NCC steps in to reduce internet service cost

Ben Uzor Jr

The high cost of distributing internet bandwidth from submarine cables on the shores across the length and breadth of the country, will soon become a thing of the past. Indications are that the Nigerian Communications Commission (NCC) plans to introduce a cap on fibre transmission costs after a survey conducted specifically to determine real cost of deploying fibre is completed. It has been established that the price of moving internet capacity from Lagos to Abuja is indeed much higher than the cost of moving capacity from Lagos to London.

This, according to analysts is due to the dearth of transmission backbone network needed to move bandwidth capacity. As a result, Nigeria has one of the highest costs of internet access in the world, at approximately N8, 000 to N10, 000 for 5Mbps (Megabits per second) of data. Eugene Juwah, Executive Vice Chairman of the Nigerian Communications Commission (NCC) said in an interview, that the commission is also conducting another study to clearly map out the country’s fibre assets. “The NCC is conducting a survey to determine the real cost of deploying fibre. We are not running away from putting a cap on fibre transmission cost but we must have cost- based information before the NCC makes its decision. We do not want to destroy businesses because we are aware that operators have made huge capital expenditure in laying fibre. The commission is committed to bringing down the cost of internet services.

“We want good distribution of capacity. This is why we have adopted as a means of our regulatory intervention, an inclusive process we call ‘Open Access Model’ for broadband deployment.”This, according to Juwah is a model that provides a framework for sophisticated infrastructure sharing. On the timeline for implementing the much talked about policy, Juwah noted that the NCC’s broadband plan was still awaiting approval from government before implementation begins. “A broadband plan takes sometime to be rolled out because there are many stakeholders involved. It has to be approved by the federal government before we implement. If left to me, it will start tomorrow but I have to obey the guidelines of the government. In terms of the number of licenses that would come up as a result of the implementation of the policy, our consultants will be in a position to determine that”, he added.

In addition, the federal government is working to ensure full interconnectivity and interoperability between National Long Distance Operators (NLDOs) in accordance with the provision of the Telecoms Act in section 96-97 that mandates interconnection between all network and facilities service providers. Moreover, some telecommunications companies in Nigeria who have extensive fibre transmission networks are unwilling to share infrastructure. In cases where they do agree to share infrastructure, they charge very high prices, often for strategic reasons. This explains why the cost of distribution is very high.

“Our inability to gain cost effective and high quality access and distribution networks required for data distribution at fair and non-discriminatory prices, places the promise of faster, better and more affordable broadband services to the end user by the advent of the submarine cables on the verge of defeat”, Funke Opeke, chief executive officer, Main One Cable Company, observed in an interview recently. Juwah however believes that the commission’s broadband plan based on an ‘Open Access Model’ would assist in unbundling the broadband infrastructure market into three layers – the passive, the active and the retail.

“This structure will ensure vibrancy in the market and prevent dominance, as no company will be allowed to play in more than two of the service layers and the equity participation in bidding consortium for the licenses will be controlled.” Giving further insight into how the open access model will play out in terms of implementation, the NCC helmsman explained that bandwidth will be provided by the active infrastructure providers to the retail service providers on a fair and non-discriminatory basis. The active infrastructure providers, he continued, will buy bulk bandwidth from the submarine cable companies, which will then be delivered via optical fibre, owned by the passive infrastructure providers. “Implementation of this model will bridge the gaps in broadband deployment, eliminate last mile issues, reduce the price of bandwidth for end users and unlock the market for massive broadband usage.

“The commission will issue licenses in the passive and active layers while price caps will be executed in these layers using cost based pricing”, he stated. In the retail segment, he stated that multiple licenses will be issued, with pricing to end users determined by market forces. This, according to Juwah would enable service delivery at affordable prices for the end-user. “Where it may not be economically viable to do so, the commission will offer financial incentives to the infrastructure providers to enable them operate reasonably profitably. The government, through the commission will facilitate agreements and engage in dispute resolution among the various stakeholders. In terms of implementation, we have already concluded preliminary studies that will enable cost effective deployment. In this process, we have developed a model for the deployment, and have engaged reputable internationally acclaimed consultants to drive strategy and design process for achieving our goals”.

CDMAs may relocate to new frequency spectrum band

Ben Uzor Jr

There are strong indications that Private Telephony Operators (PTO) otherwise known as CDMA operators in Nigeria’s highly competitive telecommunications market may soon be relocated to a new frequency spectrum band. Eugene Juwah, executive vice chairman of the Nigerian Communications Commission (NCC) gave the hint on Tuesday at the 4th West Africa Information and Communications Technology (WAFICT) Congress held in Lagos. This said this move would assist in freeing up already scare resources for more telecoms operators without requisite spectrum allocation to deploy innovative and reasonably priced broadband services to the generality of the Nigerian population.

