In tandem with the yearnings of the over 94 million Internet users, the Nigerian Communications Commission (NCC) has commissioned a study expected to provide it with findings to accurately establish the appropriate pricing for broadband retail services in the country. KUNLE AZEEZ reports
Despite the observable drop in cost of telecommunications services since 2001 when the industry became liberalised, there have always been sentiments among telecoms consumers that the cost of accessing telecoms services, especially data is exorbitant.
Currently, there are over 94 million individual mobile Internet users in the country and hundreds of thousands of corporate customers
. Indeed, with voice services nearing saturation, as some experts have suggested and more clearly, the provision of broadband services is being touted as the next frontier of revenue generation for telecoms companies.
It was against this backdrop that the Nigerian Communications Commission (NNC) organised a stakeholders’ forum on a study for the determination of cost-based pricing for retail broadband and data services in Nigeria.
Data as next critical phase
Addressing a large gathering of industry stakeholders at the event, he noted that the Nigerian telecommunications industry has, undoubtedly, recorded significant growth over the years and the impact and benefits that come with this growth cuts across every segment of the Nigerian economy and the lives of its citizenry.
Whilst there has been a phenomenal growth recorded in the industry, especially in active voice subscriptions to the tune of over 142.3 million, stakeholders are of the view that the next critical phase is to ensure that everyone – wherever they live, and whatever their circumstances – have access to the benefits of broadband.
“But this can only happen with the pervasive deployment of broadband infrastructure and services across the country considering the potential of broadband as a key enabler of national productivity, economic growth and development, social inclusion and cultural enrichment,” Danbatta said.
Need for cost-based services
He said that ensuring that prices charged for retail broadband and data services are cost-based in line with international best practice is critical to the deployment and uptake of broadband and data services in Nigeria.
As such, the new move by the regulator will result in a major restructuring of the $70 billion telecoms industry, experts said.
To this end, a global consulting firm, Messrs’ KPMG, has been appointed by the telecoms regulator to carry out a comprehensive costbased study on data retail pricing.
The study starting this month is expected to be completed by KPMG latest by April, this year. “In line with the Commission’s mandate of creating an enabling environment and promoting fair competition in the telecoms industry and in line with the strategic objectives of the National Broadband Plan (NBP) of achieving 30 per cent broadband penetration this year, it has, therefore, become imperative to develop a proper pricing structure for broadband in Nigeria,” Danbatta told the gathering.
He explained that the new move will not only ensure the affordability and availability of broadband but also ensure fair competition by checking price discrimination, excessive pricing, predatory pricing, margin squeeze and price fixing amongst other things.
“Therefore, ensuring that prices charged for retail broadband and data services are cost-based in line with international best practice is critical to the deployment and uptake of broadband and data services in Nigeria has become critical,” he said.
Tacking market dominance
The chief regulator said whilst addressing market dominance issues in the upstream wholesale markets is one of the ways to facilitate competitive price levels in retail broadband access and service markets, it is possible that such action may not be a sufficient constraint on pricing in all segments of a retail broadband market, as such, some form of exante regulation of retail prices is appropriate or even necessary.
He said this has, therefore, necessitated the conduct of the study on the determination of cost-based pricing for retail broadband and data services in Nigeria.
Expectations from KPMG’s study
According to Danbatta, the NCC’s KPMG-commissioned study will set guidelines for the regulation of the pricing of retail broadband and data services in Nigeria and specifically determine price cap and floor where necessary; help to develop a regulatory pricing model based on the peculiarity of the Nigerian broadband and data services market coupled with international best practices and to design the framework for collation of data that will be used for the determination.
Not only these, the study is also expected to help to determine the appropriate cost modeling technique and methodology to be adopted; determine the appropriate pricing regulatory measures to be adopted and determine need for ex-ante and ex-post regulation with respect to pricing in the retail broadband and data market segments, among others.
In his presentation, Partner and Head of Management Consulting, KPMG, Mr. Segun Sowande, informed operators and stakeholders of the objectives of the study; provided insights on the methodology underlying the study and sought the buy-in and stakeholders and operators’ active participation in the course of carrying out the study. He said, since 2013, the industry’s competition dynamics in the broadband segment has dramatically evolved, with new challenges/ issues necessitating the need to explore new alternatives.
Speaking on the expected outcome of the study, Sowande said, “we anticipate to have a cost model providing high-level estimates of the cost of national and regional transmission capacity; outcomes from the cost model and other elements of the market assessment to feed into an overall assessment of whether retail and wholesale data pricing meets the NCC objectives while we also expected development of clear and practical regulatory measures to address any market issues identified, among others.”
Also speaking, Regulatory Expert, KPMG, Dr. Roger Steele, the study will be adopting the Bottom-Up (BU) Model. According to him, “The BU methodology will be adopted in developing the cost model, which entails building up costs from many detailed components, and from the costs of each.
Steele said the BU model principles are widely used by telcos and regulators across the globe. “It is the most appropriate to reflect the real economics of Nigeria,” he said, urging “telecoms companies and other stakeholders that would be approached to supply data and other necessary information to cooperate with the consonants in order to get outcomes that present the realities of the industry.”
Meanwhile, stakeholders such as the Association of Telecoms Companies of Nigeria (ATCON), Internet Service Providers Association of Nigeria (ISPAN), Association of Licensed Telecoms Operators of Nigeria (ALTON) and other key players in the industry have tasked the Commission to ensure that the outcome of the study bring about effecting price restructuring and sustained industry growth
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