Nigeria plays catch-up as Internet value chain approaches $5.8trn

The complete Internet value chain has been estimated to grow by 11 percent annually over the next five years, reaching $5.8 trillion by 2020 as connectivity increases and savvy minds leverage the Internet’s endless opportunities to maximise returns.

“Looking at all areas of the internet value chain combined, the total size increased at an average annual growth rate of 16 per cent between 2008 and 2015 and is expected to grow at 11 per cent per annum over the next five years, which will lead the total value of the internet value chain to grow from $3.5 trillion in 2015 to $5.8 trillion by 2020,” reads a portion of the May 2016 study on economics of the Internet by GSMA, the body which represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 250 companies in the broader mobile ecosystem.

It further reveals, “Higher smartphone penetration, spend on data connectivity, consumption of online media, and spend on e-commerce logically fit together, and in turn, they drive increased value in digital content rights, spend on online advertising, and revenues for billing platforms (to name a few of the related items).”

The success of Internet affiliated businesses and services in Nigeria, however, remains a mirage as the bulk of prospective customers cannot get good, reliable connections to the Internet, thereby limiting the potential for multi-platform transactions.

Ismaila Bamidele, Lead ICT engineer at Lonadek Nigeria Limited remarks that “Broadband penetration has no wide visibility in the hinterlands. The remote areas do not have access to high-end fibre connectivity. The last administration launched a project to equip all geopolitical ones with Internet connectivity but it was focused in the major cities alone.”

“Also, where you have broadband, the cost of subscription is unusually high, owing largely to an unregulated market by NCC/CPC. This also creates adverse effects on quality of service for SMEs whose businesses are dependent on the Internet. They are confronted with high costs of subscription and the same time only receive poor quality service,” Bamidele adds.

An Ericsson Mobility Report on sub-Saharan Africa in 2015 stated: “While countries like South Africa and Ghana have long since passed the 100 percent penetration mark, other large markets like Nigeria and Kenya are still below 100 percent,”

Nigeria, in fact, currently stands at 10 percent in terms of broadband penetration, while the country’s approved National Broadband Plan (NBP) targets 30 percent broadband penetration which is expected to be achieved two years from now.

Data from the Nigerian communications communication has also shown a steady decline in the total number of Internet subscribers to the four GSM networks in the country. Subscriptions have dropped to 91,192,371 in April 2016, maintaining a monthly decline from 97,824,017 in November 2015.

The growth in the Internet value chain has been driven by three powerful factors. First, there has been a continuous increase in the number of people able to access the Internet worldwide via fixed broadband and mobile networks, at ever even greater speeds. Second, the declining cost of internet-capable devices, most notably smartphones, is making it more affordable to get online. Third, people are using the Internet for a wider array of activities and for longer periods of time each day.

However, for as long as many Nigerians are unable to get quality and cost effective access to the Internet, the opportunities will continue to elude large multinationals, SMEs, and small entrepreneurs that would have been generating additional revenue streams through the Internet.

The broad value chain of the internet as identified by GSMA spans across components such as; Content rights which is further broken down to  “Premium rights” and “Made for Digital”.

Also, there is the all-popular online service, which encompasses E-Commerce for both e-retail and e-travel. It also includes Entertainment- publishing, gaming, gambling, video, and music. Under online services, there is also Search, Information, and Reference Services; notable here are Google and Bing.

Included also is Social, Community, and Communications and lastly, Cloud and other E-services.

The third on the Internet value chain is “Enabling technology and services” which includes enabling platforms for- Design and hosting, Payment platforms, Machine-to-machine (M2M) platforms.  Advertising, Managed Bandwidth and Content Delivery falls under this also.

The fourth is Connectivity. The connectivity segment represents the means by which end users connect to the Internet. For most users, this takes the form of either a fixed connection such as digital subscriber line (DSL) broadband, or a radio based mobile network using 2G, 3G, or 4G data services.

The final segment of the internet value chain which GSMA describes as the most tangible from a user perspective, includes the devices, systems, and software they use to access the internet and the services in the other segments.

Caleb Ojewale