Last week, stakeholders in the telecoms sector rejected the $197.4million reserve price fixed by the Nigerian Communications Commission (NCC) for a slot of the spectrum in the 3.5gigahetrtz (GHz) band to be used for the deployment of 5G technology. LUCAS AJANAKU writes that the punitive price of the spectrum could scare operators and scuttle the drive for 5G.
When he was invited to the podium for his goodwill message at the Stakeholders’ Forum on the Draft Information Memorandum for the 3,5GHz spectrum Auction organised by the NCC in Lagos, the Chairman, Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, did not miss the opportunity to spotlight the cost implication of 5G deployment in the country.
Pledging the readiness of his members to cooperate with the government to realise the 5G dream, he said the technology comes at a premium price.
NCC has scheduled December 10 for the mock auction, while the actual auction is fixed for December 13, 2021.
The forum was convened to review the Information Memorandum (IM) for the deployment of 5G. at the centre of the IM was the $197.4million reserve price which was considered expensive by all the stakeholders except the NCC which insisted that it benchmarked the cost with other jurisdictions in addition to other variables which may not have been considered by other studies before arriving at the reserve price which ‘we believe is reasonable’.
The IM provides information, conditions, obligations, financial implication, timelines and other details on the planned 3.5GHz spectrum auction.
The IM also explains the rollout obligations of the would-be eventual winners of the spectrum licence auction.
It stated that only licencees, who make down payment of 10 per cent of the reserved bid price and with 100 per cent regulatory compliance would be allowed to participate in the auction while licensees with outstanding debts that have secured NCC’s approval for a payment plan will be allowed to participate in the auction.
According to the IM, the auction comes with a 10-year spectrum licence and a minimum requirement of an operational Universal Access Service Licence (UASL). However, new entrants or licensees without a UASL will be required to obtain a UASL operational licence to be qualified for the 5G licence.
The eventual licencees will have a rollout obligation plan spanning 10 years, beginning from the date of award of the licence. Between the first and second year of the licence, the operators are expected to rollout service in at least, one state in each geo-political zone. From the third to fifth year, they are obligated to cover the zones. Between six and 10 years, they should cover the states, according to guidelines set out in the IM draft.
Spectrum
Spectrum is a very scarce commodity in the telecoms industry. To underscore the importance of spectrum to the telecoms sector, Head of Sub-Saharan Africa at Global System for Mobile Communication Association (GSMA), Akinwale Goodluck, described spectrum as the oxygen with which the industry breathes.
Also, the International Telecoms Union (ITU) Explainer said: “The electromagnetic spectrum refers to the range of frequencies (the spectrum) of electromagnetic radiation. This electromagnetic radiation is made up of waves, of varying wavelengths, which carry energy. From shortest to longest wavelength, the full electromagnetic spectrum comprises gamma rays, x-rays, ultraviolet light, visible light, infrared light, microwaves and radiowaves. The radio spectrum refers to that part of the electromagnetic spectrum which comprises radiowaves; these are waves with wavelengths of between 1mm and 10,000km.
“Waves are also measured according to their frequency. All waves travel at the same speed meaning the shorter the wavelength, the greater the number of waves that will pass through a given point during a period. The number of times a wave passes through a point in one second is called its frequency and is measured in Hertz (Hz). The radio spectrum is the part of the electromagnetic spectrum with frequencies from 3 Hz to 3,000,000,000 Hz (or 3,000 GHz).”
Cost hiccups
Adebayo said aside the cost of spectrum, the technology requires ubiquitous base transceiver stations (BTS) to receive and distribute signals. All the equipment used in the telecoms sector are dollar denominated. With everyday erosion in the value of the naira against the dollar, it is certainly going to be a terrific challenge.
Head of Innovation & ICT Strategy at Huawei Southern Africa, Dr Bello Moussa, realises this.
He said infrastructure sharing could however lower the costs of technology deployment for the 5G coverage in Africa, as well as the time it takes to complete deployments.
“We have seen a lot of challenges in site acquisition and site deployment in 2G, 3G and 4G era; this has hindered the development of mobile telecommunication and coverage. With the 5G we will need more sites, maybe three times the number of 2G and 3G.
“There should be a tight collaboration between municipalities and telecom service operators. This will not only save time but also the cost of deployment. The savings will be transferred to the consumer enabling digital access,” he said at the Africa Law Tech Festival.
Prohibitive cost, stakeholders said, might make the deployment of the technology a wishful thinking.
Moussa urged African regulators to offer favourable spectrum licence fees to operators to ensure that more players can join in the 5G deployment. “We have seen in the past that spectrum has been costly for 2G, 3G and 4G. If we want to have a 5G roll out which will be beneficial to the user, the regulator has to take into consideration the spectrum cost,” he said.
