MainOne Cable Company, West Africa’s first wholesale broadband capacity company recently celebrated its first year of commencing operations in Nigeria and delivering unmatched broadband services to Nigerians. Funke Opeke, chief executive officer of the company in an interview with select IT journalists’ talks about the challenges and prospects of broadband deployment in Nigeria. She says government must encourage infrastructure sharing in order to address the country’s last mile challenge. Ben Uzor was there.
Operations in the last one year
We have been in operation for almost one year, and we are delighted to note that in this first year we have connected majority of the large telecom operators and internet service providers in Nigeria and Ghana to the Main One network. We believe undoubtedly that we are the number one provider for wholesale internet into the West African market today. However, we are not pleased with the amount of progress we have made in bringing broadband to the overall population. And so that is the focus for going forward. We have done a great job of maintaining an extremely reliable network, and our network has maintained 100 percent availability since we launched a year ago. Even with some challenges, we are able to ensure 100 percent availability on our network for our customers. So our focus now is that have a stable operation and have connected majority of the operators and internet service providers, is to find ways to service the majority of the population that is still yearning for more broadband, higher speeds, low prices, easier access to such services.
Challenges
The challenges are one of distribution. We brought a big cable with a lot of capacity to the market and, we reduced the price points. Wholesale internet price points have dropped significantly, but what we find is that the infrastructure on ground to distribute is limited. And in the areas where better infrastructure or longhaul national backbone networks, metrofibre networks exists for example, it is controlled in a proprietary nature whereas an open access cable, any one can connect to us at a uniformly low price. The prices for accessing such capacity is prohibitive and so it limits how close to the consumer we can get with the capacity that we have brought into the region without building the network ourselves. Of course it is not cost effective. I guess every time we need power which is what we do in this country you buy a generator. It is not cost effective for us to start doing that all over again for domestic networks and so we are looking to work with the rest of the industry regulators to open up channels for us to move the capacity that we have available in our landing stations more effectively to the consumers who want that. And it is a mix of policy action, industry action and also the operators building up their networks, internet service providers building up their networks so that we can effectively get this capacity to the consumers who want these services.
MainOne’s Contributions to NCC’s broadband plan
We are in touch with the NCC and we have been requested to provide input on some items just recently and we also have our own initiative, providing input and policy papers to present what we think needs to be done in terms of a national broadband policy. We do not think that is something unique to Nigeria. The United States which is the most advanced technology in terms of ICT has a national broadband policy because they said broadband is becoming what electricity was to the industry and so for economic development to take place, and to ensure that for United State to remain competitive, they have easy and affordable broadband access for all their citizens. The International Telecommunications Union (ITU) is calling for a multifaceted national broadband policy because they see that it is critical to development, and clearly we as the stakeholders trying to facilitate broadband see that as essential for Nigeria in terms of its aspirations towards development, job creation, and improved education. We need to do more from a national policy standpoint, in terms of how we are going to stimulate broadband and ensure that the benefits actually accrue to the Nigerians who need them the most.
Partnership with Glo-1
I think we co-exist, and actually we co-exist well. I don’t see that particular area as a challenge. I think in most markets, you have multiple cables because you want diversity. And should things go wrong, then the country and the operators in that country still have connectivity to the internet. We’ve had instances in Egypt where three cables were cut and so it was difficult to get access to that country. But the availability of multiple routes allows for constant connectivity. An analogy would be having only one airline coming into Nigeria and if that airline were grounded, people cannot travel out, which would be a faulty model. Where the challenges exist is in the national backbone. If we look at things today, the price of moving capacity from Victoria Island to Ikeja in some instances is higher than the cost of our moving that same capacity from Lagos to London. As you may note, even the international voice calling prices to London, New York and major cities have come down considerably, but calling across networks in Nigeria is still at a higher cost. So clearly that is not directly related to the cost infrastructure. It’s related more to the approach to the market and that’s where collaboration is required because a lot of national backbone networks have already been built. The right of way are along government roadways. Concessions have been granted. But concessions have been granted to deliver services in an open and balanced manner as opposed to a proprietary manner for the exclusive use of the person who built the infrastructure. And if we continue to have frameworks where things can only be utilised for the exclusive use of the person who constructed the infrastructure, when public assets are involved in delivering bills, then the best interest of the population is not being served. And in other markets where you have open policies for accessing such infrastructure in a fair and balanced way, the investor needs to be rewarded, they need to be able to get their return but the price also needs to be determined in a way that is reflective of the real value and to ensure that the policy objectives of the country, of the regulator are being met. I will say for Nigeria, if we want to develop economically, we have to increase the adoption of ICT, we have to get better connectivity into our schools into our universities. We have to get better connectivity to government establishments, our businesses have to be better connected to increase productivity and market reach. And so this is critical for us as a nation to get this right and that is why all of these bodies, ourselves included, are advocating a national broadband policy that lays out a pragmatic roadmap on how we can get the capacity that is now available across the shoreline, so to speak, of Nigeria to the hinterlands.
