Funke Opeke, CEO of Main One, the undersea cable company shared her vision of the next frontier for broadband in Nigeria in this presentation at the Nigerian Communications Commission (NCC) Stakeholders Consultative Forum for the Year 2013 -2017 Strategic Management Plan held July 2012 in Lagos.
We reproduce the presentation below as the issues raised by the Main One CEO remains relevant today as they were back then.
Broadband Nigeria: The next frontier
This paper shall briefly examine the current status of broadband access in Nigeria vis-à- vis the potentials for growth in the sector, and as well attempt to identify the need for urgent, deliberate and practical regulatory and policy imperatives needed to ensure the attainment of the desired level of ICT growth and development in Nigeria, particularly in the broadband and data segment of the telecommunications sector of the Nigerian economy, to enhance the contribution of ICT to the socio-economic advancement of Nigeria.
2. SERVICE REALITIES IN NIGERIA
The Nigerian ICT sector has witnessed phenomenal growth in the last decade, to emerge as the leading mobile telephony market in Africa in terms of subscriber base and revenue. This growth 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. The resultant increase in investor confidence led to an abundant inflow of foreign direct investment which provided the financial lubricant required to sustain growth in mobile telephony infrastructure and services deployment in Nigeria.
These regulatory changes were supported by a series of financial incentives, economic market (largely mobile) which is evident in improved availability, affordability and quality of services to the Nigerian consumers today. However while the foreign investment has been good and necessary to jump start the sector and make better telephony services available to Nigerians, it has also implied that most of the financial gains from the development over the past decade have been exported offshore. Furthermore, a decade into this process, Nigeria remains largely a consumer of telephony services and contributes minimal local content to the services enjoyed. Indeed, telecom has become a larger part of our GDP, so it creates some jobs and income; however the significant gains from providing the initial capital, network and subscriber equipment, software and specialized services are gained offshore. This growth so far witnessed in the ICT sector has also been largely restricted to the voice telephony segment of the sector and has so far failed to extend to broadband and data segments.
The huge dichotomy between the voice telephony and data segments is evident when statistics are presented. With tele-density in the country growing from below 2% in 2001 to about 65% within 10 years, the broadband segment is yet to catch up. Recent statistics show that there are over 45 million internet users in Nigeria, which on the surface appears to be a large number until we note that this figure represents only 29% of the population1. In reality, we estimate that actual broadband penetration in Nigeria is in the 10% range, and places us in several published studies behind South Africa, Kenya and Ghana in sub Saharan Africa. We believe the goal in terms of broadband penetration should be such that there is a higher degree of penetration and broadband is available in all parts of the country such that it starts to impact our lives in a more meaningful way – in education, service delivery to run our daily lives, government, commerce and big business and also entertainment. When broadband is readily available, behavior patterns will change because we will rely on such to obtain services and get tasks required in our daily existence as students or workers or business people done. With the advent of the Main One and Glo-1 submarine fibre optic cable systems (as well as the expected WASC and ACE cables), Nigeria has sufficient bandwidth capacity and the fundamental ingredient to drive the growth of data and broadband penetration in the country but we have not made the same kind of progress other countries have made with the same kind of development since these cable systems bring in the potential of delivering fast and affordable international connectivity at speeds far in excess of what was previously available on the NITEL SAT-3 submarine cable system. With this in mind, it is evident that advances made so far in international bandwidth connectivity are yet to be translated to the end user due to certain factors with the first being the absence of a national backbone with the failure to privatize NITEL. Thus the fast, affordable and reliable bandwidth connectivity which is available at the shores of the country is not effectively distributed to end users across the country with any meaningful impact. There is a reason why incumbent national carriers which have been long privatized in other countries remain the anchor of the communications industry. In the United States where I am quite familiar, AT&T was split up into 6 regional Bell operating companies, which reconsolidated into two and remain the largest telecommunications providers in the United States today i.e. Verizon Communications and SBC/AT&T. It is the same reason we have BT in the UK, Deutsche Telecom in Germany, France Telecom in France continuing to play leading roles in their telecommunications sectors. Closer to home, we have Telkom South Africa and Vodafone Ghana playing similar roles in these African economies. 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 1 http://www.internetworldstats.com/stats1.htm. Figures represent statistics as at 31st December, 2011.and more affordable broadband services to the end user by the advent of the Submarine cables on the verge of defeat.
WHITHER THE CONNECTIVITY?
