In spite of the enormous contribution of the telecoms sector to the nation’s gross domestic product (GDP), it is still conatrained by a myriad of challenges which could derail the Federal Government’s target of 30 per cent broadband penetration. But the Executive Commissioner, Stakeholder Management, Nigerian Communications Commission (NCC), Mr. Sunday Dare says the regulator is partnering stakeholders in the industry to address these challenges, LUCAS AJANAKU met him in Lagos.
What is your assessment of the industry and why is NCC convening this forum?
The situation across the country is dire in terms of non-approvals of Right of Way (RoW) and multiple taxation. In some cases, we have more than 25 applications for permits unapproved for two years or more. Thus, in terms of deployment of telecom infrastructure, the major telcos suffer great setbacks and these translate into declining quality of service (QoS) to millions of subscribers. The non-approval and heavy taxation of telecom infrastructure have led to service gaps in FCT in particular and across the country. Nigeria has slightly over 250 service gaps where there is no telecom service or penetration. Connectivity is not yet 100 per cent and we said without this approvals, we cannot have improvement in the QoS. The Commission has received assurances particularly from the FCT minister and some state governors that approvals will be granted speedily and taxes reviewed. Even as I speak, I think certain approvals have taken place. Presently, given the situation which is staring us in the face, with the expiration of the NEC document soon, NCC is speeding up consultations. We are leveraging the results of the state-to-state interventions we have had, the feedback we’ve had across the stakeholder matrix, the experiences of the operators and numerous other engagements at the highest levels to review the document and present an acceptable standardised RoW and taxation document with regard to the telecoms industry. The Commission, in October last year, made a presentation to the office of the Vice President.NCC, through the Industry Working Group (IWG) is now looking at how it can bring all of these together- by identifying different interests, challenges of the economy and revenue and other relevant matters in the document review process. What do we hope to achieve? To come up with a reasonable and acceptable document -a standardised regime of charges and taxation. One that pays attention to the peculiarity of a strategic state like Lagos and a developing telecom state like, perhaps Jigawa for instance, because it might be difficult to charge in Jigawa the same amount Lagos is charging. In some instances, charge per linear meter in Lagos can be N500 while in Jigawa, it may be slightly higher due to low volume of telecom activity and the need to generate some revenue. Importantly, beyond the charges, we hope to shorten the times for approvals, improve the engagement between the state governments who need tax revenue and the operators who want to deploy to expand their networks. Now, the NCC is caught between these two giants and the Commission’s overriding interest is to ensure that Nigeria’s goal of attaining a broadband penetration of over 60 per cent across the country is not impeded. The interests of the parties do not collide but are reinforcing. They complement each other. If for instance, the telcos deploy their infrastructure, their revenue base increases by the same token the taxable revenue that will come to the state also increases. So if one of the operators makes N10billion because it is able to improve and increase the volume of its business and then it has problems with certain deployment and the revenue dips to N5billion, what is going to go to the federal and state as taxable revenue also decreases. So we hope that this document that we are trying to review now will look at this critically. NCC has other critical stakeholders. It is not just the state governments. We have the federal ministries, departments and agencies and everybody is coming with charges. It’s a whole galaxy to say but we are trying to bring that whole galaxy under one regime and then have something that can be looked at. There might be a range for Row charges with a ceiling. We hope that the IWG will do that difficult task so that by April, we could have a draft resolution that will be presented to NEC and then NEC can discuss this towards reaching an agreement. NCC hopes to do a presentation there, answer their questions and then see how we can get this done.
What are the implications of these charges on government and telecoms end users?
Well, I think the implications are tripartite. There are implications for the telecom industry especially and the key stakeholders, implications for the government in terms of the revenue accruing to it, in terms of the investment that comes into telecom and then that dovetails in terms of the number of people employed in the telecom industry and then we have implications for the subscriber. Let me start from the subscriber, the quality of service (customer satisfaction) suffers because a subscriber expects that if he gets a registered line, puts credit on it, he expects to enjoy some level of satisfaction in terms of quality of service. Your call is going through, your text message is not delivered on time, and your connectivity to the internet is slow and lots more. These will persist if the operator for instance continues to have problems in deploying additional infrastructure or expanding his network because of multiple charges and right of way issue. What it means is that the operator has to or will put a lot of pressure on the system and equipment it has such that if you have a duct that only 500 calls can go through every hour and you want to expand and you cannot expand, you will now start piling 2000 calls through that duct. That leads to congestion and of course dropped calls. You know what happens when 2000 people are trying to get into a door that was made for 500 people and of course the only reason might not be that they don’t have the permit but it is part of it, we will say we want to deploy but we cannot deploy because we’ve not been given permit but there is also something called the capital expenditure (capex). The dollar component of their commercial agreement and the rest is a major concern for operators. Some of them took loans from the banks at the rate of N195-196 to a dollar and it went to N500, N450 it’s at N360 now but we are still looking at almost twice the amount and have not been able to get out of that debt trap. It’s going to take a while so they are cutting down, they are not getting enough forex which will bring in equipment from outside. On the part of government, it affects the revenue (annual operating level) because if they are not making enough revenue, we’ll only tax them based on the volume of business they do that’s one. Two, one of the core mandates of NCC through the NCC Act 2003 is to encourage investment we have seen between 2015, 2016, 2017, we’ve seen an almost 10 per cent contribution to GDP but as the telecom industry is facing some challenges the GDP contribution has dropped slightly. All of these affect the taxable revenue that comes to government, impact on quality of service and employment is at risk. So, you see, it’s tripartite. It is so connected and let’s say, unless we face these challenges and solve them, it will affect the foreign direct investment (FDI) coming into the country, it will affect QoS and consumer satisfaction, it will also affect the revenue base of the operators and the taxable revenue accruable to government at different levels.
