Nigeria’s N600bn broadband income entangled in structural frailties

Structural frailties in Nigeria’s telecommunications industry are causing the nation huge economic losses especially amidst government’s failure to properly implement the National Broadband Plan (NBP). The broadband plan, is aimed at facilitating nationwide deployment of metropolitan and backbone networks on an open access, non-discriminatory basis. The GSMA, a body representing the interest of operators globally, had predicted that the country’s broadband market could have a direct revenue impact of N600 billion by 2016, only if government can create the enabling environment. Industry observers say that the said target remains unattainable because the current market structure is vertically integrated. This however implies that some players provide both passive, active and retail services on one hand, while providing passive and active (or part active) infrastructure to the competition within the retail segment on the other hand, with no price caps at the interconnecting layers.

This has given rise to price regimes that negate the objective of increasing broadband penetration in Nigeria, according to them. This structure, which has served the country well in terms of penetration of mobile  services, has faced limitation in terms of increasing penetration of high speed broadband services.This situation is worrisome because the economy is in dire straits in view of the raging revenue crisis, amplified by the steep decline in oil prices and widespread corruption, which is already dampening government finances. Eighteen out of 36 states of the federation are technically bankrupt, with a backlog of unpaid workers wages and salaries running into months. Given broadband potential to generate revenue for economies, Matthew Wilsher, chief executive officer at Etisalat Nigeria, is of the view that government has failed to put in place regulatory interventions to address market imbalance in order to exploit the huge prospects of broadband for income generation.

 In a paper presented at the 2015 Commonwealth Broadband Forum in Abuja recently, Wilsher also pointed out that studies have shown that broadband internet has the potential to drive GDP growth in excess of N400 billion between 2014 and 2018. With the creation of the much needed enabling environment to foster pervassive broadband infrastructure rollout, “Jobs will be created and young people can feed on their intellectual property (IP). “Small businesses will spring up across the country. Creative people will come up with new solutions that would take Internet services to the hinterland. “Government at all levels can generate huge revenue from taxing new businesses that would spring up as a result of improved internet connectivity”, said Usen Udoh, senior director, high communications, Accenture Nigeria. Since the liberalisation of the telecom sector in 2001, government has generated over N300 billion from spectrum licensing auctions, making it a significant revenue earner.

The telecommunications sector has so far attracted over N6.4 trillion ($40 billion) in invest-ments, 13 years after the sectors’ deregulation and liberalisation, according to the Bureau of Public Enterprises (BPE). Market observers are however suggesting that investors are already raising questions about the country, in view of its harsh  economic climate and the telecoms industry’s structural imperfections. Wilsher further said broadband internet deployment involves considerable amounts of fixed cost, also explaining that struggling telecommunications operators who are unable to attract the volume of reasonably priced, long-term funding required to deploy and operate broadband infrastructure profitably, are leaving a major broadband investment deficit. “The resultant shortfall is underlined by Nigeria’s ICT investment as a percentage of Gross Domestic Product (GDP) ratio of 2.6 percent while the average for peer countries is 5.5 percent”, he added.

Speaking with BusinessDay at a press conference organised in Lagos, recently, to intimate the media on the company’s five year milestone, Funke Opeke, chief executive officer at MainOne, stressed the need to sustain the broadband policy initiatives introduced to promote open access and manage spectrum more effectively in order to drive economic development. “The is a structural issue in broadband. Companies are unable to share infrastructure and compete effectively. British Telecoms continues to provide infrastructure and there are clear frameworks for sharing”, she added. In view of Nigeria’s economy and GDP per capita, Opeke said, “you cannot have broadband without cost efficiencies”, explaining the the structure does not exist to facilitate the most efficient delivery of broadband service. According to the MainOne CEO, Nigeria needs to move up the value chain beyond dependence on natural resources, and into a labor-intensive service economy.