Escope

Some people wonder why talks about co-location of infrastructure, base station sharing and other issues that will ensure pooling resources or strength among telecom operators have not been felt in the industry, especially in the quest to develop infrastructure.

The Nigerian Communications Commission had in past forums sought a lead as to what operators feel should be or not regarding competition and anti-competition regulation; what the regulator needs to put right or was doing wrong, and ways of an amendment. Operators have been speaking out.

One of the key points is the Unified Access Service license. The problem with operators with Unified Access Service (UAS) license is that it might have turned out to be unfair licensing as they have been granted permission to encroach and crowd some other markets where the operators have not anticipated that a non-licensed operator will play on their turf.  Now, National Long Distant (NLD) Operators have to complain that they only envisaged that competition will be between the licensed 9 operators, not also with the 16 firms with UAS license. This means that 25 firms (plus the two national carriers, Ntel and Globacom) started to compete on the provision of transmission services which NLD operators thought was their exclusive right.

Today, some operators have called for a review of licenses and release of complimentary licenses to enable smaller operators to delve into the marketplace and provide smaller services.

So what is the regulator doing wrong here? Obviously, there needs to be a proper streamlining of licensing and what it allows each category of licensees do. Competition is not only among GSM operators. Now, the issue of having a dominant operator in the Broadband sub-sector is being tackled.

According to the Managing Director of Interconnect Clearinghouse Limited, Engr. Oladele Ayambade jp: “Our challenge is (anti) competition, everybody is sitting in his own compartment, and doesn’t want to share what he has with the other person. This is what is really impeding the growth and spread we want.”

Although the NCC has tried to streamline the operations of various operators under it, it still has a lot of work to do as some of the operators may have found ways of engaging in operations that transcend their licences but can’t be directly attributed to them. For instance, where a telecom (GSM) operator is not allowed to engage in mobile money operation but liaises with a bank to push such an operation, pretending to only provide a platform that allows customers to use its SIM provision as a vehicle, seems to be out of place.

A dominant operator status sometimes is developed out of the share profitability of a competing company. This means that the company is able to expand and cloud over other operators using the resources at its disposal. But a regulator armed with this knowledge will invariably put rules on the ground to curb this. Such rules as mandatory infrastructure sharing, passive and active network sharing, structured legitimate distribution of incentives, among others.

Also, the allegation of non-payment of interconnect debts by some CDMA operators and non-compliance of the Interconnect Agreement, also of NCC’s neglect of such contravention, seem to be in line with anti-competition trends that needed to be addressed. Now that the CDMA operators are almost extinct, there is less heard about breach of interconnect agreement.

This is also why the last mile factor is still plaguing the country’s deployment of broadband services – who will invest there? The USPF is yet to address this issue, hence the call by operators for a re-visitation of the provisions of the fund.

The quest to ensure parity in the system had led the NCC to restructure the USPF and institute the anti-competition guidebook that ensures that operator dominance in the telecommunication sphere is ruled out.

It will be difficult however to determine to what extent an operator’s right should stretch when it has to do with infrastructure leasing or sharing. The problem is that aside NCC’s look into the development of the country’s services via elimination of the dominance threat, there is the underlying aspect of ‘private sector business’. Some operators believe that they have spent a large chunk of their money in setting up infrastructure, and dominance in that area (for as long as it will take their competitor to measure up) will not hurt.

Operators, however, believe that there might not be a need for further enactment of rules, laws or regulations as existing 2003 Act empowers NCC sufficiently to act against anti-competitive and undue dominance threat among operators.

But the challenge will be identifying these threats, determining if they are here and tactfully addressing them without stepping on the rights or license provisions of an operator. It is needful to further review and publish rules guiding infrastructure sharing, colocation, and certain other inter-operator ‘fellowship’ that needs to be regulated.

Some of the things the operators were in agreement on included the fact that the Commission’s subsisting power should be used where there is an identified contravention of rules in competition, that dominance cannot be proven until there is a proper delineation of the market so as to know who plays where and what their licences allow them to do, that there should be punitive measures ranging from suspension of operating licence to payment of fines against defaulting/compensation to aggrieved operators in anti-competitive cases. Some even recommended a special tribunal to investigate and prosecute offending operators.