These, indeed, are not the best of times for CDMAs - as some of them are finding it extremely difficult to survive the stiff competition in the nation’s telecoms industry. Analysts who spoke with Business Day yesterday, said subscriber preference for GSM technology, as well as corporate governance issues, low capitalisation and poor promotion of CDMA technology, have seen the fortunes of these CDMA operators decline over the years. “It is a well know fact the spectrum band between 790 – 862 MHz is been occupied mostly by the CDMA players. Normally, the CDMA frequencies are not efficiently planned as is the case with Long Term Evolution (LTE) frequencies.

“We have asked CDMA players who have tiny frequencies (5 up, 5 down) which cannot do much on LTE to upgrade. We have said if they are prepared to upgrade, the commission will re-farm these frequencies and give them a higher slot in terms of capacity to provide value services, but they must do LTE. A lot of them are already considering it. Very soon, CDMAs will have difficulty finding appropriate handsets because technology is changing. As they begin to realize this, CDMAs will begin to plan for LTE. Considering their poor performances, analysts told Business Day yesterday that CDMAs must consider migrating to LTE as this new wireless platform offers them capabilities to provide innovative services well beyond mundane voice and data.

According to Juwah, this migration will not require any form of licensing from the commission. The NCC helmsman also told the congress which attracted a broad spectrum of stakeholders ranging from policy makers, operators, academia to industry regulators that the commission was willing to provide necessary financial incentives to CDMA operators in order to facilitate this migration. A recent newspaper report disclosed that the commission had embargoed spectrum allocation until 2015. Giving further clarifications on the matter, Juwah said the only frequency spectrum available to the commission currently was in the 2.3GHz band, adding that spectrum will be auctioned this year.

 “If the NCC has more spectrums, we will give it out. But we must plan well in line with international standards. The only spectrum NCC has is in the 2.3GHz band and we are going to auction it this year. We have decided at the National Frequency Management Council (NFMC) that the 2.6GHz which is the spectrum telecoms need, we will plan with broadcasting industry, re-farm them and decide how to allocate them to telecoms providers. However, these frequencies will become free in 2015. Frequencies below the 790 MHz, NCC has fought for this band to be allocated to Africa. But the International Telecommunications Union (ITU) says they won’t be free until 2015. If you check frequencies in 2.1 GHz (3G), Nigeria has offered more frequencies than any other country in the world with little impact in terms of broadband penetration.”  

Banks deploy 70, 000 PoS terminals in Lagos, says CBN

Hope Moses-Ashike & Ben Uzor Jr

Efforts towards sustaining Nigeria’s transition from cash to electronic-based economy are yielding fruits. As at May 7, 2012, deposit money banks have deployed a total of 70, 000 Point of Sale (PoS) terminals to merchant locations in Lagos. Sanusi Lamido Sanusi, governor, Central Bank of Nigeria (CBN) who made this revelation on Wednesday at the Cash-less Lagos Fair 2012 organised by BusinessWorld in Lagos, said that the intention is to deploy over 150, 000 PoS terminals by the end of the year. Sanusi, who was represented by Olu Adaramewa, deputy director of banking and payments, CBN said Cash-Less  policy was designed to promote financial inclusion, reduce the amount of cash payment and encourage electronic payment.

This, Adaramewa went on was because the cost of cash and associated risk of cash-driven economy to Nigeria’s financial system was high. In fact, estimates show that the direct cost of cash management would reach N192 billion by the end of 2012. In order to encourage alternative means of payment, he noted that banks and acquirers have deployed over 9,000 Automated Teller Machines (ATMs) in and outside of the bank branches, adding these machines have the capability to enable bill payment, funds Transfer, Virtual top-up etc. He also enjoined all Nigerians to support this initiative in order to make the country one of the world 20 economies in year 2020 and by extension, take her rightful place in the comity of nations.

He said the fair afforded the opportunity for CBN to further enlighten the public on the status of the project and clarify grey areas of the implementation. “The policy on withdrawal allows individual customer to make a free cumulative withdrawal of N500, 000 daily across the counters and ATM. Withdrawal above the free limit will attract processing fees of 3 percent for every N1000 above the limit. Corporates are allowed to make free cumulative withdrawal of N3, 000, 000 daily. Withdrawal above the free limit will attract a processing fee of 5 percent for every N1000 above the limit.” As it relates to cash lodgement, he explained that the policy allows individual customer to make a free cumulative lodgment of N500, 000 daily.