Thrust of national broadband policy
The key issues that should form the thrust of the policy is a review of the national backbone, access, availability and Interconnection. Look at the industry structure. Do a cost and price determination study and see if it is been managed in an open manner or what kind of rules or policies need to be in place with respect to infrastructure sharing on the backbone. In addition the NCC needs to look at matters of spectrum and frequency and distribution and look at what policies or what objectives we are trying to effect and how some of those resources are being allocated to actually achieve the objectives. Also evaluate how when they are allocated they are managed to achieve those objectives. If these resources are allocated but there is no enforcement, then those resources are now not being deployed to achieve what we set out to achieve; which is get broadband to the masses. We need to ensure we are putting the things in the right places where it is driving the right results. And I would say at this point in time for Nigeria, clearly ICT adoption, internet connectivity, broadband availability are what we view as the next major milestone. Voice connectivity is in most parts of the country today. You can be reached via a mobile phone for voice conversation. What we need is data for our use, for our work places, for business, for job creation, commerce, security monitoring, more effective law enforcement to be able to send which data over the internet and have instantaneous remote monitoring. All of these are critical issues. Clearly we need to get broadband across the country and that’s what we see. It is opening up the infrastructure that exists and setting the framework for sharing access to the infrastructure.
Listing on Nigerian Stock Exchange
Main One is a wholly African owned company. The company and its shareholders are constantly looking at ways to maximize their return on investment. A lot of the companies that invested in Main One directly and indirectly are publicly listed institutions. So it is not unlikely that they may like for us to move in the direction that opens up the ownership of the business to other members of the society as well. We haven’t made a decision to do that yet but it is something our current owners may look at doing if it helps bring more capacity and enhance those values that will move the company forward. In the meantime, we will continue to deliver the value that we set out to deliver in terms of broadband service penetration and also to achieve return on investment for our investors. When we do make a decision in that regard, I am sure you will be among the first to know. With respect to Phase II, we thought we would be doing more in Phase II but in reality as we’ve discussed, the challenge of distribution, just the insatiable demand in our market that we’ve really struggled to meet has consumed more of our energy and resources. As discussed earlier, putting more into building domestic distribution as opposed to expanding the network has been the focus. We are looking more closely at that now. We believe that extending the Main One system to the South South region of the country is of utmost priority. If we think of the main developmental objectives there, if we look at the means to get capacity to that part of the country today and the cost of doing so, we believe that another solution is urgently required. So we are focused on working on that with some degree of urgency. In addition we see the need to continue to go south and extend the cables to other countries down south West Africa, so to speak. So we are putting more attention on that now with particular emphasis on another landing in Nigeria in the South-South region. 10 years of GSM, we think it is a wonderful thing. Look at what policy shift and effective regulation and private sector capital is able to do. We think it provides a model in terms of what can be achieved if you look at regulation. We also want to highlight likewise we are talking about the issues of distribution and a broadband policy, shared infrastructure on national backbones, when shortly after GSM companies came in, they had to fight on issues of interconnect, and interconnect regulation and that really facilitated the growth of the multiple networks, the competition and the reduction in prices that we have seen over time. In the broadband arena, we think of effective regulation, right policy, and private sector participation to drive growth. We are looking forward to a phenomenal decade of growth in driving broadband and having to seek more impact on our economy. We would also like have more indigenous impact on our economy. We say this for Nigeria where we operate, we say the same thing for Ghana where we also operate and have good traction with our business in Ghana. . The business there is managed and run by Ghanaians. We are hoping to drive indigenous value into that economy by partnering with Ghanaian internet service providers. Connecting schools, connecting government offices, connecting businesses to bring economic development in our region.