One of the recommendations or observations of the NCC partner in a research in 2012, KPMG, is the provision and access to Transmission Cable and Backbone Infrastructure Services to stimulate competition in the Nigerian Internet/ Data Market. Good observation! But the NCC will have to find out who should provide the infrastructure, and if the operators provide these infrastructure (against the provisions) what incentive will be accruing to them, bearing in mind that whatever the operators spend (despite their shouts and cries) they eventually pass down to the hapless consumers, both in terms of quality and cost of services.

The bottom-line is that anti-competitive activities by operators should stop, to make room for growth which will cut across all the strata of the ICT industry.

Consequences of Anti-Competition Practices

• Increased costs of providing services culminating in the high price to end user
• Low level of broadband penetration in a case of dominance
• Duplicate Infrastructures where operators refuse to share or increase the cost of leasing
• The barrier to market entry and enhances the quick exit of smaller/ new operators
• Discourages investment
• Little or no return on investments to some operators
• Impacts Quality of service negatively
• Creates a dominant operator
• Brings chaos and disharmony in the market

In the past few years, one of the major challenges ICT industry players have been saddled with is the difficulty in acquiring foreign exchange (FX) to transact their businesses.

No doubt, ICT in Nigeria today is import dependent. It is well understood that the country’s journey to growth is highly premised on its ability to develop its infrastructure. We are still building infrastructure.

Burdened with other inhibiting challenges as power, multiple taxation, investment deficit and unfavourable policies, the ICT industry have made several calls on the financial regulatory body, the Central Bank of Nigeria (CBN) and the federal government to set policies that will engender growth in the industry that is seen as the nation’s next cash cow.

Telecom companies had in the past requested for priority allocation of foreign exchange to telecommunications industry from the CBN since the business is grossly import dependent.

In November 2014, the Central Bank of Nigeria (CBN) excluded ICT equipment from the Retail Dutch Auction System (RDAS), where the exchange rate was N155/$. Operators were mandated to purchase FX from Interbank at the rate of N199/$. The CBN subsequently introduced a floating FX regime at the interbank market and cleared 3 months backlogs at N280/$ and this technically moved the exchange rate from N199/$ to N280.

The CBN subsequently issued another circular mandating Banks effective August 22, 2016 to sell 60% of all FX availability irrespective of source of inflows to the manufacturing sector and the balance of 40% to other sectors. This directive tactically closed FX inflows even from Parent Companies of telecommunication firms, thereby aggravating the impact of the Illiquid FX market on operations and the ICT industry at large.

Following this move, the squeeze on FX became so much that ICT companies like Spectranet, nTel and others had to shelve some of their projects for lack of FX for infrastructure import.

The squeeze also led to increase in operation cost, and with telecom, when they are not able to honour their roaming charges in foreign currency they will be disconnected. Some foreign vendors have issued notice of disconnection, demanding for advance guarantee before they can honour your services since your country is in problem. You now have to prepay a deposit in other to accommodate payment when due.

As the Chief Executive Officer, Spectranet, David Venn lamented: “The major challenge with the dollar drought is that the technology firm has the cash in naira but cannot get dollar to buy to pay for goods and services.” According to him, international bandwidth requisite for the delivery of super-fast broadband internet services and equipment are sourced from outside the country in dollars, therefore the forex squeeze is disorganising the capacity expansion plans of the firm.

Also making a case for the industry, the Association of Licensed Telecommunications Operators of Nigeria (ALTON), led by its Chairman, Engr. Gbenga Adebayo presented reasons why telecoms and ICT as a whole should be considered for priority allocation of FX by the CBN.

According to him, ICT companies need to renew their licences, procure equipment, honour foreign obligation to suppliers and if we don’t do that we can’t improve the quality of service. “We need the foreign currency to services those obligations because we don’t do everything here. In all of these, we can’t increase tariff, we can’t increase rate. We have the disruptive technology OTT that is taking away part of the revenue.” The country do not manufacture equipment such as, RS coverage equipment for BTS, BSC, Core equipment, mobile city centre, Spare parts, Media gateway, Optical fibre, transmission equipment, microwave, Planning tools, customer planning equipment, SIM cards, network tools, among others.

