Virtual network operation : strategy, structure and profitability

Abstract

This report describes and analyzes critical conditions for achieving net benefit from opening the value-chain in telecom by introducing virtual network operators (VNOs). These are facility-less operators that outsource most of basic service production, while focusing on a smaller core business in intelligent network operation, service innovation and distribution. Whereas one essential condition for profitable return is that the VNO is granted significant influence both over service offerings and the price margin between final user price and rental price, this is far from a sufficient one. In addition, several conditions related to transaction attributes, production technology and supplementary resources along with sufficient degree of effective competition and efficient governance, must also be fulfilled.