How Big Two telcos forced Nigeria to fix data prices

[dropcap]M[/dropcap] TN Nigeria and Globacom Limited, the two biggest telecoms operators allegedly engaged in anti-market practices that made the industry watchdog fix data prices in Nigeria, Technology Times has learnt.

Nigerian Communications Commission (NCC) alleged in documents sighted by Technology Times that the anti-competitive markets practice by the two telcos made the regulator decide to fix higher data price floors for the Big Four mobile networks operators (MNOs)---MTN Nigeria, Glo, Airtel Nigeria and Etisalat Nigeria---different from smaller players in the Internet market segment. According to the Nigerian regulator, mechanisms like price floor serves as one of the regulatory safeguards normally put in place by the telecommunications regulator to check anti-competitive practices particularly by the dominant operators.

While the telecoms regulator has suspended the December 1, 2016 take-off of the proposed data price peg due to public outcry, as the directive was perceived wrongly as an increase in what Nigerians would be made to pay for Internet data on across service providers.

The suspension may be short-lived in the wake of consultations underway on the matter, sources have confirmed as more details emerged on what informed the NCC decision to fix data prices in the Internet market.

[caption id="attachment_54348" align="aligncenter" width="8000"] Internet subscribers on Nigeria Mobile GSM networks by October 2016[/caption]

MTN Nigeria, the biggest telecoms operator in the market owned by South Africa’s MTN Group and Globacom, the SNO (second national operator) owned by Nigerian businessman, Dr Mike Adenuga Jnr, both control market numbers and the pipes that carry information to the customers.

At October, this year, Nigeria had 153,514,107 active phone connections split among MTN Nigeria, 60,982,487 (39.84%); Glo, 37,117,992 (24.25%); Airtel Nigeria 32,775,916 (21.41%) and Etisalat Nigeria, 22,210,315 (14.50%).

In the market for Internet service, the balance of power measured by subscriber numbers shows that at October this year, out of a total 93,176,061 subscribers are shared among MTN Nigeria, 32,464,779; Glo 27,185,552; Airtel Nigeria, 18,832,238 and Etisalat Nigeria, 14,693,492.

[caption id="attachment_54346" align="aligncenter" width="8000"] Number of Internet subscribers of Visafone and Multi-Links in Nigeria by October 2016[/caption]

But MTN Nigeria and Globacom, which owns stakes in undersea cables in the country, allegedly used their “dominant position” as wholesale provider of bandwidth (data transmission capacity) to also trade in the retail space, a trend considered by NCC to “significantly erode competition” in the Nigerian market.

The growing trend where these wholesale data companies engage in the downstream retail market was one of the reasons the industry regulator hitherto pegged data floor in the Nigerian telecoms market, according to the internal documents of NCC sent to the nation’s highest political stakeholders in the wake of public outcry that trailed the regulator-ordered data price caps.

In reality, MTN and Globacom, the telecoms industry’s number one and two operators by subscriber numbers in Nigerian telecoms market were allegedly “underpricing” their data offerings due to their competitive advantages as owners of undersea cables.

South Africa’s MTN Group and owners of MTN Nigeria is one of the 17 international telecoms carriers that owns WACS (West Africa Cable System), the submarine cable system that links Southern Africa and Europe. WACS also spans west coast of Africa, including Nigeria and terminates in the U.K. WACS that offers bandwidth on the 4-fibre pair system with total length spanning of approximately 16,000 kilometre complemented with 15 terminal stations.

In Nigeria, WACS cable service is sold by MTN Nigeria through its MTN Business unit, which the telco pitches as “the most advanced and only ultra-high capacity submarine cable system ever to hit the shores of Nigeria. WACS is delivered to Nigeria by MTN and links Europe, West Africa and South Africa. With WACS, businesses can enjoy unfettered connectivity between anywhere in Nigeria and anywhere in the world.”

[caption id="attachment_37895" align="aligncenter" width="1037"] Big players may jeopardise market growth thinks regulator, Professor Umar Danbatta, Executive Vice Chairman of NCC[/caption]

MTN Nigeria says that WACS’s bandwidth capacity of over 5.12 Tbps (terabits per second) and spanning 14,530 km delivers unmatched international connectivity to enable the telecoms company offer International Private Leased Circuits to any location across the globe; terrestrial IP & broadband infrastructure to deliver high grade and highly-availability connectivity anywhere in Nigeria and high quality, low latency connectivity “giving an unfettered internet experience for wholesalers/carriers and end-users alike.”

[caption id="attachment_21298" align="alignleft" width="300"] Dr Mike Adenuga Jnr., owner of Globacom[/caption]

On its part, Glo sells its Glo 1 IPW (IP Wholesale)/IPT (IP Transit) as a Dedicated Internet Access through a one-to-many broadband service backbone connection to provide Internet services to corporates, telecom companies and Internet Service Providers (ISPs).

The SNO’s Glo 1 Domestic Leased Lines offers Leased Line connectivity to interconnect nodal centres such as primary data centre, back up site, call centre and regional hubs for a variety of telecommunication applications, including point-to-point voice, high-speed data, and video transmission, according to the telco.

The company says its GLO 1 International Private Leased Circuits (IPLC) also supports two-way transmissions of digital signals at speeds ranging from 2 Megabits per second (Mbps) to 2.5 Gigabits per second (Gbps) and higher bandwidths and also offers Indefeasible Rights of Use (IRUs).

According to Glo, The IRU offered carriers and major telecoms companies “is a contract that allows dedicated access for a wholesaler to bulk bandwidth for long periods, like 15 years.”

According to Glo, its IRU “bestows certain unique advantages, including the right to lease that bandwidth to someone else. For both the European Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA).”

But marketplace competition analysts within NCC believe that these “wholesaler advantages” by the two biggest telecoms companies in Nigeria will also bestow an unfair advantage on them over rival operators.

[caption id="attachment_33871" align="alignright" width="300"] Another Nigeria headache ...Mr. Phuthuma Nhleko, Executive Chairman of MTN Group[/caption]

“Therefore, the introduction of price floor for data services in the country was to address market distortions, unhealthy price wars and value erosion that could threaten the going concern of the service providers”, according to the industry watchdog’s internal documents.

According to the Nigerian regulator, mechanisms like price floor serves as one of the regulatory safeguards normally put in place by the telecommunications regulator to check anti-competitive practices particularly by the dominant operators.

Specifically, NCC justified why it had to weigh in because “dominant operators in the wholesale leased line market, who also operate in the retail market, embarked on massive predatory pricing, a conduct capable of substantially lessening competition.”

NCC fears the trend could jeopardise growth in the Nigerian market as “some service providers were actually pricing their services below cost, a situation which could spell doom for the industry.”