Former President, Association of Telecoms Companies of Nigeria (ATCON), Olusola Teniola, in an emailed note, also said: “For a sizeable piece of spectrum in sub-6GHz range over a tenure of 10-15 years this amounts to N7.5billion or N10billion yearly over 10 years, which is about the size of a typical marketing budget for the top Tiers of MNO(s) or other global players in a market size of a possible 20 million subscribers by 2025. This amounts to a N31 per subscriber monthly over 10 years amortised – at this amount for just a slot of 5G spectrum it appears more than likely that NCC may be able to achieve the reserved price per slot depending on other factors that each operator may consider material to the reserved price and auction.”
A major stakeholder in the telecoms sector faulted the high cost of the spectrum. According to him, at a time the local currency, the naira, is on a consistent roller coaster fall against the dollar, it will not be wise to over price 5G spectrum.
“We must take note of our peculiar situation in Nigeria. The operating environment remains suffocating. Most of our equipment are dollar denominated. We must source for dollar to get them imported into the country. And you and I know the ridiculous exchange rate in the country now,” he said on condition of anonymity.
He recalled that in 2016 during the last spectrum auction for 2.6GHz, 14 slots were put on offer by the NCC. While MTN Nigeria acquired six, Airtel acquired four while another firm, Open Sky picked two slots. “That was in 2016 when the economy was still in good health. It was only two operators, MTN and Airtel that participated. Glo and 9mobile didn’t move near the auction. That development got the NCC thinking. I am sure a committee was set up to do a post-mortem of what happened. Prominent among the findings then was the health of the economy, especially the exchange rate,” he said.
The President of the Association of Telecommunications Companies of Nigeria (ATCON), Ikechukwu Nnamani, said reduced spectrum cost would help operators to deliver 5G service to subscribers at an affordable rate.
Acknowledging that 5G deployment is far more capital intensive than 4G and other lower technologies, he said the Senate had during a recent public hearing on the technology, expressed concern that the operators might pass the cost to subscribers.
“There is no doubt that the operators are going to spend a lot of money to deploy 5G and they will need to recoup their investments from the service. The only way the cost can be lowered for the subscriber is for the telecoms regulator to make the 5G spectrum cost as low as possible,” he said.
Speaking on the cost of 5G spectrum, Nnamani, said: “The NCC does not come up with spectrum pricing arbitrary. It is based on a number of metrics including the service to be offered using the spectrum, the potential revenue that can be generated using the spectrum if the operator rolls out service based on assumptions, the estimated cost of both rolling out the service and operating it over the license period, the estimated cost of funds, and a reasonable return on investment. It is the combination of all this that will be used to determine the final cost. I am sure that is what the committee is working on.
“At the end, the operators that will bid for the spectrum will do their own analysis. If they are convinced the revenue potential is sufficient to cover their costs including spectrum cost they will go for it and bid above the reserved spectrum price in an attempt to win if more bidders are available beyond what is available. If they are not convinced they will not bid for it like the example you gave. If service providers don’t bid then the Commission will review the process and see if the price was the reason the auction was not successful. This process will repeat until all parties are happy with the process.”
So far, 81 other countries have already deployed 5G networks across the globe. In sub-Saharan Africa, checks showed that 5G networks have been launched only by Vodacom and MTN in South Africa. This even happened ahead of schedule with the South African government assigning temporary spectrum in the wake of the coronavirus pandemic, ostensibly to boost broadband connectivity with millions working from home amid a national lockdown.
Deployment remains in inchoate stages elsewhere on the continent with trials already conducted in Nigeria with MTN, Gabon, Kenya and Uganda.
Speaking at the forum, Minister of Communications and Digital Economy, Prof. Isa Ali Ibrahim Pantami, said the Ministry has been working closely with the Commission to ensure that necessary spectrum resources needed for the deployment of 5G network in Nigeria to accelerate the nation’s digital economy space is made available.
Represented by a Director in the Ministry, who is concurrently the Secretary, National Frequency Management Council (NFMC), Abubakar Ladan, the Minister said the 3.5GHz is the most popular spectrum band used globally by regulators and operators for the deployment of 5G technology, and it seems the only band available in Nigeria for immediate use by operators.
Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta, listed the various steps diligently taken by the Commission that culminated in present status of the 5G deployment plan. He also reeled out data to justify how profitable investment in 5G deployment will be for potential operators and investors in the country.
“Nigeria has an estimated population of 214 million, with an average growth rate of 2.6per cent annually. Approximately 76.46 per cent of the population is under the age of 35. In line with these demographic changes, internet penetration grew from 3 per cent in 2004 to 73.82 per cent as at September, 2021, and broadband penetration increased from less than 10 per cent in 2015 to 40.01 per cent in September, 2021,” he said.