This big challenge has also either killed some ICT companies or turned some of them into unprecedented debtors. Some of them cannot get FX to pay off loans, thereby accumulating undue interest on loans. Also the case of Etisalat (now 9Mobile) was a glaring example of the damage FX issue can cause on the industry.

It is alleged that since the beginning of 2017, no ICT firm has made a major investment announcement to expand network due to the forex issue confronting them.

Investment in ICT can be accelerated if special attention is paid to the forex need of operators in ICT business, how easily they can access it, its availability and rate.

It is due to this funding need that the NCC started contemplating the establishment of Communications Bank, which will be a development bank that will assist in the financing of ICT companies based in Nigeria.

However, in the bid to approve unfettered access to Forex for ICT companies, extreme care should be taken to ensure that the approved forex must be put into infrastructure development. It will be unfortunate if the Forex window is opened and some ICT firms use it as a means of acquiring foreign products that will further kill the country’s quest for improved local content/ patronage drive. It will be abysmal if such forex will be used to import software and other products that could be easily be acquired in the country and sign them off to foreign companies under partnership agreements.

Also, the NCC and other government agencies need to put a halt to foreign currency demand as mode of payment for Spectrum, licenses and sundry charges.

It is very important to ensure that the call to join the global train of countries that are going to use ICT as a driving force and platform to achieve exponential economic growth and global innovative reckoning, should not just be by word of mouth and paper signatures, it also has to do with visible policy changes and walking the talk.

In view of the economic downturn in the country, and with the much bragging in the ICT sector being the cash cow of the economy, and in the light of ICT being import dependent, there is a need for the country to have a closer look at its campaign at attracting investments in the ICT industry.

As the Forex squeeze bites harder, one of the challenges most companies in this fledgling industry have is on funding. Companies have put on hold their infrastructure development projects waiting for investors or funding from financial institutions that are not disposed to lending to the industry.

As at the last quarter of last year, the Nigerian Communications Commission (NCC) disclosed that Foreign Direct Investment (FDI) in the ICT industry stood at over $35 billion.

Both the Nigerian Communications Commission (NCC) and National Information Technology Development Agency (NITDA) have at different forums tried to sell the country’s ICT industry to investors.

The Director General of NITDA, Dr Isa Ali Ibrahim Pantami had at a forum called on ICT investors and entrepreneurs seeking for high returns on investment to have Nigeria as a strong ally. While noting that the business environment in Nigeria is favourable, he further pointed to the quest of the Nigerian Senate to review the tax laws to aid the presidential effort to make Nigeria more investor-friendly.

Also, the Minister of Communications, Adebayo Shittu led an industry delegation to China and after discussions with the investment community and unveiling investment potential in the Nigerian ICT industry, the Chinese investors decided to come to Nigeria to invest about $15 billion into the ICT sector.

In a related development Nigeria’s first indigenous and largest automobile manufacturer, Innoson Group partnered a consortium of Chinese investors to inject $1 billion into Nigeria’s ICT sector.

The federal government has also established investment promotion initiatives that will provide funding for investors that address certain types of investment needs, most notably those aimed at providing broadband access to specific stakeholder groups or communities.

All these are targeted at developing the ICT industry and engendering growth in the economy. But a lot still needs to be done.

Paramount in the investment needs of the industry now, is infrastructure development. As the country moves towards achieving the 2018 target for 30 percent broadband penetration; and the need for funding for infrastructure companies (InfraCos); with the financial challenge in the country’s digital broadcasting migration bid, need for FDI and local funding is of utmost importance.

But also it is very expedient to ensure that we attract local investors into the industry. Banks and other financial institutions should see a reason why they should fund or invest in ICT. Furthermore, every business is looking at bottom line, Return on Investment (RoI). Therefore, it will be a wasted effort preaching the gospel of investment locally and abroad, while policies and practices negate that campaign.

It is high time the federal government looked critically, and with a long term focus, on some of the policies that have over the years threatened investment drive in the ICT industry.

