regulations; NCC Competition Practices Regulation; and other applicable regulations and guidelines. The licensee is further required to comply with regulatory authorities such as the Central Bank of Nigeria and Corporate Affairs Commission, among others.

The MVNO licence has the following licences subsumed under it: sales and installation licence; value-added services provider licence; internet services licence; and international data access licence. ln effect, the MVNO licensee may provide the services permitted by these licences. Value-added services are a primary differentiator for MVNOs and, as such, the value-added services licence is subsumed under the MVNO licence, permitting an MVNO to host and distribute its own content to customers. Licensees are, however, forbidden from distributing value-added service content created and managed by other valued-added service providers.

Conclusion

The Framework provides an outline for an MVNO agreement but serves only as a guideline to the contents of an actual MVNO agreement (although, there is an expectation that some elements in the outline will be incorporated into a final agreement).

The MVNO is a new phenomenon within the Nigerian telecom industry, and it creates fresh opportunities for subscribers and other stakeholders. It is expected that the implementation of the Framework will positively impact the telecom industry in Nigeria.

Join the IBA

Expand your international network, gain new business and learn about the latest legal developments through IBA digital content and events, with IBA membership. Available for individuals, students, law firms, bar associations and corporations.

Find out more