Kazeem Oladepo, general counsel for Main One Cable Company, a wholesale bandwidth provider in this interview with Ben Uzor Jr draws out strategies to address Nigeria’s last mile challenge. He talks about the need to develop a national broadband policy that would focus on the demand and supply side of internet services, spanning both regulatory and economic intervention plan by government.
Question 1:
What’s your assessment of Nigeria’s telecommunications market in terms of regulatory framework and business environment?
The numbers (statistics) we see support the premise that the industry has grown enormously in the last decade or so, when viewed from where this market was at that time and where it is now. At 65 percent or so tele-density and 90 million active (by NCC’s criteria and records) subscribers, there is a clear indication of phenomenal growth and advancement in the industry. Not that there are no shortcomings in the current framework, but telephony is no longer a luxury item for everyday people in Nigeria, and that’s a quantum leap from where we used to be, which must be acknowledged with glee.
Government should be commended for providing the framework for market liberalization i.e. legislative consistency incorporated in the Communications Act and other subsidiary regulations, and heralding the emergence of a truly quasi-independent regulator that was able to instill confidence in investors and helped to bring the much needed FDIs into the country to develop the industry. The regulator deserves enormous credit for nurturing the growth and sustaining it through the different phases of evolution so far, whilst the entrepreneurs who took the initiatives and the risk to invest in the Nigerian telecoms market when the fear of uncertainties were still lurking deserve loads of credit for their tenacity.
Overall, there is a general feeling in the industry that the regulatory framework revolving around the Policy, the Act and the NCC, as well as industry participation has been instrumental to an impressive run of sector growth so far. The question is whether this framework is properly poised to support future advancements, or there is a need for it to be recalibrated to meet emerging industry trends both and today’s Information Communication Technology (ICT) challenges facing Nigeria. I believe the answer to that will be yes, we need a revamp. On the business environment, I believe this is more matured today and will continue to get more sophisticated as the market evolves. It would need to be supported by an appropriate framework that we are talking about to bring home the expected market dividends.
Question 2:
The CDMA segment of Nigeria’s highly competitive telecommunications market has continued to show signs of distress. Experts have called on the federal government to provide a bailout to aid their recovery. What’s your take on this? From a regulatory standpoint, how can the NCC assist ailing CDMA operators?
Advocating bail out, whatever that means, for the CDMA operators without doing a root cause analysis of their predicament is conveniently missing out on the real issues. We all know that businesses fail to meet performance objectives for diverse reasons, which could be from management of the business itself to other market externalities, including the regulatory environment or general business environment itself in terms of product/services and simple factors of demand and supply.
In the case of the CDMA operators, the technology is also an issue for consideration and whether or not this conveys a market advantage or is a major cost and service innovation disadvantage is an important point to consider. Generally, and quite ironically, I believe the current unrest in the CDMA segment began with the Unified Access Service License initiative, which in itself was a well-conceived service liberalization effort by the NCC, in that it removed the exclusive mobility service status conferred on the GSM operators and created a one-stop shop license for operators who are able to procure the license and removed barriers to compete if you had the scale and deep pocket.
It was meant to create a level play-ground. I doubt that the framework actually considered the fact that the play-ground was heavily lopsided in favor of early entrants in the mobility market to understand that the impact on competition was not going to be addressed by simple change in the licensing regime. Let us put it this way: you have 50 acres of farm land to farm, then you give “Farmer A” 5 acres. 2 years later, you withdraw the land and give 45 acres of it to “Farmer B” exclusively for 5 years, after which you now give “Farmer A” the right to farm in any part of the 50 acres where he can find a foothold.
Do you think Farmer A, without clear and precise guidelines being implemented to grant and protect his access would thrive as a business in that environment? I bet the answer is no. Some of the CDMA operators, i.e. Multi-Links, were successful businesses when they were smaller and focused on corporate/enterprise fixed line business, where they had a niche. Starcomms was a leading Data solution provider. The moment these guys went after the retail mobile business, they took a hit trying to play along-side the deep pocket GSM operators who were more entrenched in the market and had gained critical mass.
