There are numerous operational obstacles hindering broadband development in Nigeria. But a clear national broadband policy will go a long way in opening up the sector, attracting investments in broadband infrastructure build, writes BEN UZOR JR
Does the roll out of high speed broadband increase economic growth? It is a reasonable enough question considering that data transmission defines the speed at which businesses are conducted in most advanced countries of the world. From all indications, there are compelling statistics which show that there is a correlation between broadband and economic growth.
A new report, conducted jointly by Ericsson, Arthur D. Little and Chalmers University of Technology in 33 Organisation for Economic Co-operation and Development (OECD) countries, quantifies the isolated impact of broadband speed, showing that doubling the broadband speed for an economy increases Gross Domestic Product (GDP) by 0.3 percent.
A 0.3 percent GDP growth in the OECD region is equivalent to $126 billion. This, according to the research corresponds to more than one-seventh of the average annual OECD growth rate in the last decade.
On the economic impact of broadband increases, Eugene Juwah, Executive Vice Chairman, of the Nigerian Communications Commission (NCC) recently made a calculation based on the World Bank report which states that in low and middle-income countries, every 10 percent increase in broadband penetration accelerates economic growth by 1.38 percent.
“Doubling the broadband speed for the economy increases its GDP by 0.3 percentage points. The above percentage points may appear small but if you apply them to the Nigerian GDP at N40 trillion, you obtain an increase of more than half a trillion naira in the first instance and N120 billion in the second,” Juwah says.
To this end, there is need for the country to find innovative ways to increase access to broadband for employment creation and wealth generation. More so, development-focused nations of the world such as the United States of America (USA), United Kingdom (UK) are paying keen attention to broadband development.
Some of them have even gone as far as defining access to broadband as a fundamental human right, just like access to water, electricity and healthcare.
Current situation
Without a doubt, Nigeria has conquered voice telephony. Currently, there are more than 101 million active lines compared to some 400,000 some ten years ago. The next frontier for industry stakeholders and analysts is broadband Internet. But there seems to be a sore point in Nigeria’s quest to harness the potentials of broadband for economic development.
The International Telecommunications Union (ITU) says Nigeria has 45 million Internet users, the highest online population in Africa. However, only nine percent, which is about 14.5 million people of the population, are actually internet subscribers and broadband penetration is at a mere six percent.
Access to mobile broadband is growing tremendously. But interestingly, the above statistics show that majority of Nigeria’s online population still access the cyberspace through public venues such as cybercafés and computer laboratories.
Even with the emergence of three submarine cables (MainOne, Glo-1 and WACS) on the country’s coastline, Nigerians are yet to feel the impact of these infrastructures in terms of the availability of efficient and affordable broadband services.
Prices have actually crashed at the wholesale international connectivity level, according to Kazeem Oladepo of the Association of Licensed Telecommunications Operators of Nigeria (ALTON).
He explains in an interview that IPLC (Internet Protocol Leased Circuits) bandwidths from Nigerian Telecommunications Limited (NITEL) were sold for close to $1, 500 per MEG few years ago.
“Today, you can buy the same capacity at between $300 and $500, depending on the volume and duration of service you are buying,” Oladepo says. This, he says underscores the impact of the cables, adding that huge cost reduction has not yet trickled down to the end users.
“The gap between the wholesale and retail services has not been adequately bridged through infrastructure, which delays access and generally hinders end users from benefitting in corresponding proportion on the radical price reduction, combined with superior services quality,” he adds.
Operational challenges
The ability of telecoms operators to deploy requisite broadband infrastructure needed to improve Nigeria’s internet penetration is been hampered by prohibitive cost of right-of-way, according to industry stakeholders at a broadband summit 2012 held in Lagos.
Speaking recently at the Lagos conference organised by BusinessDay in conjunction with the NCC, Omobola Johnson, Minister, Communications Technology, says that the Right-of-Way (RoW) procurement contributed 50 percent of the cost of fibre build.
She says that the cost of RoW procurement was probably the highest in the world today. High cost of maintaining the infrastructure after deployment, according to her, had become a critical drawback to investment in broadband infrastructure.
Incidences of vandalism, power constraints and wanton theft of fibre cables is rife especially in an industry where the mobile Average Revenue Per User (ARPU) can only discourage investment in fibre build.
“No right thinking infrastructure provider will invest in the deployment of infrastructure if this situation prevails. We will continue to have tremendous under-utilised capacity of international bandwidth,’’ she explains.
While this issue seems intractable, there are obvious solutions. State governments could move away from the current practice of imposing one-off charges for right-of-way procurement based on distance to a new regime of periodic revenue streams from their right-of-way assets.
One way to realize this stream is to contribute the assets as participation in the project. Alternatively, state governments may choose to barter their right-of-way assets for a specialized service from infrastructure operators. For example, access to right-of-way can be traded for a security surveillance network provided from the infrastructure.
