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Patronage, Competition; Our Sector’s Greatest Challenge – Interconnect Clearinghouse Boss

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The country’s telecommunications sector has grown by leaps over the years, however, modifications to policies and enactment of new policies continue to drive further development in the sector. The Clearinghouses are meant to serve as links or bridges for effective termination of calls and provide a platform for all operators. In this interview with CHIDIEBERE NWANKWO, the Managing Director of Interconnect Clearinghouse Nigeria Limited, ENGR OLADELE AYANBADEJO, talks about himself, the company, the challenges facing the sector, and way forward.

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How Big Would You Consider The Market space for Interconnect Clearinghouse Nigeria Limited  (ICN)?

The market space for ICN had always been there. From my experience, because I worked extensively with NITEL, we were their contractor, the interconnectivity of the various operators was provided by NITEL. And when NITEL went under, this vacuum was there. And this vacuum was what ICN came to provide, to provide the connectivity for the various operators. And another thing which it does is that, for new entrants, it makes coming into the telecommunication arena simpler and easier. You can imagine, people get what we can Private Network Licenses for specific areas; they have subscribers who want to call all the networks in Nigeria, what it means for them is that they need to make connectivity with every other operator. So for them the connection to ICN, one single connection, takes them everywhere. And for us, we are independent, meaning we are not affiliated to any of the telecom operators, in the sense that we don’t have shares or interests in any of them; al we do is that we provide a seamless interconnectivity with them. So we don’t have any reason to make one of them look bad, we only provide interconnectivity for them.

We are the largest, I can tell you. We have all the MNOs, we have PTOs, we have all the ISPs and this is not common practice with our competitions. We are the largest in terms of the number of people that have access to our network, and we have spectrum. We have multiple switches, we have five Switches in Lagos. I don’t know what others have or how many they are doing, but in terms of clout, I know we have an edge over all our competitions.

What Will You Consider The Greatest challenges Facing Clearing Houses?

The greatest challenge facing Clearing Houses in Nigeria is patronage. Our regulator in its wisdom established the Clearing Houses. It is like you open a shop, and stock up and nobody is buying from you. We have invested so much money in this, we actually want to expand to more locations; but we need to sustain what we already have. We have the capacity to handle close to 100 million calls per day, but we are getting less than 10 million calls per day. So, our utilization is less than 10 percent of our installed capacity. According to what NCC says, we need to have more spread. But how do we have more spread when we don’t get patronage.

The thing is that the operators, majorly the mobile operators, continue to come with the excuse that they spend money to interconnect with themselves. When NITEL went down, NITEL used to do the interconnect for them, but over the years, we have taken the business over. So they need to send more traffic to us so that we can invest in more areas. All they need to do to drive this business is to draw a KPI target in an SLA. And we will work with it. So the biggest challenge we have is patronage.

There is a mandate from NCC that the operators pass 10 percent of their traffic through Clearing Houses. But the ambiguity of this is this, what is the 10 percent of the traffic? You must have a view of what the hundred percent is, to be able to know what the 10 percent will be. They pass some traffic through us and when you ask they will say the other traffic has gone to the other Clearing Houses. So, you need to have a summation of all the traffic they pass through the Clearing Houses. And after this, you have the summation of what is available for you to know if they are actually passing the 10 percent through the Clearing Houses.

Let me give you a brief about this. It is a commercial decision. Where we are having challenges with the mobile operators is that the Clearing Houses are constituting an additional cost to them. If the termination from one network to another is N3.90; if they pass their calls through the Clearing Houses, they are supposed to add 55 kobo, which is our transit fee to it, so it has now become N4.45 for the same thing that when they connect peer-to-peer, like MTN-Airtel, they pay only N3.90. What we are asking the regulator to do is this, make the Clearing Houses a least cost route. If they pass through us, let it be like N3.00, so that when we add our 55 kobo, it will be N3.55.  With that, we are cheaper than the peer-to-peer cost. It is an economic decision for them to pass through the Clearing Houses. They need to make the Clearing Houses a least cost route. You can give a mandate tomorrow of 20 percent, the operators will feel you are making them pay additional money coming through the Clearing Houses. But if you make it an economic decision in such a way that this side is cheaper for them, what will happen is that we will all sit down and define a Service Level Agreement (SLA) in which they will state at least 10 Key Performance Indicators (KPI) and say I want this, I want that. And we can distribute their traffic to reduce their utilization concentration. With this patronage, we can make more money and we can invest more.

When PWC came around collecting data from operators, we gave them and told them what we wanted. But when the NCC came out with the position, we were shocked at the position they came out with.

One thing which I see, because of my expertise and experience working overseas, is that Nigeria is a unique place, some of the people you are asking to do this evaluation for us have no inkling or idea about the way Nigeria is. It’s like the way our politics is being run; some people don’t understand the way Nigeria is; when we talk about stakeholders, you just sit down somewhere and take decisions, you don’t carry along the people that will make those things work, then that decision is dead on arrival. So when the NCC presentation was made we asked them, where is the Least Cost Route? And there is nothing like Least Cost Route there.

Interconnect Clearinghouse was the first to be licensed. And in their wisdom, they licensed more, but that is okay. And the operators agree with us on the least cost route. They know it is better because we are a neutral ground. And one thing we have always told NCC is that whatever data these people are giving you, compare it with the data we give you and you will get the true position because we have no affiliation with any of them. This is because when a network wants to make the other network look bad, they know what to do to achieve that. Even when they want us to look back, they can do what they call ‘call gapping’ and the calls we send to them will keep bouncing back. This is where the regulator needs to put its feet down.