The existing framework either didn’t factor adequate competition mechanism to protect late market entrant from incumbents’ whims, or found it tedious to enforce the bit of market rules that where available and could have offered protection to the new and smaller guys. For instance, it is interesting that there was no asymmetric interconnection termination rate in this market until 3 years after full license liberalization (2009) and there are still no effective competition mechanism and policy incentive addressing the specific fate of these smaller operators, without which they will not be able to contribute to the overall competitiveness of the market.
Question 3:
Even with proliferation of submarine cable systems, Nigerians especially those in the hinterland will not have access to efficient and affordable broadband services due to the absence of last mile connectivity. How has this impacted Main One’s operation in terms of service availability and cost?
The advent of the Main One Cable system signifies an increased availability of 2 Tbps, more wholesale international connectivity capacity on the shores of Nigeria, available for deployment and proliferation of high speed broadband internet access to the Nigerian consumer and improved local and international connectivity services, including voice and video services. It also meant cheaper bandwidth options, priced at 80 percent less than the cost of capacity prior to the Main One cable, and improved service efficiency with 100 percent service uptime in our services from inception in July 2010 till date.
What we have done is scale the hurdle of availability and affordability for the market. Now, how do we resolve consumer accessibility? Delivering broadband services in Nigerian has its peculiar challenges in the wake of high cost of deploying access infrastructures and the high prices of leasing or sharing such infrastructure from other operators, in the few instances that they are willing to share. The feeling in the past was that there were limited last mile solutions on ground, wired and wireless, trailing the failures of the incumbent (NITEL).
Today, however, there are considerable fibre optic and wireless infrastructures all over the place connecting cities, build out by the incumbent mobile operators and other providers of national long distance backbone services, which can be used to implement the first phase of capacity delivery into these cities for further metro delivery through other existing network and new last mile and access build-outs. The cost of these access infrastructure, for instance for leased lines between Lagos and Abuja, or even between Victoria Island and Ikeja in Lagos, are in most cases twice as more expensive than the cost of capacity between Nigeria and London on the Main One cable system.
Consequently, there is great disincentive for penetration of services in not only the hinter land, but locations even within Lagos, whilst those that are lucky to have it are neither fully enjoying the impact of the crash in prices that Main One cable and others such as the Glo 1 cable have brought into the market, nor the improved service uptime. It is also part of the explanation for lower international call rate compared to local call rates in Nigeria.
Question 4:
What do you think the Regulator and service providers such as Main One could do to address the challenge of last mile connectivity?
I believe the way to go is infrastructure sharing supported by strong access regulation that not only mandate clearly the sharing of access and distribution infrastructures, but also regulates prices of these facilities, including wholesale leased lines services, to encourage cost based incentive for further build, whilst at the same time nurturing competition and service penetration. We currently have an infrastructure sharing Guideline, which I believe is not particularly clear on the inclusion of infrastructures such as leased lines in the list of network facilities to be shared, even though these are already being transacted between operators in the industry, albeit at discriminatory rates.
The guideline does not prescribe or regulate the pricing of access and infrastructure sharing, more or less leaving it to commercial negotiation between the contracting parties. It is hard to imagine in such asymmetric relationship, where one party is a dominant network operators with every incentive to be protective of its market and create barriers to entry, that the negotiation will be fair and rate not discriminatory as is currently manifest in the current cost of these services today.
Conversely, the fear might be that since we have not attained optimum level of proliferation of infrastructure, wouldn’t regulating price discourage further investment and stifle future build. In reality, sharing and cost based, transparent and non-discriminatory pricing of access and distribution infrastructure will immediately improve service penetration in broadband deployment, create new market opportunities through improved services, and thus competition, which will drive further investment in new infrastructures by the initial sharing operators.