For investment to come from foreign firms/consortium, there should be an assurance that the investments already in place are protected. A situation where policy goalposts keep changing in favour of the federal government will not attract any investor. Harsh economic conditions are already deterrent to FDIs,

Investors need to believe in the viability of projects before they can put their money down.

Efforts should be made to ensure that investor confidence is restored in the industry. Issues relating to multiple taxation, Right of Way, Levies, over-kill penalties and policy strangulation should be addressed.

There is a need to continue putting into focus international events as platforms that are meant to bring foreign investors into the country. Such forums as the International Telecommunication Union (ITU) Telecom World; African Investment Forum (AIF) held in Gulf Information Technology Exhibition (GITEX) in Dubai, United Arab Emirates (UAE), among others, should be used as campaign platforms.

While foreign investors are looking at huge capital intensive projects, local investors can collaborate in establishing ICT parks and other smaller projects.

There should be a synergy, a collaborative effort between the 3-tiers of government and private sector stakeholders; and between teams comprising the federal/state governments and private sector stakeholders versus foreign investors.

This is the time for investment. This is the time for growth initiatives.

​

Communications Commission (NCC) to telecommunications service providers. The warning, over the years, has also been followed with sanctions, penalties and fines to buttress the seriousness with which the regulator holds Quality of Service (QoS).

In telecommunication, quality service did not come with voice service to Nigeria, but we can’t afford to have quality service travel in a separate bus from data service.

Of course, there has been progressive improvement in service quality from the operators on voice. However, the recent warning on QoS by the Executive Vice Chairman of the NCC, Prof. Umar Danbatta was not totally geared at improving the call connection rate or billing inaccuracies; it was, to a great extent, directed at ensuring that data services, which is the next market in Nigeria, do not go through the same process of trial-and-error that voice services went through.

The recent promise to release the 38GHz and 42GHz Spectrum, as well as re-plan the 23GHz microwave spectrum band to facilitate broadband penetration and improve the quality of telecom services as part of his 8-point agenda, is a step in the right direction.

However, what should be at the crest of our minds is that the margin of error with voice cannot be tolerated with data services, every break in transmission could be hazardous. Consistent speed is key.

When GSM communication kicked off in Nigeria in 2001, there was a general feeling of excitement and expectation. As services progressed and spread among Nigerians, overriding social class with pricing and cost, expectations started to shift to quality.

Since then the quality of service had progressively improved, albeit at a rather slow pace. While some may argue that challenges being faced with Nigerian telecommunication services are same as other countries of the world, services such as drop calls are only experienced in areas with known limited coverage. While that can be accommodated, billing drop calls and inaccessible Customer Care (and most times non-resolution of issues) are totally mischievous practice or service to render to consumers.

Also, unfortunately, Nigerians have been made to endure periodic epileptic service from telecommunication operators. Reasons for these are most times never explained to the consumer; rather it leaves consumers dissatisfied after speaking into a phone for several minutes without communication; and the operators smiling to the banks with billings that were never serviced.

Quality of Service (QoS) is an issue that has pervaded in the voice segment of telecommunication. 

However, as the focus turns on data services and broadband as the next thing to happen, quality cannot be compromised. The Voice segment guaranteed communication, but Data is expected to have a broad shoulder to drive socio-economic growth and global competitiveness.

Like voice, we expect exponential growth in data traffic, a transition from information to knowledge society, and as we do this we would not want truncated knowledge. We can bear truncated calls, but not truncated data flow. Imagine a situation where one is receiving data information flow from an important source, or a download, and there is a network cut, entailing a fresh start. Frustrating, isn’t it?

It was obvious that telecommunication service providers were not prepared for the exponential growth in subscription, and therefore had to play catch-up, thereby encountering service challenges. Already, there has been enough warning on the relevance and volume of data to be generated in coming years and the need to be prepared for excellent data services.

A study titled: “The Information Generation: Transforming The Future Today”, conducted by the Institute for the Future and Vanson Bourne indicates that by 2020 more than 7 billion people on at least 30 billion devices will have created 44 zettabytes of data (or 44 trillion gigabytes). 