From the foregoing, the connectivity realities in Nigeria reflect an artificial overabundant supply of international bandwidth without a corresponding supply of domestic bandwidth. High domestic bandwidth prices, non-level competitive market for operators, inadequate access to last mile infrastructure fraught with discriminatory and prohibitive costs and poor quality of service are symptoms of the domestic bandwidth sector that requires urgent intervention. While these same conditions have prevailed with the growth of mobile voice telephony services and each major operator has invested in its own infrastructure rather than leverage shared infrastructure, such arrangements do not lend themselves so easily to data services. The reason being that while voice requires limited bandwidth and the high population of Nigeria makes it feasible for mobile operators to deploy the infrastructure on a proprietary basis and pass the high costs onto consumers, broadband services requires a lot more infrastructure (fiber and electronics), which is unaffordable to serve most parts of the country if the infrastructure is not scalable and shared between several operators. It is clearer now than ever before that service providers are being forced to develop proprietary distribution infrastructure to deliver services in the absence of a fair regime on sharing. Huge capital outlay and time to market factors, amongst others, are key disincentives for this option, and it is not always an economically feasible option, nor does it offer a viable business model for new entrants in the broadband market. It goes without saying that the cost associated with such procurement of builds will be transferred to the end user, the consumers, leading to the current situation where broadband services are still offered at rates disproportionate to the immensely reduced prices offered by the submarine cable companies to the service providers. No doubt, a more feasible alternative is for service providers to procure access on a shared basis to existing last mile infrastructure for the provision of their services, at least where available, or engage in industry supported joint build models to reduce cost and improve productivity.
The current status of broadband in Nigeria therefore begs the following questions: I How do end users reap the benefits of the abundant international bandwidth connectivity at their doorsteps?
II How can we resolve the issue of access to distribution and last mile infrastructure resolved?
III What amount of independence should be given to the forces of demand and supply and free market dynamics in resolving anti-competitive practices by operators especially those owning infrastructure which may be considered essential to the provision of domestic bandwidth capacity?
IV What role must the regulator and policy makers play by way of policies, regulation and infrastructure funding?
We must also highlight what we believe will be the key indices for tracking the progress of broadband in Nigeria in the near future.
The major index for the growth of broadband services in Nigeria in the future will be the sheer ease of access to a variety of broadband services. This refers to the availability of broadband services to the consumers. Currently, the broadband market in the country cannot be said to be homogenous, with major cities like Lagos having a larger share of the market than the others. It is therefore important for broadband services to be readily and fully available in all states of the country such as Jalingo, Taraba, and Bayelsa to ensure that the services are accessible to the end users who requires access. A child in Yenagoa must be able to go home after school confident that they will be able to obtain access to the Internet to complete research required for the paper due for submission in school tomorrow.
3.2 Low Cost – High Quality In market segments where broadband and data services are available in the country, there is disequilibrium between the cost of these services and the quality provided. Quality here refers to the quality of the services itself, in terms of download throughput, upload throughput and latency competencies and to the available broadband speeds on offer. The future of broadband in Nigeria must be characterized by low service costs while at the same time ensuring high service quality. Consumers must be motivated to purchase broadband services by a competitive environment that guarantees that the service providers will provide the best possible services at the most competitive rates.
A competitive service provider market
The future of broadband in Nigeria must be characterized by a market driven competitive landscape that focuses on sustaining growth and innovation in the sector through required FDIs and local investment. Regulatory intervention and investment incentives particularly for local players should pervade government policies and regulatory intervention should be tailored towards enhancing sustainability of the market and creating effective level playground for all and sundry. It is well known globally that market domination by large players in high technology related businesses stifles innovation, punishes consumers with high prices, while rewarding the players with high profit margins, and fails to encourage or support growth of local content and participation. Our regulators will need to be active in sector specific regulation of the markets, where the market does not self-regulate and it must be such regulation that rewards investment in open infrastructure, innovation and local content participation.
Efficient consumer protection mechanism
It is of paramount importance that there exists a system to address consumer concerns to guarantee their expectation from the promises made by services providers. Customer confidence in the service market should be taken as important as investor confidence in the country itself. As such, there is a need to ensure that consumers are guaranteed a simple and effective mechanism to have all their concerns address and remedied where possible. The onus for ensuring such a mechanism will lie on both the industry and the regulator.