Assess partnership with Global Crossing and Seacom
Global Crossing is a Tier 1 internet provider that we have partnered with recently. Currently most of the internet traffic originating or coming back into Africa is actually switched in Europe. So when we came into service last year, if you give us traffic and we are sending it to connect with your friend here in Nigeria...even though we have an internet exchange here, we send traffic to be effectively connected by the operators to reach Tier 1 providers in Europe, switched in Europe and then brought back into Nigeria. What we are doing with Global Crossing is we are building an IP NGN (Next Generation Network) platform in West Africa. Traffic originating in West Africa, terminating in West Africa should not have to go Europe to get routed back into the region. If the traffic is what goes to other part of the world, then this means that Global Crossing as a Tier 1 internet service provider is one of the top ten movers of traffic of the global internet. So we have partnered with them to route that traffic through their network to other parts of the globe. However, in concert with that, we have put infrastructure in place that ensures that traffic originating in West Africa, stays on our network, and we can route it to a terminating node that is connected to us on the internet. With respect to Seacom, Seacom runs a similar infrastructure where they also have that kind of IP connectivity down the east coast of Africa, and what we have done is connect our networks in London so we can provide services across the region. So all the way from Nigeria, Ghana through to the countries down the east coast of Africa, Kenya and South Africa being the most prominent, we can deliver services to customers in these places.
Return on Investment
We are still investing, because as we mentioned we are compelled to invest more in enhancing distribution infrastructure than anticipated. We have put in a new IP network to switch this traffic in Africa. That’s new investment. We are interconnecting with other networks; so that’s new investment that we are making around the globe to interconnect with these networks. So we are still investing. I think the outlook on ROI remains positive. We have built up a healthy business within one year. We are self funding our operations and funding these additional investments. So we have stable business and the outlook is good. But do we have a return on investment to the original investors as of yet? We are still working to achieve that objective.
Broadband penetration
I think we need, when we look at the size of the youth population, and I would bring that a little differently, when we look at our objective in terms of employment, job creation, security, I will say we need to set a goal as a country on what we want to achieve within what period. And I will say realistically that you should start seeing real impact in 12 – 36 months. 12 – 18 months you should start to really feel a lot of what’s going on. So I believe the way I would approach it is for the government to say we need to get to 40 percent penetration. And what is it going to take to achieve that in this period. If you look at recent economies and a lot of examples who have similar policies in place, for example, South Africa, Kenya, some of these countries are high internet users and they have declared what it is that they want to achieve in terms of broadband penetration. When we bring that home, we want every school to be connected, we want every police station to be connected, we want every local government to be connected, and we want every community of a certain size to have this kind of access. So if we put that kind of policy in place we can start to think practically about how do we achieve this? What kind of policy frameworks do we need at what period? What kind of incentives do we need? Who are the parties that we can work with to make this happen? And then I could say that if we set milestones in 12 months, 24 months, 36 months, we have a clearer plan on what we want to achieve.
Estimated investment
In terms of the task force, I am not sure. We have seen GSM take off. We have seen GSM penetration rates above 50 percent, led by the regulator and the private sector. So I think it’s a policy framework, enforcement of the policy framework, working with the private sector. I don’t see the need for a separate task force but as part of that, if the government feels there’s need for a taskforce, then we would see how that really adds value to the process. But I think we have the institutions on ground and the bodies on ground to do this. It is really engaging them and setting the goals and say what do we need to do differently? But I don’t know that we need new bodies or new structures necessarily. Certainly perhaps, more focus on ICT at the Federal Government level might be interesting. There’s already the Ministry of Communication, the NCC, there’s the Ministry of Science and Technology, there’s NITDA, we have enough agencies. I think maybe not task forces. We just need to be clear about who has the mandate to do this. We believe the NCC is the regulatory body for our industry; they have to regulate telecom operators and internet service providers. So they have the lead responsibility on this. They can set up policy and enforcement and work with the industry to achieve it. So we don’t know if there’s a need for a task force. In terms of investment, we invested $240 million initially to get the cable in service. We have made some other small investments. I will say we have probably made close to $250 million at this point in time that we have invested in the network overall.
