The decision by fourteen states in Nigeria to increase Right of Way (RoW) charges is likely to be the biggest obstacle to a new push by the federal government to increase investment in fixed broadband.
The Nigerian Communications Commission (NCC) said on Friday it plans to invest 265 billion naira ($732 million) in broadband infrastructure over the next four years as the government sets its sights on nationwide coverage and boost the economy.
According to Umar Danbatta, the chief executive officer of NCC, the government will provide 65 billion naira for the project and six private infrastructure companies the balance under a public-private partnership.
In a telephone interview with Bloomberg, Danbatta said the plan is to roll out an additional 30,000 kilometers (19,000 miles) of fiber across the 774 local governments, taking the total to 71,000 kilometers by 2024. The penetration rate could rise to 65% from 38%, he said.
However, unless the federal government addresses the hike on Right of Way (RoW) earlier in the year, the latest plans would have great difficulty.
The 14 states including Lagos, Kano, Ondo, Cross River, Adamawa, Osun, Kaduna, Enugu, Ebonyi, Imo, Kebbi, and Gombe increased the cost of RoW from the initial fee of between N300 to N500 per linear metre to between N3,000 and N6,000 per linear metre.
News of the hikes has fanned consumer speculations that operators might resort to increase in broadband service fees in order to mitigate the added cost. But experts say this is unlikely.
“There won’t be any increase in service fees. Right of Way is the small part of the cost of deploying fibers but the administrative overhead can be quite exhausting,” said Adedeji Olowe CEO of Trium and a consultant for telecommunication companies.
He, however, notes that the fiber cable operators may have no choice but to pay the new fees as there is no better or more reliable technology with the capacity of optical fiber.
Harmonising Right of Way fees is a mission the minister said in 2019 he intends to pursue to a logical end once the new National Broadband Development Plan is drafted in March 2020.
The sector also risks losing the momentum it has achieved which reflected in its 2019 contribution to GDP.
The telecom’s contribution to the GDP by the second quarter of 2019 was 11.39 percent making it one of the best performing sectors of the economy in the year. Unfortunately, much of that contribution came from investment activities in the startup space which led Africa by attracting the most investment.
For the telecommunication space, only a few companies like MTN and MainOne made new investments in mobile money agent networks and satellite broadband respectively. Investment in fixed broadband stayed below 1 percent.
Later in the year 2019, the government through the minister of Communication and Digital Economy expressed confidence recently that investment activities would soon pick up across the country as plans are already in motion to address all the problems operators face in the sector.
The latest development, however, is sure to put the government’s resolution into the great test as stakeholders say that Right of Way issues are responsible for about 70 percent of the costs in the sector.
Fixed broadband delivered mostly through fibre optics cables is widely acknowledged as the best way to deliver reliable, limitless and fast internet to homes compared to mobile wireless and satellite technology. The alternatives to fiber face headwinds that fiber does not, including limited bandwidth, attenuation, noise, upstream/downstream asymmetry, and latency.
Nigeria has five major fibre cable operators; MainOne (10Tb), SAT3/SAFE (800Gb); WACS (14.5Tb); Glo1 (2.5Tb); and ACE (5Tb), with a combined capacity of 32.800Tbps. So far, less than 10 percent of their capacity has been deployed. A major clog in the wheel is the problems surrounding Right of Way.
To lay fibre optic cables in Nigeria, an operator would need to make an application to a host state or to the federal government if the cables are to pass through a federal road. A guideline issued by the federal government in 2012 pegged that chargeable access for laying of ICTSP ducts and cables at N145 per linear metre and N20 per linear metre as annual maintenance access fees.
Usually, cables run through an intersect of states and federal roads. In essence, operators laying cables for broadband would necessarily have to pay the various parties; federal, state and local governments, the stipulated fees. Although the federal guideline stipulates that the amount to be charged, states naturally exploit the fact that the guideline is not mandatory but advisory.
For instance, Lagos State during the days of Babatunde Fashola charged N500 per linear metre, but the Akinwunmi Ambode government jerked it up to N3000. The current administration under Babjide Sanwo-Olu has hiked it to N5000.
The federal government had condemned states’ attitudes towards Right of Way charges.
“If a State is charging for right-of-way from communications companies and is hindering the laying of cables and other broadband infrastructure as an IGR measure, permit me to say that that will be penny wise and pound foolish,” Prof Temi Osinbajo, Nigeria’s Vice President said in 2019.
But the government at all levels and broadband operators have to come together and map out a way forward for RoW.