For instance, in Iraq, mobile operators do not interconnect to each other at all.  They connect through the government, there is a government switch everybody connects to. If you are coming from other countries also, you connect to the switch and you are interconnected. The operators only connect directly to their local subscribers. Government is able to monitor everything going on.

NCC needs to take a definite stand on this. The operators are in for business, and to be fair to them, they have invested a lot.

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What is ICN’s Market Competitive Advantage?

Part of the things we are providing for them, which a lot of people don’t know, is Gateway. From Legacy to NGN (Next Generation Network). There are a lot of people in Nigeria today that still have old equipment. They want to connect to NGN. They are coming from TDM and connecting to IP networks. Clearing Houses are doing this for them. I can tell you, Smile they are connecting Voice Over LTE, but they are able to call other networks, and we are doing that translation for them here. First, they come with jumbo packets, those packets we cannot convert to the smaller packet, but we ask our Switch people, our vendors and they say they can do it. In the beginning, Smile was not able to connect to smaller operators, but now they can. And we are doing this for them. If Smile have to do this, they will have to do it with so many other operators. And these are the investments we make. My challenge is that NCC is not seeing this, and they are not looking at it that we are a purely Nigerian company and when we expand we employ more Nigerians. Interconnect Clearing House, we are not just a Clearing House alone, we are also doing hosting. We are providing hosting services for Value Added Services operators because a lot of them want to connect to the mobile operators. But is VAS operator comes to MTN, they will say go and bring your server and put it in my location, and if they want to do with Airtel, Airtel will say the same thing. Some of them, their revenue is not up to N100,000 and you want them to buy a million naira server and put in three locations. But if they have a server here, we provide connectivity for them to all the networks. And their server in here can be managed remotely by them at home. We have connectivity to all operators.

What Constitutes Barriers to Growth In This Industry?

The biggest challenge we have in Nigeria is this thing we call competition. Competition is the greatest barrier here, and it is the biggest barrier restricting innovation. What we need to understand is that collaboration means that there is an area where you are good and there is an area where I am good and we can share.

Our challenge is 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. I will give you an example; the connectivity from Lagos to Ibadan. The connectivity is mostly along that road, but what stops one company from doing Lagos-Ibadan expressway, and another company do Lagos-Abeokuta-Ibadan, and another company do Lagos-Epe-Ijebu Ode-Ibadan; they spread down the transmission capacity on that road; I give you small capacity, you give me small capacity in such a way that they have a seamless connection.

Now Julius Berger is doing that road and by the sides of the road, if you look, you will see the fibre optics hanging on trees, they have dug out the fibres, and all these investments gone.

The thing is that where we are able to do well is the area of shared risks. If we can share the risks, and the end users have excellent service, they don’t really know how we do our thing, how the routing is done or how the things are happening, you don’t really care, all you know is that anywhere you are you have LTE service. Whether MTN capacity is passing through MainOne or Airtel is passing through Glo, or any other way, you don’t really want to know, you just want to have service. And this is why telecom service is still very expensive in Nigeria.

From my Masters’ study, once you do more than 200km of fibre, you need at least 18 months of continuous revenue, of at least 50 percent of the capacity to break even. But the problem is that you will hardly get up to six months of your fibre being underground without it being damaged or something. Nigeria needs to have a master plan for fibre infrastructure.

If You Are Asked To Change Or Modify A Policy, What Policy Will It Be?

It still comes down to creating a level playing field for players in the industry. The challenge we are having is the monopolistic tendencies of incumbents, which is impeding new players or not allowing innovations to really go round. It is our regulator that needs to look at this holistically.

What Other Career Would You Have Chosen If You Didn’t Have A Career In ICT?

This one is not difficult for me to answer. Because of what formed my mind of going into telecommunications, there are two things that fascinate me. Telecommunications is one of them, the other one is flying. I know probably I would have been a pilot, but my mother refused. I wanted to be, I nearly got taken by Bristol Helicopters, even though I passed all their interviews, but my mother insisted, “you went to school and studied to be an engineer, and that engineer is still there”. Actually, when I left secondary school, I was supposed to go to the NDA to train under the Air Force, the sentiment then was that ‘we don’t want our child to be a soldier’, that it was drop-outs that go into the military.

When I came back from the university, my brief stint in Warri, when we go off-shore with Bristol Helicopters, I still get fascinated with flying. One of the best things I enjoy about flying is that when I am up there because I like sitting by the window, I can tell you the routes the planes take, things so many people don’t care about.

If I could have been anything else, I would have been a pilot. I still keep track of things happening in the aviation industry.

Where Did You Start Your Career?

I studied Electrical Electronics Engineering in Nigeria’s oldest University, the University of Ibadan. What made me study Electrical Electronics Engineering is not an accident. Ever since I was very small I had been fascinated by telecommunications. The thing that actually formed my idea of coming into telecoms was when I was small, my father took me to an event, a television event of the landing of the Americans on the moon. I was with my elder brother and I was sitting on his neck, there was only one TV set and the place then was Cocoa House, Ibadan. I was very fascinated.

All that night I would sit outside looking at the sky, wondering if I would see them. How that fate was achieved was something that marveled me. Even till date, I am still so much interested in space and space travel. So, you can see the reason why I eventually ended up with Electrical Electronics. And in Electrical Electronics we have various segments, there is the Power Systems, there is the Communications, there are the controls, but I chose Communications because it had always been my love from the beginning.

Although I worked briefly in Warri, Delta State, I actually started my career after Service, with global giants, Siemens. I worked as a Commissioning Engineer for transmission, which is now known as Transport Network for Siemens. I specialized in Microwave Transmission and optical fibre.

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