Among telcos in the country, data services is gaining traction as revenues from voice calls attain plateaux. The revenue decline is accentuated by the increase in the number of Over the Top Services (OTT), such as voice over internet protocol (VoIP) instant messaging (IM) and others that constrains revenues from text messages. LUCAS AJANAKU explores ways governments and regulators could create the right conditions to help internet protocol (IP) data reduce costs and produce some of the cheapest data delivery in the world
Nigeria and indeed, Africa have a unique opportunity to make the transition to IP data more quickly than other continents. Using IP data will help reduce costs and could produce some of the cheapest data delivery in the world.
With the rise of the internet of things (IoT), one day, everything will be data and voice will not exist as a separate business category, needing different technology. The transition in developed countries has been relatively slow. However, at the international level, large amounts of calls now move through IP and Multiprotocol Label Switching (MPLS)-based networks.
At the level of the consumer, consumer software such as Whatsapp, Skype and Viber are used by larger number of people every year. Blackberry, Facebook and WhatsApp are used to convey the kinds of messages they used to send over short message service (SMS) via instant messaging (IM) application.
The transition is slow because the industry making it ‘difficult. The industry is caught between irresistible forces and an old business model. They don’t want to become a dumb pipe but all the underlying business logics point to the next big stage being about large ‘dumb pipe’ companies.
According to Balancing Act, in terms of this transition, the position in Africa is much worse. The mobile companies know that they have to make a transition to data revenues but (with certain notable exceptions) haven’t really embraced the change. The situation has improved in Nigeria as telcos invest heavily in infrastructure.
Gone are the days when they see the internet and data as a capital-intensive business for which they don’t really have the networks. The returns on data are not anything like those for voice and this troubles those who lived through the ‘gold-rush’ returns of the last decade.
Data is all about content and African users have already voted in large numbers for things such as Facebook, not for content products produced by mobile operators. The content deal offered to Africa’s content producers is still skewed so heavily in favour of the operators that it is impeding development of a local content ecosystem.
This should be a concern to the regulator and operators because while voice and SMS were the first wave of the communications revolution, these cannot be used to deliver lengthier or more complicated communications. Internet-enabled devices are needed to be able to make companies more efficient and public sector services like health and education more effective.
The internet has grown enormously in terms of user numbers in the last decade. There is now a ‘critical mass’ of users in the more competitive countries but in the smaller, less wealthy countries, Internet is a relatively expensive privilege used by the few rather than the many.
For too many countries, Internet is still seen as second fiddle to voice in terms of government and regulatory thinking. There needs to be a focus on three things: getting Internet costs down for end-users; increasing the reliability of the Internet; and pushing out access to a much wider number of people.
These objectives need to inform the roll-out of more fibre networks and the next generation of mobile Internet, LTE. It is no longer good enough to talk about 256 kbps as broadband as video will be what users want as next generation services arrive.
According to Balancing Act below is a sketch of the kind of things government could do to accelerate the pace of change:
Lower prices to increase uptake
The focus needs to be on getting Internet access costs for African end-users down. The targets adopted by the Alliance for Affordable Internet are a useful starting point. The rapid growth of African Internet users over the last five years has been in large part because prices have come down.
Information is a powerful tool in this battle. Only a handful of regulators publish Internet subscriber numbers and rates charged by operators. Regulators need not only to collect Internet user numbers from operators but to publish them. They also need to publish quarterly Internet access cost data, cross-compared to help consumers choose the best deals.
Regulators need to make annual Internet access cost price comparisons and get operators to agree to bring prices down to more affordable levels. The skeptics may rightly protest at this point: how will this occur?
The new incumbents are the mobile operators and they have become accustomed to living a certain kind of lifestyle. To produce cheaper Internet services, they either have to cut costs or the regulator can licence others who can achieve this.
Democratise internet
coverage
In the best of African countries, there is a critical mass in urban areas but it is barely available in rural areas. There has been a lot of rather warming rhetoric about spreading services to rural areas (including voice) but the sad truth is that relatively little has happened relative to the scale of the task.
Mobile operators have more or less reached the edge of what they consider are addressable markets and on this basis, they should not be allowed to stand in the way of progress. The attitude from regulators needs to be: either get in there and develop services or stand out of the way and let others get on with task. They need to be made to offer fair and transparent interconnection rates for those who tackle geographic areas they won’t move into.