“Lodgment above the free limit will attract processing fees of 2 percent for every N1000 above the limit. Corporate customers are allowed to make free cumulative lodgment of N3, 000, 000 daily. Lodgment above the free limit will attract a processing fee of 3 percent for every N1000 above the limit”, he posited. In the same vein, Ade Shonubi, chief executive officer, Nigeria Inter-Bank Settlement System plc (NIBSS), said the market was responding positively to the Cash-Less Lagos Campaign having tasted the convenience and security benefits of e-payments. “A major area of concern in the quest to grow the Nigerian Payment System is achieving effective Publicity and Enlightenment. Besides, electronic payment infrastructures are on ground and are being improved upon by various payment service providers.”

He called on stakeholders in the emerging ecosystem to do more to bring payment services to the doorstep of the consumers of payment services.

Driving competition in telecoms... imperatives of mobile number portability 

Ben Uzor Jr

In the last decade, the Nigerian Information Communications Technology (ICT) sector witnessed exceptional growth in terms of revenue and subscriber number. To this effect, Nigeria has emerged as the leading mobile telephony market in Africa. This growth however has been due largely to regulatory and policy reforms in the country, and the emergence of a quasi-independent regulator, which in turn ushered in an era of stability.

However, the resultant improvements in investor confidence led to a copious inflow of Foreign Direct Investment (FDI), which provided the financial lubricant required to sustain growth in mobile telephony infrastructure and services deployment in Nigeria.

In recent times, telecoms consumers have continued to complain about the poor Quality of Services (QoS) delivered by network operators. The Nigerian Communications Commission (NCC) strongly believes that when fully operational, Mobile Number Portability (MNP) will tremendously impact on the quality of services offered by service providers.

MNP is a practice in the mobile telecoms industry whereby a customer can move his number from one network operator or service provider to another. This process of transferring customer numbers between service providers is called ‘porting.’ Number Portability is not to be regarded as a subscriber service, which a subscriber can subscribe to. It is a network feature that allows the subscriber to keep a unique mobile phone number but must be agreed to among different mobile operators within the defined national or regional boundaries.

Though a recent phenomenon, MNP has recorded significant successes in Asia markets which is very similar to the Nigerian scenario. In 1997, Singapore was the first to implement the scheme, Hong Kong in 1999, and Taiwan also implemented in 2005.

But more basically, these markets at the time had already achieved 50 percent mobile penetration rate compared to Nigeria’s penetration rate of 25 percent which still offered a huge underserved market with a population under licensed territory of 140 million people and mobile phone subscription of over 40 million. Evidently, Nigeria is ready for MNP. In the last decade subsequent to the successful deregulation of the telecoms industry, subscription has grown from 400, 000 active lines in 2001 to the current 96.6 million active subscriptions.

MNP can be locality based which enables a mobile subscriber to move from one location to another without changing mobile number. This will significantly reduce CAPEX (Capital Expenditure) cost and reduce roll out time in different regions in the vast Nigerian land mass for a new operator like Etisalat.

Second type of number portability is Service Portability that enables a mobile subscriber to keep same number when changing different telecoms services and this is commonly used for mobile value added service. If a subscriber on a donor network wants to access a particular service on a receiving network, there will be no need to change number for the duration.

Lastly, the Operator Portability that enables a subscriber switch mobile operator without changing the mobile phone number is essential for fair competition among mobile operators and to help new entrants gain market share.

The scheme, according to industry watchers, represents consumer choice in Nigeria’s mobile industry and that undoubtedly promotes competition.

Competition

For Bill Best, a global expert and former chief technology officer (CTO) of the GSMA, MNP represents an opportunity for the industry to progress and develop by breaking down one of the biggest impediments to customer choice – number lock-in. “Historically, telecoms services have been provided by monopoly operators.

The customer for the first time has real options on where to go for their mobile services and competition is the driving force for better quality of service, new products, wider distribution and – crucially – more affordable price plans. Besides, economies of scale lead to lower costs for operators and customers, but more importantly, for retail device and handset prices.”

According to him, as the early markets moved towards saturation it was obvious that competition was being stifled by number lock-in. For many reasons, he continued customers did not want to change their number and this meant that they had no choice but to stick with their incumbent supplier.

This impedes market development and is the principal reason for introducing mobile number portability. Moreover, the introduction of MNP is indeed a catalyst for customers to be able to shop around and retain their mobile number even if they changed to a new service provider.