Three years ago, Association of Licensed Telecoms Company of Nigeria (ALTON) signed an agreement with Lagos State government over the harmonisation of these charges. What is the situation? Has it become a stumbling block?
It will not be right to say Lagos is a stumbling block and this is the narrative. Lagos State is a bellwether for this country in several aspects. When it comes to the telecoms industry, the telecom headquarters of this country is Lagos; when it comes to population, the one single biggest population is Lagos; when it comes to the centre of business, it is Lagos; when it comes to the pace of development, it is Lagos. So Lagos does matter and like other big cities in the world, you expect that a state like Lagos in any economic engagement will like to maximise the benefit for the sake of the state. So that is what you are seeing in Lagos and rightly so. Lagos is trying to make sure that even in engaging with the telecom industry and other similar industries as you have seen, the state wants to renegotiate the basis of agreements or review this and that. Is there a way Lagos can get more value for this engagement? That is what is happening. Now, the worry for us is that while the legitimacy of that position cannot be challenged, time is of essence. Lagos has the right to do it, but we are worried about the timeline, the pace at which it is happening. If it is not fast enough, if it is delayed willingly or unwillingly, the effect on the telecom industry and particularly the effect on the achievement of the roll out obligations in the National Broadband Plan (NBP) 2018 suffers. And there will be ripple effects. Our role is to ensure amicability and help facilitate collaboration between states like Lagos and NCC licence holders. So what we want to see on the part of Lagos and we know that once Lagos gets it right, other states will take a cue from it, is harmonisation of positions and a partnership that works both ways.
For the benefit of all the states of the federation let’s have this review; let us have this understanding and agreements and make sure that we hit it on an accelerated pace such that every party wins. For instance, Lagos and any other state as the case may be, gets more value, the operators can deploy the infrastructure needed and ultimately the man on the last mile which is the consumer also gets better services. Let me give you an example, Lagos is clearly the number state in the country and its Smart City project tis on course. There is greater value in working with all the elements in the industry especially the regulator. The smart city thing is also within the new ecosystem and you have to ride on the back of telecom infrastructure. What is this telecom infrastructure? It’s not independent of the infrastructure of any of the operators, it’s not independent of the NCC as a regulator; it’s not independent of the quick deployment of the huge submarine cables lying at the shores in Lagos needed to create the backbone infrastructure for broadband penetration. We have Main One, SAT 1, GLO 1 just lying there at the shores. We know about six other states who have started their Smart City projects in Nigeria and are working with NCC.
The engagement spectrum is wide; government to government, some is government to private but we are all connected. NCC will work with Lagos as with others to achieve smart city, e-government and a digital economy. So like I said, Lagos is not a stumbling block. Lagos provides that critical passage to the success of the Infraco or NBP of the Federal Government.
Against all these odds, is the 30 per cent broadband penetration target is still achievable?
Well, I think as at the end of last year, we were at 23.1 per cent and we have a 2018 target. We are not where we exactly want to be. We believe that the fact that we are at 23.1 per cent now realistically has to do with some of the challenges I mentioned earlier. One of these challenges has to do with the economic environment and the steep rise in forex pricing. Nothing indicates that more than what happened to Etisalat. Beyond the fact they took a loan of $1.2billion, dollar component was massive and taken at the rate of N195 and have to pay back at almost N400. Etisalat almost collapsed. The fact that the other big telcos were able to survive also shows the resilience of the telecom industry and its operators. But also with that comes the fact that the rate of network expansion and the rate of deployment we expected to see has slowed down. The industry has not been able to move that fast enough with the development of backbone infrastructure for broadband penetration. Ironically, you look at our shores, we have Main One, we have Glo 1, we have Sat 1, and they are there at our shores untapped. Other countries are saying if you are not using them give us, they are sitting there because we don’t have the backbone infrastructure to distribute. It is a question of the backbone infrastructure. Once you have the backbone infrastructure, the broadband penetration we are talking about is going to happen. Right now, we have 270 access gaps across the country and you know what I mean by access gaps, places where you don’t have connectivity at all either internet or telephone connectivity.