The Nigeria Communications Commission (NCC) yesterday said it intervened with an interim price floor for data services to avert a looming price war in the telecommunications sector.
But the Communications Minister Adebayo Shittu has asked Nigerians to brace for a price rise.
The regulatory commission said it feared that the price war could eventually lead to a monopoly in the telecom industry that would force small operators to shut down.
It said that monopoly in the telecom sector could also push the country back to the days of NITEL – the troubled governenmt-owned telco – to the detriment of small operators.
NCC Executive Vice Chairman Prof. Umar Dambatta stated this when he appeared before the Senate Committee on Communications.
The committee was mandated to investigate the proposed data tariff hike said to have been ordered by the NCC.
Committee Vice Chairman Senator Solomon Adeola, who presided, noted that there was a public outcry over the proposed increase.
Sen. Adeola said Nigerians were united in their opposition to the proposed increase.
He said the position of Nigerians was that a tariff hike was ill- advised, especially with the biting economic situation.
Dambatta told the committee that the NCC’s intervention was not designed to undermine consumers.
He noted that if cheap prices were introduced, they may end up undermining the telecom service operators.
He said if the situation arose where the operators could no longer cope, the consequences could be better imagined.
Dambatta said the need to avert a crisis in the industry informed the decision to introduce interim price floor for data services at N0.90k per BM.
He said: “We wanted to protect the Nigerian consumer from unhealthy price war in what may lead to a monopoly that may lead us to the days of NITEL. We did not increase any price but merely provided a regulatory standard to protect small telecom operators.”
Dambatta said there were some telecom operators that lacked the capacity to compete with the big operators.
He said the N0.90k price floor for purchase of data was a benchmark below which no operator could sell.
“We said in the interim directive measure that no operator should sell below 90k per megabite. There was a price war in the market; that was why we issued the interim directive.
“A situation where a dominant operator provides services far below what is obtainable in the sector in order to attract more customers may lead to a situation where smaller operators will be forced to shut down,” he said.
Dambatta, who said there was a mix up of the interim directive, noted that instead of increase, the NCC wanted reduction in price of tariff to create a balance between big and small operators.
He said the NCC did not set any price ceiling but provided a price law.
Dambatta added, “ We stepped in when we noticed a price war in the sector. The price war was already reaching undesirable level that we had to step in to prevent a monopoly like the days of NITEL.”
The interim floor price, he said, has been suspended temporarily to allow for further consultations.
Dambatta said the NCC would conduct extensive research to come up with a price floor that would be acceptable to Nigerians.
The Minister said the reality was that telecom service providers are operating in an unfriendly business environment, including lack of electricity and increasing security challenges.
He said: “This is one area that I believe that we all must face the reality… If you look at the NCC law, it is positioned to reflect experiences, expertise and all of that and I want to believe that there must not be too many interventions in the activities of the NCC.
“I am a political office holder. I am not an expert, so I cannot venture to say whether they did wrong or right, except they say that the constitution has granted them the role of a supervisor of a direct regulatory authorities, particularly relating to the activities in the telecoms industry.
“The only area I feel they were deficient was in the area of communicating with the people of this country, particularly because of the sensitivity that has been imposed on Nigerians by the harsh economic situation.
“I know that if you want to make omelet you must break eggs. Unfortunately in this country, we fail to appreciate the transformation role that ICT has brought about in the lives of Nigerians.
“I keep saying this, and I have no apology in saying this, before 1999, GSM lines in Nigeria were less than 500,000. Today, we have well over N152 million lines. All the hustles that Nigerians were going through before the exponential development of ICT are no more with us.
“It is also important to say that operators in Nigeria are operating on a very harsh situation, which is not known in other advanced countries. For instance, over the years, the Nigerian state has not succeeded in fixing electricity over the last 20 years.
“This industry’s reliance on electricity and because Nigeria has failed in providing reliable electricity, it means they have to rely on extra budgetary provisions to provide electricity 24 hours, seven days of the week, which additional expenditure does not operate in other countries which we seek to copy. This is one challenge that we must look at.
“The other challenges in the area of security; a lot of infrastructure by operators are usually under coma by criminals all across the country. Indeed we know what the security situation is in the country. Apart from that we also have the problem of taxes which they have always be talking about. I have always challenged operators that I want to see all the taxes so that we find a way of harmonising them.
“What I am saying is this, if Nigeria has invited international investors to come and invest in Nigeria so that our lives will be better, so that the economy will be better, so that businesses can be more conveniently made, so that even government can run more conveniently, to whom much is given, much is expected.
“The Nigerian state must also be in a position to provide its own share to make an enabling environment operate properly.
“So, I am not supporting at this stage or not supporting the price increase with regards to the floor. But what I am saying is, these are technical issues whose decision must be taken having regard to all the factors that are important before a decision can be taken.
“I am appealing to the distinguished senate in intervening, they should try to encourage NCC to be the best that it can, they should try to assist us (NCC) in the area of holding the balance between the interest of operators and the interest of the Nigerian masses so that we can be seen to be providing the best.”
MTN CEO Mr. Ferdinand Moolman, who was also at the hearing, said that the industry had been operating without data floor since 2015.
He underscored MTN’s commitment to ICT development in the country.
The MTN boss also stressed the need for a long time overview of the industry.
He was emphatic that the industry needed to be health to continue to grow.
Moolman said: “MTN remains unrelentingly committed to the sustained provision of affordable and accessible voice and data services in accordance with the National ICT and Broadband plan. In line with this commitment and to continue the provision of high speed data services to its esteemed customers, MTN recently bid for, and acquired the 2.6GHz LTE spectrum at the cost of US$96million.MTN also launched 4G LTE services, enabling faster access to digital platforms and igniting socio-economic development with a multiplier effect on the economy.
“MTN actively contributed to the development of the National Broadband Plan, and has consistently taken every step to facilitate the achievement of Government’s objectives of pervasive, cost-effective and sustainable access to data services by all strata of Nigeria’s population. The company continues to be an ICT development partner to the government and people of Nigeria.
“Telecoms’ Contribution to National Socio-Economic Development and Factors Constraining Industry Sustainability
“MTN is committed to continue its efforts to provide the best data network to the people of Nigeria. In this regard, however, there are a number of factors that impact the sector’s sustainability such as:
“The rise of headline inflation to about 17.9%
“The depletion of operator revenues by unlicensed providers of “over-the-top” telecoms services who do not have any physical presence; nor pay any taxes; nor make any significant contribution to employment or other socio-economic objectives of government in Nigeria;
“The inability of operators to access foreign exchange (this is particularly debilitating given that most of our inputs are sourced off-shore). This has very significantly increased both operating and capital expenses.
“Despite these macro-economic challenges, telecom tariffs have declined significantly (over 67% between 2007 and 2016) and data prices are amongst the lowest on the continent. With this in mind, MTN looks forward to the cost study as confirmed by the NCC, and remains committed to working with the Regulator and Industry to ensure fair value and fair competition in the Nigerian market.”