Steve Evans, CEO, Etisalat Nigeria, said in an interview that number lock-in was an immense challenge to telecoms customers’ choices which many industry experts do not really emphasise. “Once a subscriber has a number from a particular network, it is usually locked-in into that network.

This means that the subscriber is tied to the good and bad things that the service provider offers. “However, with MNP, an opportunity arises for a subscriber to switch to another network without having to buy another SIM.

With this, the customer now has real options on where to go for their mobile services and with competitive offerings from various providers, quality of service is improved, new products developed and a wider distribution and more affordable price plans are made available to subscribers.

“We have discovered that as the early mobile markets moved towards saturation, competition was being stifled by number lock-in. Customers, who do not want to change their mobile numbers, have no choice but to remain with their incumbent operator, no matter the quality of service.

This development hampers market development and is the prime reason for the introduction of mobile number portability,” he posited. Explaining the rationale behind the number portability regime, Tony Ojobo, director of public affairs, NCC in an interview, disclosed that scheme was a regulatory intervention coming from the NCC, to further deepen competition. “We needed to change the tactics.

We needed something new, and creative, we needed something tasking, which will make the operators stand on their feet and address the challenges of quality of service faced by consumers in their various networks. “The commission needed to empower the consumers while they make the choice as to what network they chose to stay on.

With the number portability, regime, if a consumer is not satisfied with the service of a particular network, he has the choice to switch to another network, without losing his number, which is his/her, identity,” he said. Ojobo further explained that the reason why some people have remained on a particular even with poor service quality was simply due to fear of losing their numbers, which has become their identity.

“There are people who have been on a particular number for ten years, so when they think about losing that particular number, and building their network of friends, business associates all over again, they simply remain with the stalling operator,” he said.

MNP service providers

In March 2012, the telecoms regulator had issued the license for number portability service. The contract for the establishment of the MNP Clearing House, which forms the pillar of the scheme, was awarded last October.

A consortium of three firms had won the bid to operate. The firms that make up the consortium are Interconnect Clearing House Nigeria (ICN) Telecordia of the USA and Saab Grintek of South Africa.

These operators, according to the telecoms regulator will make it easy for mobile network operators to comply with number portability mandates by creating a centralised system for porting all number types which would thus ensure a smooth and trouble-free process.

The commission had earlier explained that these MNP firms would have only six months to build out requisite infrastructure to implement the scheme. In addition, an extra two months, according to the commission would be given to the MNP operators to carry out testing before rolling out the scheme in the country.

Ojobo pointed out that it was expected that in the first few months after the number portability commences, the telecoms industry would witness some movement from the telecoms subscribers to other networks until there is stability in the service.

Explaining that the stake would lie in the hands of the consumer to decide which network he/she chooses to be on, Ojobo said there would be rules and guidelines, which will be laid down, to guide against the abuse and distortion of network by subscribers who might like to switch more frequently than was required.

Guidelines

Determined to meet its target of commencing MNP scheme before the end of 2012, the NCC only recently released the first draft of a document detailing the rules and regulations for running an MNP service in Nigeria. However, the commission said the release of the document was to invite comments from mobile telecoms operators and other stakeholders. The first draft of the document titled: “Nigeria Mobile Number Portability: Business Rules and Port Order,” sets out the business rules to manage the processes for porting mobile number(s) (MSISDN) between mobile service providers, NPC and subscribers, licensed by the NCC to provide mobile telecommunications service in Nigeria.

The document, however, refers only to MNP which means it does not cover Fixed Number Portability (FNP) or any other form of number or service portability. According to NCC in its introductory message, the document had been prepared without prejudice to any future requirement for number portability between fixed and/or mobile customers.

The NCC said: “In furtherance to the NCC’s objectives of protecting consumer interest through the development, monitoring and enforcement of compliance with regulations by telecoms service providers in order to ensure better quality services, fair pricing and competition, and in line with the provisions of section 128 of the Nigerian Communication Act 2003 which vests the NCC with the exclusive right to regulate numbers and number portability in Nigeria, the Commission developed a framework for number portability in Nigeria.”

The NCC stated that the approval of the need to introduce the scheme by all stakeholders had galvanized it into setting in motion machinery for developing an effective framework that will ensure its successful rollout within the purview of the established laws in the country.

“Following the approval of the MNP framework, the commission began plans to develop the regulatory, legal and technical framework for the implementation of MNP in Nigeria as well as the process of selecting a suitable vendor to run the Number Portability Clearing House in Nigeria with the publication of an Request for Quotation (RFQ) document for the provision of services with regards to the “Administration of Number Portability Clearing House in Nigeria,” the commission said.