Regulatory From the foregoing, intervention in access to critical last mile infrastructure (backhaul and the local loop) for the delivery of the services to the end user remains essential for progress. Regulating access to, and prices of, existing backbone and last mile distribution infrastructure will create competition and provide further incentives to drew entrants to deploy only unavailable infrastructure. The objective should not be to stifle growth in infrastructure development but to ensure that efficient competition is fostered and infrastructure builds are appropriately directed to meet areas where those fostered and infrastructure builds are appropriately directed to meet areas where those needs truly exist, whilst services requirement in areas with existing backbone infrastructure could be immediately addressed. The nature of competition contemplated is the fair and competitive unbundling of local loop access to existing infrastructure by an infrastructure owning operator to other service providers at prices that are reasonable and reflective of economic cost of the provision and maintenance of the infrastructure and sundry investment by the facility owners. Though current regulatory prescriptions in Nigeria provide for such access to shared infrastructure, the scope and enforcement provisions of the regulations leaves more to be desired. Whilst the respective provisions i.e. the Communications Act and the Telecommunication Networks Interconnection Regulations, guidelines on Collocation and Infrastructure Sharing generally provides for access in one way or the other, there are no specific pricing regime and enforcement of the current rules are not particularly firm, even though some of these regulations suggest that the prices should be reasonable, non-discriminatory and cost based. Specifically, there is no cost based rationale for bandwidth from Lagos to Abuja or Port Harcourt to be more expensive than bandwidth between Lagos and London but such is the reality because there is no enforcement of the existing regulations for infrastructure sharing.
Given market antecedents, it is unlikely that infrastructure owning operators are ever going to commercially agree rates that are truly cost based, competitive and nondiscriminatory without regulatory intervention. The current level of continued investment and build in intercity and intra-city backbone network infrastructure by each and every network is also in itself testimony to lack of willingness to agree each and every network is also in itself testimony to lack of willingness to agree equitable and cost justifiable prices for access to those facilities. While the absence of specific backbone or wholesale leased line service regulation in the sector could have been fuelled by the view in the past that there were no legacy intercity lease line and been fuelled by the view in the past that there were no legacy intercity lease line and local loop infrastructure on ground, thus no need for regulation. However, the situation has tremendously changed over the years and despite the proliferation of such networks, the cartel like behaviour of network owners with respect to access and pricing remain deterrents to the further competitiveness of Nigeria’s consumers bear the burden of such high costs. In addition to the foregoing, current proprietary owners of the most expansive last mile and access facilities in Nigeria are also the largest networks providing data and voice telephony services. With the rates charged for leased lines services i.e. by these operators, they are able to maintain market dominance by keeping the small ISP businesses and other secondary providers of data services such as CDMA operators from reaching the end user market and successfully stifling competition in broadband services in Nigeria. Given that some of these operators also have international connectivity cable infrastructure, the fate of other operators and their ability to compete for price competitiveness, even as Main One continues to be an open access cable with competitive pricing made available on its network. There are therefore also serious competition issues, which justify our stance on the need to effectively regulate access pricing in the market if any meaningful growth and development would be attained in broadband services segment of Nigerian telecommunications market. It is clear that the regulator must make strict pronouncements that mandate access and determines pricing in the interest of promoting broadband access, particularly in relation to duct space, dark fibre, other ancillary network infrastructure and high capacity bandwidth needed to aid the market development of broadband services. Several models abound all over the world, and looking inwards, the Commission could benefit from similar experience in the voice telephony segment, which was largely uncompetitive in retail and end user pricing until the three different phases of voice termination regimes were made by the NCC. The phased determinations have significantly improved competition in the voice market, helped to improve quality of services in the process and drastically improved prices. Main One, along with other industry players, firmly believes there is an urgent need for the Commission to implement a study of the wholesale leased line and other last mile access and distribution infrastructure market, and implementing a firm access and pricing regulation and enforcement regime. Such regime needs to also clearly spell out the guidelines for sharing with incentives and penalties for operators willing or unwilling to open up their networks to others at competitive rates. In addition, the measures would need to be structured in a manner that such incentives do not continue to strengthen dominant players, but support overall growth in the sector and local content development.
Policy and Investment Incentive
Main One has been in the forefront of the push for the development of a National Broadband Policy for Nigeria to drive the expansion of broadband in the country. This viewpoint is predicated on the conviction that both the demand and supply sides need to be enhanced beyond the efforts of operators and service providers, but with concerted efforts from the regulator and the policy makers as well. Significant improvement in the access to and current levels of broadband infrastructure build should form an essential part of the National Broadband Policy and implementation strategy. There is need to ensure efficient allocation and utilization of government owned and government influenced assets such as Spectrum and Right of way, since ensuring efficient access to such resources at fair prices will only drive further deployment.