In Nigeria, operators of data services need to be prepared for the impending data explosion that will come as Broadband grows broader; and fathom innovative ways of ensuring that there is seamless data transmission and storage. They also need to carry only what they can bear. One of the ways, is infrastructure development. It doesn’t need to start now, now is late. 

Looking at the global competitive Index (GCI), a peek into the competitive readiness of select countries globally, Nigeria’s rating is abysmal. Juxtaposed with the ‘successes’ we have recorded in our communications technology sector and the many ‘business talks’ by both the private and public businesses operating in the country on the prospects of the industry, one would realise that there is a missing bridge between the country’s local successes and international relevance.

Recently the 2015-2016 Global Competitive Index (GCI) of the world economic forum, published that out of 140 countries examined, Nigeria ranks an overall 124 behind other African countries including Morocco at 72, Kenya (99),  Ethiopia (109), Cameroon (114); Ghana (119) and Benin (122).

Further breakdown shows the country rated 133 in Infrastructure, 119 in Intellectual property protection, 124 in Internet access in schools and 106 in Technological readiness – behind countries like Rwanda, Senegal, Egypt, Ghana and Kenya

The ranking shows that technological readiness has helped Nigeria shore up some points, but infrastructure challenges has not helped, and needs to be addressed.

In the various sub-sectors of the technology industry, the local successes are most visible, but this is mostly when compared to where the country is coming from, when compared to days of 400, 000 telephone lines, days of lack of access to internet, days of zero innovativeness in the software industry, days of no infrastructure in the industry except that which had been laid by the Nigerian Telecommunication Limited (NITEL).

Today, with industry liberalisation, specific policies addressing specific issues, regulatory firmness, and media watchdogging, among other things, the country has moved several steps away from its former technological dark age to a more illuminated present.

Today, legislative frameworks such as the Communications Act, NITDA Act, Nigerian Copyright Commission Act, Content Development Act, among others have set the platform on which growth can happen.

Also the Ministry of Communications Technology’s National Broadband Plan 2013-2018, Galaxy Backbone’s National Information and Communication Technology Infrastructure Backbone (NICTIB), Federal Government’s Cloud & Video Project, Nigerian Communications Commission’s (NCC) Code of Corporate Governance, National Information Technology Development Agency’s (NITDA) Nigerian Local Content Development in ICT, along with several others initiated by the private sector, the country’s technology industry has been able to climb to unforeseen heights.

The gains of these initiatives and many more efforts at regulation have brought smiles and forward-look to the industry.

With over 151 million active telephone subscribers, and a huge population, the country has the capacity to absorb products and services, and to churn out same.

In the software, internet, e-services sectors, the country has pushed hard to drive the economy with technology, and to show the country’s innovativeness and ability to adapt to new, modern and globally applicable technologies. However, the GCI indicates that lack of protection to intellectual property right is still pushing the country’s software industry down.

Nigerians have been noted to be quick in adopting and adapting to new technologies. The four critical components of today’s global technology that will make and shape the future are Social Media, Big Data, Cloud Services and Mobility. These four are seen as the mega trends in technology…at least for today and the nearest future. And Nigeria is keying into these trends to rise to global competiveness. But so much more needs to be done.

The truth is that the world looks upon us seeing the fast pace in technological adaptation, development and potential, but we are still struggling to be internationally relevant. The fact also is that we have the ability to be globally competitive tech-wise. But we still have a lot of work to do.

Many forums have tried to seek pointers to be globally competitive, but the software industry has led the way in putting Nigeria on a global platform, although we are yet to compete in world-changing software beyond apps.

Going by the GCI rating, although the country has stepped up from its 127^th position the previous year,  the country still needs to shore up in areas such as Training (including for advanced technological skills), Innovations and Infrastructure (including power).

According to the World Economic Forum: “Beyond the vision, enhancing competitiveness is a complex and often protracted process that demands difficult trade-offs, careful consideration for sequencing reforms and room for calibration in changing conditions. Steering the cause towards enhanced competitiveness requires vigilance and commitment from all stakeholders and throughout the process.”