As a matter of fact, it will bring more efficient infrastructure build into the industry given that today’s intercity backbone build, for example, are largely needless duplication of resources where each operator is lining up on the same route to build capacity that is in each case sufficient to meet their respective requirement and those of others. It’s a palpable development that highlights our penchant for proprietary interest at all time, which unfortunately adds to the prices that consumer pays for services ultimately. The NCC needs to urgently wade into these issues to save the industry and consumers alike, through a cost study, price determination and mandatory access regulation for leased lines and other wholesale capacity services and effective enforcement modalities.
Question 5:
At various fora, Main One Cable Company has continued to clamour for the development of a national broadband policy. As an expert, what key areas should form the thrust of this policy and how can the policy help improve internet penetration?
I think the best place to begin is changing the perception towards broadband services. Contrary to widely-held belief in this part, broadband is not mere access to fast internet services for on-line entertainment on sites such as youtube or for social networking. It is a quintessential utility service that has the same level of socio-economic importance as electricity or any other social amenities. It not only benefit consumers as a service medium, it allows them to innovate, thereby powering a vibrant reproductive cycle of services and enhanced productivity that cuts across all facets of socio-economic activities in any community where there is ample access to broadband services. It drives productivity and efficiency in public and private sector activities and will impact economic growth positively. This is why, even in countries where one would ordinarily assume high level of internet proliferation, such as the United States, it remains one of the key thrust of government policies as recently as 2010 taking its position as an all-important public utility services, since these countries have come to the realization that market forces and private sector led initiatives will not meet government’s objective in this direction.
Government and policy makers in Nigeria need to take a cue from these more advance markets and develop a national broadband policy, whether as part of the on-going review of the national telecommunications policy or on a stand-alone basis, if Nigeria is to meet the MDG and Vision 2020 objectives, which fate will hang on the level of ICT development in the country going forward.
In terms of thrust of the policy, the focus should be on the demand and supply side of broadband services and should span both regulatory and economic intervention plan by government. The policy should address current regulatory challenges to local access infrastructure build by services providers and efficient utilization of existing infrastructure for common benefit and overall consumer benefit.
It should key in on government funding of access and broadband distribution infrastructure build nationwide through a special national broadband infrastructure development fund, or whatever name it may be called, that will appraise requirements and support operators with viable plans that have also shown historical ability for execution. In fact, government may, with the collaboration of the providers, build a national backbone infrastructure that can be leased to operators on a maintenance cost basis solely. The policy should also incorporate initiatives that will support broadband usage which should include digitalization of public services, promotion of local content and supporting innovation in broadband service usage through fiscal incentive amongst other consumer stimuli.
Question 6:
What is Main One doing to ensure that issues hindering broadband penetration in Nigeria are addressed by the government and other stakeholders?
As you rightly acknowledged, our approach is first to create awareness for the immense opportunities that Nigeria stand to miss out on in the global ICT trajectory if we fail to harness our resource through clear policy direction and implementation. This is why we continue to accentuate this issue at every forum where we have had the opportunity to dwell on it. We also have an elaborate plan to engage, and keep engaging, the NCC, as our industry regulator, the government and other stakeholders on these issues with a view to getting their buy-in on dealing with the challenges that the industry faces in delivering on governments ICT growth objective and how government can be persuaded for more direct policy intervention and economic support.
We know that the NCC is keenly interested in this process as a new service frontier for the industry and will support any initiative that enhances value for consumers. We continue to work with our customers and operator-partners to grow the current level of penetration through dynamic initiatives and partnership that has till date helped to deliver broadband services distribution infrastructure on trade-off basis, which has also helped to improve service penetration to other parts of the country outside Lagos.
Question 7:
Still on the policy side, industry watchers say that a converged media and telecom regulator is needed to support the telecommunications industry in delivering innovative services to Nigerians. Do you share this opinion?
