News From Telecom World

Indian operators embrace the global HVNO brand

Posted on: January 12, 2009

Two deals between emerging operators in Asia have put the spotlight on what promises to be a trend in global managed telecoms services in 2009: hybrid virtual network operators (HVNOs).

Middle East and India users get services boost
In the international virtual network operator (VNO) model, pioneered by Vanco from the UK, the operator does not own its network, but leases capacity from international carriers and local access providers as the basis for providing dedicated managed network services to its enterprise customers.

In the HVNO model, the operator does own some network, but combines it with leased network on the same just-in-time basis, where outlay on new capacity is (in theory) matched with income from new bookings. Two deals in the past month suggest that Asian operators are now leading the innovation in this new form of virtual operator:

Qatar Telecom (QTel) has signed a strategic network agreement with India’s Reliance Globalcom. The two companies will interconnect networks to provide a range of managed services for Qatar-based and international clients.

India’s Bharti Airtel, a mainly-mobile domestic telecoms provider, has signed an agreement with Virtela, a US-based global managed service operator, to use its international managed MPLS capacity outside of India, connecting to more than 5,000 points of presence across 190 countries.

In the Qatar partnership, QTel is effectively joining the extended HVNO family that Reliance Globalcom has been putting together over the last two years through a series of acquisitions including sub-sea cable operator Flag Telecom, metro Ethernet provider Yipes and most recently Vanco.

Bharti Airtel’s new partner can claim to be the original HVNO; it did not build network but concentrated on long leases with a few incumbent telcos (like AT&T and Verizon) to simplify network performance and service quality management. Virtela’s network affords connection points from Southeast Asia to Europe, and gives multinational corporate customers new options on MPLS-based IP-VPN around the world.

The VNO is dead, long live the VNO
The demise of Vanco as an independent perhaps signalled the end of the pure VNO challenge to asset-based carriers. However, the virtual network has moved on. There has never been a single form of VNO, if only because different operators have taken the approach for different reasons (speed to market, cost optimisation, market testing, etc). Significantly, Indian giant Tata Communications is also following the hybrid model and stated late in 2008 that its aim is to be the number one global HVNO.

In Bharti’s case the deal with Virtela is truly a hybrid type of business deal, consistent with the strategy at parent group Bharti Enterprises of partnering with overseas companies across a range of vertical industry sectors, most recently insurance (AXA) and retail (Wal-Mart). In that sense the HVNO model is not a strategic development peculiar to telecoms; rather it copies a partnering strategy that offers brand reinforcement as well as reach and rapid scaling.

However, it is still significant for competition in this sector. Bharti Airtel will now be able to offer its enterprise customers global managed MPLS connectivity and advanced managed network solutions. Virtela has made its name as an alternative to AT&T, especially for mid-sized enterprises in the US that felt they did not get the same support and attention from the incumbent that giant corporations did. So this agreement will give Virtela new customers in India as well as access solutions for US customers with operations on the sub-continent. Qtel can now offer a range of international value-added services to its customers in Qatar, including global Ethernet, full-circuit IPLC, managed services and IP VPN. Reliance Globalcom will add traffic to its global network, but will also get a chance to show users the flexibility and innovation potential of a layered platform-to-services model.

Source: ovum

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