Broadband strategy and infrastructure sharing
The infrastructure is the key thing. So it’s a mix of things. As we said, share infrastructure where it exists. We think it’s a mix of leveraging what’s already on ground and ensuring it is being used efficiently and also augmenting that with new builds perhaps in the rural areas where fibre does not currently exist. The major routes in the country today, multiple fibers already exist. So why can’t we jump on that and start right away leveraging that and retrofitting that? The retrofit is necessary, not a whole rebuild to ensure that Nigerians can start benefitting from fast broadband almost right away. So, yes it is infrastructure related. It is ensuring we open up and have right rules for deploying infrastructure. It is issues of right of way even to get into some of those rural areas. How many government agencies do you have to go through? What kind of fees do you have to pay to deploy infrastructure? You have to pay the Federal Government, the State Government, the Local Government and the local area boys in town to get your infrastructure deployed and each one is a separate negotiation and process. They take multiple months. And then we really have to get the equipment in place to do the work. The skills; you see how long it takes. So, yes, it is infrastructure related. But we will be missing a huge opportunity if we don’t look at what is already in place that we can leverage. Two reasons: Time – we’ve been hearing things about Vision 20:20 and all that. So time clearly is an issue in terms of the global market place and the global market economy and having Nigeria catch up and become more competitive and diversify from what we know it as a single commodity economy to a multifaceted economy. The other is actually the cost of production and being able to now manufacture goods, export agricultural products and process them. Deliver services out of Nigeria. If we keep building infrastructure over infrastructure, without ensuring we have a healthy framework for accessing existing infrastructure, we are just making the cost of production in Nigeria artificially high. We think that at the end of the day we don’t achieve our objectives because we cannot be competitive on a global basis. It is because the costs of delivering those services out of Nigeria are still high. Let’s look at what exists and how best to achieve this policy requirement. It is not just saying that everybody should go build because if everybody goes build and build ten networks on top of each other, then everybody is trying to recover their costs. You build a mini cartel. The consumers pay multiples of what they would be paying in other markets. This is when someone has to reproduce a service or a document and send it over that network in Nigeria; it’s going to be 10 times more expensive than what it is to do that in an economy where they have figured out how to share that asset. And so the cost of transmission is 10 percent of what you have here.
Government intervention in telecoms
It’s a difficult one. What I would say is that as a nation we need to think of how we leverage ICT to achieve our developmental objectives. When you look at other economies, it used to be the industrial age and now we are clearly in the Information age and Nigeria as a country has not participated in any meaningful way other than as consumers of information technology. If we are going to build our economy and create wealth for our people, if we are going to create jobs for our young people, if we are going to create service industries here, as in India, in China, in Malaysia, in Philippines, IT has been one of the key enablers of jobs. I think the ITU says over the past decade, IT has been the largest driver of job creation anywhere in the world. Nigeria wants job creation, how are we going to use IT to do that? I think it is when we have that framework; we can start to say within that framework how do we help the industry develop to ensure that those economic development objectives are achieved. So I don’t think the government should be going out and helping companies on a case by case basis just because they are distressed because you do not necessarily understand the reason for that distress. But I think that to the extent that you have a framework for how we want to support ICT, how we want to use ICT to expand Nigeria’s economy, how we want ICT to grow, once we have that, then within that framework we can look at the structure of the industry, we can look at the players of the industry and say where should the government be providing more support so we can actually achieve that vision.
I do believe that in that context, if that is done, that yes, there are some sectors or some parts of our industry today in Nigeria that could benefit from support. Look at ISPs, I want more indigenous service providers otherwise we are going to wipe out all of the indigenous service providers. How are we going to serve the rural areas? How are we going to serve the secondary cities? Why can we not support those ISPs to deliver services in those areas? I worked for Verizon in the US, when you think of how many people they employ and the good jobs they have, how many service providers that they have, deploying broadband into homes, setting up networks, call centres for services, billing, all the things that go with that. These are good quality jobs that afford people a good standard of living. So we have to think about how we use ICT to do all that in our industry. We are powerhouse in West Africa. If we start doing that, Nigerian banks all over, how can they start doing more financial processing? Why should we send a lot of our financial transactions to Europe out of Africa? Can West Africa, can Nigeria become a processing hub for that? Of course with ICT we have this reputation about security and 419. We can build all the structures to make this secure, to authenticate the transactions. We have all these biometric capabilities. We can make it secure. We can build that infrastructure. We can build expertise in security to wipe out this reputation we have for 419. We can train our young people to do that. So clearly that is what I see is the opportunity to do a lot of these things.
Commitment to customers
First of all we want to thank our customers for the confidence in us and for giving us the opportunity. Coming into the market as a new company and becoming number one in delivering wholesale services to them demonstrates significant good faith towards us. Without having those customers, we would really still be struggling to sustain ourselves as a business. So we appreciate the trust and confidence they had in us to give them the opportunity. We believe we have been of good service to them in this first year that we only think we are at the beginning of the journey together. Our focus is to continue to deliver more wholesale value with the speed we have. There’s a lot in terms of broadband service platforms and application service platforms, cloud computing, additional services that we can provide on a wholesale basis for internet service providers, telecom operators to take to the market. So we can leapfrog in this broadband revolution that we are trying to achieve in West Africa. And to our customers, we just want to say thank you. We want to continue to partner. We have started a Partner Advantage Programme where we are starting to work with them more closely to accelerate this deployment of broadband. We will continue to invest in that. We will invest in our partners to ensure that jointly we can achieve this vision and partner in success together.
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