The Nigerian Communications Commission (NCC) is yet to lift regulatory sanctions imposed on MTN and Globacom, two of the biggest players in the telecoms market, over allegations that they used their market dominance to compete unfairly in Nigeria’s telecommunications market, reports Technology Times.
Both telecoms operators are, however, concerned about the deficiencies inherent in the determination process.
Eugene Juwah, executive vice chairman, NCC, had in a determination dated April 25, 2013, held that both telecoms companies, South Africa’s MTN and Globacom, second national carrier, are dominant mobile operators in critical segments of the nation’s telecoms market.
A top official of the commission, weekend, who pleaded anonymity, said that the regulatory agency’s position is that the determinations still stand as they are yet to be reviewed after the 2013 study to assess actions by some operators that could reduce fair competition in the telecoms industry.
Giving insights into the rationale behind determining a telecoms operator in the country as a dominant player, NCC says, “The commission will presume that any licensee whose gross revenues in a specific communications market exceed 40 percent of the total gross revenues of all licensees in that market, is in a dominant position in that market”.
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Speaking with BusinessDay, on condition of anonymity, a senior executive at MTN, on Monday, said the commission is allowed to make a presumption of dominance where a licensee controls 40 percent of the gross revenues, not market share, in the specific market. “However, it is mandated that the Nigerian Communications Commission (NCC) conduct a study to determine if the ‘dominant’ player is abusing its significant market power to stultify competition within the determined market segment.”
According to the senior telecoms executive, in an interview with BusinessDay, resulting obligations cannot be justified merely by mere presumption.
Industry analysts told BusinessDay that considering that dominance in itself is not a negative position, the Nigerian Communications Act (NCA) and the Competition Practices Regulation (CPR) provide very detailed processes for determining whether such dominance has been abused, or has resulted in significant lessening of competition which the law frowns at. The telecoms executive said that the regulator did not follow the process to the letter.
The telecoms regulator said it reviewed six important market segments of Nigeria’s telecoms industry, including mobile voice, fixed voice, fixed data, mobile data, upstream segment and downstream segments.
“The NCC defined six market segments for intervention, using a theoretical model. This may be faulted, but it is within the discretion of the NCC”, the telecoms executive argued. By adopting the Structure-Conduct-Performance (SCP) Model and the HHI Index, he said, the NCC assumed that because MTN holds 40 percent market share in the mobile voice market, with up to 300 percent differentials in its on-net and off-net tariffs, the operator has the potentials of creating calling clubs, which could prevent its subscribers from calling other networks.
“In essence, NCC has penalised MTN based on anticipated conduct as opposed to actual conduct. This is clearly prejudicial to the provisions of S. 92(4) of the NCA; Sections 24, 25 and 34 of the CPR, as well as MTN’s constitutional rights. It fails to consider that historically, MTN has always been the last to reduce tariffs – tariffs are reduced to defend its market share from competitors’ actions.”
MTN is in effect being punished for the consequences of defending itself from the activities of its competitors”, he said.
As it relates to the assessment of demand and supply side substitutability to ascertain if there are competitive alternative products or services, he said there are indications if this was considered by the regulator.
“As is widely acknowledged, the Nigerian telecommunications industry is fiercely competitive. No single telecoms operator can determine pricing independently of its competitors. There are very clear, easy substitutes”, he further explained. The market dominance study of the mobile voice covered the broad spectrum of mobile telephony including messaging and fixed line telephony.
Besides, the study of the data segment covered fixed data, retail data, transmission services and leased lines as well as mobile data for example, dongle/data cards/tablets, internet through phone connections e.g. 3G/GPRS/EDGE, NCC said.
Upstream market segment reviewed included Spectrum, Tower Sites, Network Equipment, Wholesale Broadband/Internet Access and Wholesale Leased Lines and Transmission Capacity. The downstream segments review focused on handsets/device (including the Device Operating System) and Applications/Content (including m-commerce). Following the outcome of the review, NCC announced that the two companies wield significant market power and reduced effective competition in two critical segments, mobile voice and upstream segments.
In the case of MTN Nigeria, the telecoms regulator claimed that the mobile phone company held dominant positions in two key segments, mobile voice and upstream. Juwah had said then that no dominant operator was designated in the four market segments as mobile data was found to be “effectively competitive” while fixed voice market “is in a decline”. The determination, which took effect from May 1, 2013 will “remain valid and binding on licensees for the services specified in relevant market segments of this section, until further reviewed by the commission”, Juwah had said at the time when he also justified steps taken by the telecoms regulator.