Another challenge comes from government institutions themselves in form of multiple taxation.
Market structure
The current structure of Nigeria’s broadband infrastructure market is vertically integrated, and is threatening the realization of government’s target of growing the number of Internet users to 70 million by 2015.
The structure of market, according to the NCC, discourages competition, infrastructure sharing and innovation. This situation, according to the telecoms regulator and other industry analysts, has given rise to price regimes that negate the Ministry of Communications Technology’s strategic objective of increasing broadband penetration in Nigeria.
Nigeria has one of the highest costs of access in the world at approximately N8, 000 to N10, 000 for 5 megabytes (Mbs) of data. Currently, some players in the industry provide both passive, active and retail services on one hand, while providing passive and active (or part active) infrastructure to other players who they compete with in the retail segment with no price capping at the interconnect layers.
Funke Opeke, chief executive officer, Main One, who spoke on ‘Operational Challenges: Critical Success Factors for an Operator’, at the Lagos conference explains that the structure of the broadband market, price gouging and competition issues prohibit effective broadband supply to internet consumers by infrastructure providers. Distribution capacity does exist in the country, she says, but cost of access is discriminatory and prohibitive.
“There is need for open access national backbone infrastructure available to operators on a shared-basis,” Opeke advocates.
For Tony Ojobo, director, public affairs, NCC, the Commission has already proposed an ‘Open Access Model’.
At the last ITU conference, Nigeria opened its doors to the global investment community through its open access model, strategically designed to strengthen investment in the area of deploying in-land fibre networks needed to distribute bandwidth capacity.
“The commission has engaged consultants to advice on the best model that will suit our environment. That’s to say, our model is not cast in stone until the consultation are finalised,” Ojobo explains.
Infrastructure sharing
Nigeria’s telecommunications market requires a well-rounded infrastructure sharing framework to encourage new entrants and stimulate investments in broadband in order to harness its potentials for wealth creation and economic development, experts told BusinessDay.
In spite of the plethora of undersea cable systems on the country’s shores, Nigerians are yet to feel the impact of these investments in terms of access to affordable and efficient services. As at today, broadband penetration in Nigeria is still below 8 percent.
Analysts have blamed this worrying situation on the under-utilisation of the submarine cable infrastructure. Opeke explains that an infrastructure sharing framework is needed to assist operators move available bandwidth capacity emanating from the cables across the length and breadth of Nigeria at affordable costs.
“We strongly believe that it’s something government can set up in less than 60 days. It does not require years of study,” she says.
The cost of moving internet traffic from Lagos to Abuja, according to her is four times higher than the cost of moving the same level of traffic from Lagos to London. This, she describes, is because telecoms operators with huge fibre infrastructure have not embraced infrastructure sharing. Besides, those who have offer the services at unfair and prohibitive prices.
“Looking at the cost and competition policy under the Communications Act, there is absolutely no need for that pricing mechanism. We need to have more infrastructure sharing. If people who build the infrastructure are running it over public right-of-way, and have received tax concessions to build those networks, I see no reason for such pricing mechanism.
“If private sector has built the infrastructure, then they should make it available to others on a fair and non-discriminatory basis. Government has done nothing about this so far”, the Main One CEO adds.
Government’s role
Nigeria’s quest to harness the potentials of broadband for economic development will largely depend on clarity of government actions and a predictable, transparent regulatory environment in the telecoms industry, according to stakeholders.
The Minister of Communications Technology explains that currently, broadband is a prerequisite for becoming a competitive nation. In this light, she says at the broadband forum that the Ministry is working tirelessly to remove the obstacles hindering deployment of requisite broadband infrastructure needed to move available bandwidth capacity across the country.
“In some states, providers’ broadband infrastructure has to contend with as many as 7 state Ministries Departments and Agencies and local governments to procure permits and permissions to erect base stations or lay fibre optic cable. In Nigeria today, right-of-way procurement contributes at least 50 percent of the cost of build,” the minister explains.
She says that significant progress is being made in area of addressing right-of-way issues at a state government level. Johnson explains that the issue was deliberated on at the National Economic Council, and the ministry is preparing to engage the state governments as it relates to the benefits of encouraging infrastructure deployment.
Christian Rouffaert, UK & Ireland Network Strategy lead, Accenture, says that Nigeria needs to clearly articulate its broadband strategy with a view to defining expected roles of government and the private sector in the emerging broadband ecosystem.
“Most of the European nations have an active broadband plan focused on driving high speed connectivity. This is because there is a correlation between broadband and economic growth. Broadband improves workforce productivity and efficiency. The telecoms regulator will need to balance consumer interest and service provider interest,” Rouffaert says.