In recognition that we are still lacking reliable power supply in Nigeria today, this poses a challenge, but similar to the challenges faced in the power sector today, we do not want to look back in 10 years and face similar problems with regards to broadband communications. Today most developed and even developing nations recognize that access to broadband services is similar to the requirement to access to electricity and government is a major driver in ensuring broadband services are deployed to every citizen. For example, National Research and Educational networks have been a major focus of government to drive broadband network deployment to educational institutions. The US pioneered this development with NSFNet which led to the development of the focus of government to drive broadband network deployment to educational Internet and companies like Cisco Systems and more recently, we have Tenet in South Africa, Ubuntu in East Africa, NITA and GARNET in Ghana, but have Tenet in South Africa, Ubuntu in East Africa, NITA and GARNET in Ghana, but Nigeria is yet to boast of a Research and Educational network. Beyond funding support for research and educational networks, in areas where the infrastructure is inadequate or does not exist, the provision of special funds to enhance access to backbone and last mile infrastructure facilities across the country is urgently required. The National Policy needs to specify a transparent process that ensures competitive bids and an efficient monitoring system to guarantee optimum application of the resources to enhancing existing infrastructure and/or new builds. In addition, programs must be designed to cut across government agencies e.g. federal and state governments or collaboration between agencies such as the CBN with the cashless Nigeria program and the telecommunications regulator. If such programs are not leveraged to achieve the broader policy objective of broadband penetration, when will the opportunity exist? Likewise, if we continue to deliver satellite based communications services to our schools, where is the opportunity to migrate to fiber and ensure that our students have enough bandwidth to support learning in today’s environment and that gets our educational institutions once again competitive? Lessons must be learnt from previous initiatives that have failed to meet the expectations of the consumers and policy makers alike largely because they were based on frameworks that did not effectively consider their impact on the fulfillment of the project objectives, as well as the sustainability of the processes. The notion that government’s policy role should be limited and that market forces will solely drive broadband service availability beyond the most densely populated urban areas is simply wrong. Given today’s realities in Nigeria, government’s direct support is needed for infrastructure development for broadband services in urban areas as it is needed in the rural areas. Direct financial incentives towards broadband last mile infrastructure development, which may be through a dedicated government controlled national broadband infrastructure development fund or application of the USPF fund which can be equally accessed by operators and services providers demonstrating clear and proven deployment strategy, operational antecedents and execution plan. This needs to be supported by an efficient management and governance structure that will guarantee proper supervision to assess the service impact of the utilization of such funds. Such framework must take into consideration the need for local content development to ensure sustainability and economic growth. In order to ensure that again we simply do not become consumers of broadband services in a manner similar to mobile services today, government support needs to be geared towards the development of local companies, skills and jobs that will foster innovation and creation of local wealth. Ample stimulation of the demand side through the promotion of content development and entrenchment of usage of broadband through digitalization of government Ministries, Departments, and Agencies and the automation of government workforce and operational processes is equally important, such that citizens are encouraged to utilize broadband services as tools for interfacing with public departments, and public enterprises are also able to benefit from increased efficiency of online real-time services value, enabled by broadband services access.
As reiterated in our paper, Nigeria cannot overlook the important economic benefits of expanding its broadband connectivity capacity if it were to compete with the global league of developed countries. Prior strategic plans of the NCC have secured mobile voice access in the country and such services are now available within no more than 30 minutes travel time of every Nigerian. If Nigeria is going to achieve Vision 20:2020 which will place it in the G-20 league of nations, or go from BRICS to BRINCS by joining the emerging economic block of Nations in which South Africa is already a member, the next strategic plan of the NCC must address growth in broadband capacity distribution to every nook and corner in Nigeria. There is indeed ample need for the regulator and policy makers to take the lead in developing and implementing appropriate policies and regulations that encourage continued growth and investment in the sector in ways that ensure our public institutions embrace ICT, support ample creation of jobs, ensure adequate local content participation and the creation of wealth and economic growth for more Nigerians. The new NCC Strategic Management plan must address how broadband gets to every doorstep and how public institutions embrace ICT for service delivery to all Nigerian citizens.
Opeke, CEO of Main One Cable Company made this presentation at the Nigerian Communications Commission (NCC) Stakeholders Consultative Forum for the Year 2013 -2017 Strategic Management Plan held July 2012 in Lagos.