From UL(VNO) License to Principal Telecom Services Authorisation

A comparative briefing for Virtual Network Operators on the shift from the Unified License (VNO) Agreement (Indian Telegraph Act, 1885) to the Telecommunications (Authorisation for Provision of Principal Telecommunication Services) Rules, 2026, notified under the Telecommunications Act, 2023.

Executive Summary 

The Telecommunications Act, 2023 replaces the licensing architecture built on the Indian Telegraph Act, 1885 with a statutory "authorisation" regime. For VNOs, the practical effect is a longer authorisation term, a simplified set of service categories, generally lower entry fees offset by a higher minimum fee floor, more flexible guarantee instruments, a statute-based (rather than license-schedule) penalty framework, and a more codified security and data-localisation regime.

Existing UL(VNO) licensees should plan their migration under the companion Migration Rules, 2026, well ahead of expiry of their current license term. The table below sets out twelve core points of comparison, followed by two additional points we recommend tracking.

Sr. No.	Parameter	Old Framework — UL(VNO) License Agreement (Indian Telegraph Act, 1885)	New Framework — Principal Telecommunication Services Authorisation Rules, 2026 (Telecommunications Act, 2023)	What It Means for VNOs
1	Legal & Regulatory Basis	Granted under Section 4 of the Indian Telegraph Act, 1885; also governed by the Indian Wireless Telegraphy Act, 1933, TRAI Act, 1997 and IT Act, 2000.	Granted under Section 3(1)(a) read with Section 56 of the Telecommunications Act, 2023 — a single, modern, consolidated statute replacing the 1885-era framework.	VNOs move from a contract-based "License Agreement" regime to a statutory "Rules"-based authorisation. Rights and obligations now flow directly from law, changing how disputes and future amendments are approached.
2	Terminology & Nature of Grant	"Licensee" and "Licensor"; the grant is a physically signed bilateral License Agreement with DoT, Sanchar Bhawan.	"New Authorised Entity" and "Central Government"; the grant is an "Authorisation" issued digitally through the DoT portal, following a Letter of Intent.	Less a negotiated contract, more a regulatory permission issued through a portal. Portal-based communications now carry direct legal effect and must be actively monitored.
3	Application & Grant Process	Paper-based application; License Agreement executed in physical form with DoT.	Fully online — application on the portal (Rule 6), Letter of Intent, then Authorisation on the portal (Rule 7); "Digital implementation" (Rule 82) makes the portal the primary legal interface.	Potentially faster processing, but portal-tracking and digital document management become a core compliance function for VNOs.
4	Duration / Validity	Fixed 10 years from the effective date; later-added service authorisations run co-terminus with this period.	Up to 20 years, at the discretion of the Central Government (Rules 10 & 15).	Longer runway before renewal is due — but renewal terms will follow "applicable law at the time of renewal" (Rule 15(4)), so future rule changes can still apply.
5	Structure of Service Authorisations	15 distinct VNO service authorisations under one UL(VNO) umbrella: Access, Access Cat-B, NLD, ILD, ISP A/B/C, GMPCS, PMRTS, VSAT‑CUG, Resale of IPLC, M2M A/B/C — each with its own chapter of conditions.	Consolidated into 5 authorisation types available to VNOs: Unified Service, Access Service, Wireline Access Service (VNO-only), Internet Service, and Long Distance Service.	Major simplification. Many niche old categories (GMPCS, PMRTS, VSAT-CUG, Resale IPLC, M2M, ISP-C) no longer exist as separate VNO authorisations — existing holders must check, via the Migration Rules, which new category their service maps to.
6	Entry Fee (one-time, non-refundable)	Illustrative (Annexure-II): UL(VNO)-All Services ₹7.5 Cr; Access (per Circle) ₹50 lakh; NLD / ILD ₹1.25 Cr each.	Illustrative (Schedule A, VNO row): Unified Service ₹3 Cr; Access Service ₹12.5 lakh (₹6.25 lakh for NE & J&K); Long Distance Service ₹25 lakh.	Entry fees fall sharply (roughly 60–90%) across almost every comparable category — a materially lower capital barrier for new entrants and for VNOs expanding into new service areas/categories.
7	Annual Authorisation Fee / Revenue Share	8% of Adjusted Gross Revenue (AGR), inclusive of the erstwhile 5% USO levy. Minimum fee floor from Year 2 = 10% of the applicable Entry Fee.	Still 8% of AGR (of which five-eighths is now earmarked for the Digital Bharat Nidhi, successor to the USO Fund). Minimum fee floor from Year 2 raised to 30% of the applicable Entry Fee.	Headline rate is unchanged, but the minimum-fee floor triples as a proportion of Entry Fee. Net effect depends on the interplay with lower Entry Fees — VNOs should model both the AGR-based and floor-based fee under the new Schedule A before committing.
8	Financial Security / Guarantee	Only a Bank Guarantee accepted — "Financial Bank Guarantee" (FBG); no Performance BG required for VNOs (no rollout obligation). FBG = 20% of (2 quarters' fee + other unsecured dues), reviewed six-monthly.	Choice of three instruments (Rule 25): Bank Guarantee, an Insurance-company Performance Bond, or a non-interest-bearing cash deposit with Government. Same ~20% formula, reviewed annually.	Greater flexibility in collateralising obligations — VNOs can potentially use insurance bonds or cash instead of tying up bank credit lines, which is friendlier to working capital.
9	Penalty for Breach / Non-Compliance	Fixed rupee penalty caps per service listed in Annexure-V of the License (a contractual schedule) — e.g., up to ₹50 Cr for Access/NLD/ILD/GMPCS, down to ₹10 lakh for smaller categories, imposed directly by the Licensor.	No pre-set rupee cap within the Rules. Breach is dealt with under Section 32 of the Telecommunications Act, 2023 (statutory civil-penalty regime); suspension/revocation/curtailment orders are published on the portal, take effect 60 days later, and require a prior hearing (Rule 81).	Enforcement shifts from a fixed contractual penalty table to the Act's statutory civil-penalty and due-process regime. VNOs should review Section 32 penalty quantums under the Act itself, since amounts are no longer capped inside the authorisation document.
10	Cross-Holding & Overlapping Authorisation	No explicit, codified cross-holding test in the general conditions; restrictions were typically handled case-by-case or via separate DoT guidelines.	Codified "Limitations on cross-holding" (Rule 12) bars a >10% "material shareholder", or the entity itself, from holding beneficial interest in another authorised entity/licensee in the same service and area — with explicit carve-outs for a VNO and its own parent NSO. Rule 8 expressly permits holding one NSO + one VNO authorisation in the same service area.	Clearer, statute-based rules for M&A and investment structuring — useful when raising funding or planning group structures, but also a firmer compliance line for shareholders to watch (the 10% threshold).
11	Security & Cybersecurity Conditions	License-condition based (Chapter VI, Condition 38): national-security cooperation, lawful-interception access, foreign-personnel security clearance, annual security audit (ISO 15408/27001), Trusted Sources/Trusted Products regime (added by 2021 amendment).	Same core obligations continue but are elevated into statutory Rules (Chapter VI, Rules 47–54), with additional explicit provisions: mandatory data localisation for specified information (Rule 44), tightly regulated remote network access from outside India requiring prior Government permission (Rule 53), and a specific power to blacklist equipment manufacturers/vendors/suppliers responsible for a security breach, in addition to civil penalty (Rule 51).	Security compliance is now more detailed and codified in primary rules rather than license conditions alone. VNOs using overseas NOC/support teams or foreign vendors should specifically re-check remote-access and data-localisation compliance.
12	Fee Assessment & Audit Finality	No express limitation period on DoT's power to reassess AGR/license fee in the general financial conditions — a long-standing industry concern around retrospective demands.	Express limitation introduced: assessment normally within 4 years of the relevant financial year, extendable to 6 years only where the disputed amount is estimated at ₹50 lakh or more (Rule 26(10)–(11)).	A meaningful improvement in certainty — caps the Government's window to reopen AGR calculations, reducing the long-tail financial exposure that has historically affected telecom licensees.