Regulatory convergence has its big hit to the extent that it creates efficient ICT resource management through harmonized processes and should also save cost in industry regulation. The UK, for example, has adopted that model with the emergence of the Office of Communications (OFCOM) and I believe the FCC in the United States has responsibility for both broadcast and telecommunications. Having separate regulatory bodies for broadcast and communications, that is the NBC and NCC, certainly doesn’t optimize benefit for the industry in a world where the line between broadcast and regular telephony service is fast disappearing.
Strangely, converged services in Nigeria continue to evolve gradually, without the regulators being merged, since technology most time is regulation neutral and always ahead of regulation in any case. It may however not be sustained if we fail to get into that space on time. One of the biggest concerns that has been expressed for instance by operators on broadband service penetration is the release of 2.5Ghz spectrum, which is already in the pocket of the NBC, to telecommunications operators for WiMAX services. This, I suppose, would not occur if we had a unified regulator in Nigeria. We may never be able to take full benefit of the so called digital dividends if we continue to run parallel regulators for the telecommunications and broadcast industries.
Question 8:
Experts say that Nigeria’s poor management of national spectrum resources has hindered foreign direct investment into the telecom industry and slowed down the roll out of broadband services by telecom companies. How can the Nigerian Communications Commission (NCC) ensure that spectrum is made available quickly and with maximum transparency?
I am not an expert on spectrum management, so I am unable to comment fully on whether or not there has been poor management. I know for sure that there are series of issues on microwave frequencies and there is a clear need to sanitize usage to ensure that operators who have genuine needs have access to these limited resources and are able to serve the consumers with much desired broadband service from a distribution standpoint, whether point to point or point to multipoint. There have also been series of furor generated in the industry over “access” frequencies both from cost and availability perspective. Having some of these resources split between different regulators have not helped matters, while the cost may also be prohibitive for smaller operators. More than anything else, anytime I hear a clamor for more frequency allocation, the next thing that comes to mind is what people have done with the bands allocated to them. Have they made the most efficient use of these resources for to justify further allocation and are they truly utilizing the spectrum. Maybe that’s where the regulator shout start and focus its attention, i.e. are there operators out there who were allocated resources and are not using it for any meaningful purpose, and should this be withdrawn and given to people who are in actual need of the resources and have demonstrated execution capabilities to make ample case for allocation. I am not aware of any transparency issue, the processes have always been smooth but for the 2.3 Ghz bid fiasco in 2009.
Question 9:
Prohibitive taxation and administrative burden are negatively impacting delivery of broadband services in Nigeria. It is a key challenge facing stakeholders in increasing access to and affordability of broadband services. What can the government of the day do to address this issue?
The issue of multiple, not just prohibitive, taxation has been over-flogged by several industry bodies including ALTON and ATCON. It is also related to multiple regulatory oversights, which continue to stifle deployment of infrastructure and operations of telecommunications operators, affecting delivery of services, including access to broadband services. Until this is resolved clearly and each arm of government fully keeps within its legislative limits, and existing duplicity of oversight functions are resolved, the quality of all communication services will continue to be below desired levels and prices of services may never truly reduce.
Question 10:
A new report from the GSMA shows that by differentially growing non-oil sectors more than the oil sector, broadband can support diversification of the Nigerian economy. How can we better achieve this?
Concerted effort; government, regulator and industry stakeholders including operators and the media, we all have a role to play. We are all witnesses to the socio-economic impact of the advances made in the mobile telephony segment of the market, which has lesser positive externalities than broadband services. I read in some study recently that wireless broadband services alone will directly contribute additional N190 billion to the GDP by 2015, which will represent some 1.22% increase and 1.7% growth in non-oil sector, whilst indirect contribution could be as much as N410 billion during the same time. From crafting a well-articulated policy position and implementing it, to investing in efficient network infrastructure, playing by the established rules of the market and delivering optimum service levels to consumer, as well as subscribing to resources provided by broadband services medium, everyone has a role to play in the process.
No comments:
Post a Comment