Technical innovation needs to be a cornerstone to work of this kind. The newer generation of low cost base stations and the TV White Spaces pilots offer interesting ways to reduce delivery costs.
For example, in Nigeria, in spite of the over 100 per cent teledensity and over 14omillion subscribers, over 200 rural communities are still not connected to telephony services. The Universal Service Provision Fund (USPF) being managed by the Nigeria Communications Commission (NCC) should be properly deployed to useful purposes. President, Association of Telecoms Companies of Nigeria (ATCON), Lanre Ajayi, said when the big operators are being given licences, there should be provision for them to expand into the rural communities.
Accelerate competition
Even in the more competitive countries, mobile operators with large fibre wholesale networks are hanging on to ‘rent-seeking’ wholesale pricing. In less competitive countries, the discussion about this kind of market blockage has barely started: state monopolies in places like Angola, Cameroon and Togo still rule with high prices and poor quality.
Regulators need to open up competition to utilities that have fibre assets and allow them to make their capacity available competitively in the market. They need to encourage ‘carriers’ carriers’ to roll out and offer competitive wholesale fibre networks from the private sector.
At the local level, they need to ensure that there is fair and open access for those wanting to roll out local access networks so that they can use wholesale capacity to deliver competitive prices. Insurgent challengers offering household fibre to the home and LTE should be actively encouraged through the licensing process.
These new data licences should not just focus on delivering Internet but allow this new breed of operators to get access to some part of the voice markets. MVNOs should be encouraged that operate voice services over data. Mobile operators will be shrill in opposition but the response should be: why are you not already doing this?
Where revenues make competition hard (like rural areas), network consortia should be considered. Where the smaller mobile operators are finding it hard to compete with a dominant mobile operator on network, they should be encouraged to form wholesale network consortia.
Reduce spectrum cost
Regulators tend to see spectrum sales as a revenue raising activity without making a vital connection. If high costs are added to an operator’s operating costs, it will pass these on to its customers.
The cost of the new LTE spectrum must not be sold in such a way that it condemns use of these new services only to high-end business users in the central business district (CBD) and at the airport. Licence conditions can be used that place a premium on wider roll-out and lower prices: a simple conditional, if you do this on price and roll-out, we will cut your spectrum prices.
For rural areas, LTE is significantly more efficient for delivering spectrum over distance and the regulator could reserve certain geographic areas where they would offer those willing to invest, free LTE spectrum beyond a nominal administrative charge.
Service quality
Over the past years, the Nigerian regulatory environment has been a mixture of soft and hard. The former Executive Vice Chairman of the NCC, Eugene Juwah, fined the operators over poor service quality. The new EVC, Prof Umar Danbatta has set up a committee charged with the sole responsibility of addressing the issue of poor service quality in the country.
Operators have consistently blamed dearth of infrastructure, especially power, right of way issues, multiple taxation/regulation, vandalism and other factors for the low service quality offered customers.
Regulators should start to carry out service quality tests on data services and be prepared to issue fines against those failing to meet agreed standards. The regulator should listen to the industry and help get to grips with network blockages that are slowing everyone’s service delivery down.
Vandalism remains a huge problem: it comes both from over-enthusiastic employees (the cuts are too strategic to be otherwise) and thieves looking for copper. Regulators need to carry out education campaigns about how fibre is worthless and get operators to replace of much of it as quickly as possible. Government needs to pass a law that place draconian penalties on those who cut networks.
On the question of electricity supply, mobile operators and regulators need to lobby government to provide electricity supply: diesel is expensive and polluting. New power distribution licences should be issued to allow private operators to provide power supply to all operators.
Nigeria cannot afford to wait for the future to arrive at its doorsteps. The World Bank points to the relationship between an increase in broadband penetration and increases in gross domestic product (GDP).
This is true but what is required to get this increase in broadband penetration is decisive action by government and regulators to allow investors to get on with the job. The National Broadband Plan launched by the Federal Government should be implemented to its letters. Only this way could the nation tap into the immense opportunities of broadband.
‘Regulators should start to carry out service quality tests on data services and be prepared to issue fines against those failing to meet agreed standards. The regulator should listen to the industry and help get to grips with network blockages that are slowing everyone’s service delivery down’