Additional Points Worth Tracking 

Beyond the twelve points above, two further changes are directly relevant to VNO operations and are worth flagging separately:

Topic	Why It Matters
Migration Pathway for Existing Licensees	The old UL(VNO) Agreement is silent on transition (it is the framework being replaced). The new regime operates alongside a dedicated Telecommunications (Terms and Conditions for Migration) Rules, 2026, allowing existing UL(VNO) licensees to migrate to the new authorisation, with defined treatment of fees/guarantees already paid and relinquishment of the overlapping old license (Rule 19; Rule 23(5)). This is likely the single most time-sensitive action item for current VNOs.
Point-of-Sale / Subscriber On-Boarding Regulation	The old framework addressed subscriber registration only in general terms (Condition 29). The new framework adds a distinct, more detailed "Point of Sale" regime (Rules 55–57) regulating registration and franchisee-level obligations for SIM/connection sales — an added operational compliance layer, particularly for access-oriented VNOs.

Note

This briefing is based on the Unified License (VNO) Agreement (compendium updated up to 31.03.2024) and the Telecommunications (Authorisation for Provision of Principal Telecommunication Services) Rules, 2026 (G.S.R. 513(E), dated 23 June 2026), both as supplied for review. It is a summary comparison for orientation purposes and is not a substitute for a full legal opinion on any specific VNO's authorisation, service mix, or transition plan.