Industry readiness

Some industry analysts strongly believe that Nigeria’s highly competitive telecoms market is not ripe for introduction of MNP given the circumstances that the industry is currently facing. According to them, there is an urgent need for all stakeholders in the industry to come together and agree on the modus operandi and terms of number portability. Gbenga Adebayo, chairman, Association of Licensed Telecommunications Operators of Nigeria (ALTON), in an interview, said: “the industry is not ripe for it.

But I would say the operators are ready for number portability but given the circumstances that the industry is facing, it is a bit doubtful if the industry as a whole is ready for number portability.

But there is a way around it and that is that all stakeholders must come together and agree on the modus and the terms of number portability.

Informed sources close to some of the networks told BusinessDay that preliminary consultations have already begun between MNP firms and top-level management of telecom firms in Nigeria on technical and commercial issues critical to the successful implementation of the scheme.

This is ahead of September date set by NCC for the commencement of the scheme in the country’s telecoms sector. Beyond that, MNP will enable Nigeria’s 96 million mobile telephone users to retain their numbers when changing from one mobile network operator to another.

However, BusinessDay also gathered that the scope of the ongoing consultations from a technical perspective revolves around how MNP firms can integrate with telecom provider’s Operations Support Systems (QSSs) and internal business processes, such as customer care, billing and order management.

“I am not aware of this. “But, it is critical that network element systems are integrated so the network can obtain the correct routing information for calls to ported numbers. “Fundamentally, operators and MNP firms will be discussing systems integration and interoperability of their systems.

And of course, there will also negotiate on interconnect charges and network handshake. “There will also be legal issues to discuss as it is critical to the success of the scheme. Discussions will also revolve around terms of billing, terms of porting, etc,” Adebayo posited. “I am not aware of this development.

But I believe telcos and MNP firms will have lengthy discussions on technical issues relating to interface of systems initially before commercial issues. “There certainly has to be an interface between telcos and MNP providers if the scheme is to be successful”, Lanre Ajayi, past president, Nigerian Internet Group, said in an interview.

Barriers

Often the biggest obstacle is the reticence and reluctance of the larger, more established operators to deploy MNP. Alluding to these operators benefiting from being the first operators in the market which has enabled them build the largest customer base, Best noted that these older and more dominant operators, though they might come out overtly to express their distaste for the scheme, see MNP as a threat to their dominance.

They believe that they can only lose customers to newer entrants and small players in the market. This, according to Best is an error of judgment because “it is the operators with the best range of products and service, the best quality of service and the best price plans that win the most customers. MNP enables the best Service Providers to win in the market place – not the biggest.”

As of December 2011, official subscriber statistics showed that MTN had 41.6 million subscriptions, while Globacom 19.8 million; Airtel had 16.1 million. Fourth GSM operator, Etisalat had crossed a critical threshold in subscription numbers with 10.7 million in the voice segment.

According to the former CTO of GSMA, the larger networks should look at MNP as an opportunity, adding that but all too often they actually act to slow down its implementation. “This requires firm and decisive action from the regulator to prevent happening.

MNP brings about the prospect of additional competition in the market place. Added competition among Service Providers does mean profit margins are likely to erode, but this will encourage them to innovate and introduce new and differentiated services.”

Dominant operators such as MTN have openly expressed their support for the scheme. “We have been preparing our business for it and believe that MNP would separate the boys from the men.

We are confident that MNP will deepen competition, it will restore the customer as king and any operator that is not giving a compelling value proposition to its subscribers in terms of pricing, quality and customer care will be punished when MNP starts”, Wale Goodluck, corporate services executive, MTN Nigeria said.

Conclusion

There is a crucial role for the government and/or telecoms regulator in every market as it relates to the introduction of MNP. Industry watchers say the time is right for MNP in Nigeria, adding that the commission needs to show leadership in devising the precise solution for the market place and setting deadlines for implementation by all mobile network operators.

Against this backdrop, the telecoms subscriber will be the chief beneficiary by having more choice available. The additional competition in the market place will stimulate service innovation, speed up the introduction of high speed data rate services, encourage telecoms operators to service their customers better and provide better quality networks.

Increased mobile penetration in turn increases national gross domestic product. Nigeria should be at the forefront of developing modern and innovative telecoms services for its consumer and business users – the implementation of MNP should be aggressively pursued. The telecoms watchdog is already making significant headway in this regard with the appointment of a Porting Administrator.

Finally, the Porting Administrator must as a matter of urgency facilitate the following: “The setting up of inter-operator implementation committees, agreement of porting business rules, technical implementation procedures, testing regime, a deadline for introduction,” Best advised.