Professor Umar Danbatta, EVC of NCC
The talk for much of last week was the proposed plan to introduce a new price floor for data services for telecom operators in the country. Shortly after news about the proposal filtered into the public space, all manner of commentators went to work, criticizing the regulator, the Nigerian Communications Commission (NCC). Some hauled their anger at the operators especially the major players for their effrontery to demand for more money from consumers when they are already making all the billions of naira.
The anger is understandable but the truth is that most of the critics of the new price floor for data services reacted from a position of ignorance of what the new pricing regime set out to achieve. Very clearly, it was intended to protect the same consumers who vehemently criticized it. It was also intended to protect the industry by frustrating any form of monopolistic dominance by big operators. The floor price regime accords smaller and new operators enough space within the telecom ecosystem to operate in a manner that would engender competition.
Let’s break it down a little. First, what does a price floor mean? It means setting a base (minimum) price below which no operator should charge per megabyte of data. Note that this pricing applies to only data services and not voice. In the absence of such minimum price peg, it is possible for an operator that has acquired enormous capacity to crash its price per megabyte of data to as low as ten kobo or even less at a time others are charging 80 kobo, 95 kobo as the case may be which is the least price they could charge if they must still remain in business. The implication is that subscribers will migrate in droves to the so-called ‘cheap’ operator and in no time, all the other operators would face extinction and go out of business leaving the ‘benevolent’ operator. When this happens, the telecom consumers who are today critical of the regulatory intervention would have created a monopoly to the advantage of the big operator and to the detriment of the other operators, the economy and many Nigerian homes as there would be massive job losses.
Let’s get the picture clearer. Once this happens, the surviving operator or operators (in the likelihood of the two dominant players surviving) will have too much data traffic to handle. The direct consequence of this is a highly degraded quality of service. The darker side is that such operator, having been gifted with a monopoly status, can hike the price at its whims far beyond what consumers are paying today. And such operator can conveniently sustain an exorbitant price regime for as long as there is no competition. Is this possible? Yes, it is. It has happened in many jurisdictions in the past. Monopoly serves no good for any economy. The Anti-Trust Law which is very strong in certain climes is promulgated chiefly to ensure that no single corporate entity no matter how good its products and services are does not emasculate other players from the business space. The law ensures that competition rules and not monopoly.
But we need not go far. Nigerian telecoms was for a long stretch of years under the crippling halo of monopoly. The behemoth state-owned NITEL played yoyo with pricing. At a time, you could not get a line for N200,000. Subscribers were told that lines were not available and they had no choice but to join a lengthening queue. Added to this nightmare was the affliction of call drop, network failure and sundry technical glitches that attended the old NITEL and its services.
Unknown to many Nigerians, the nation’s telecom market was already heading to the precipice of monopoly especially in data services. The dominant players in the industry armed with Unified licences are already manifesting dominance tendencies. The inevitable terminus would be for Nigerians to wake up one day only to discover that they are left with one or two telecom operators who will in no time form a formidable cartel that could inexorably take the nation back to the days of monopoly.
This is why the intervention of the NCC was not only germane but timeous. It should be seen for what it is: a proactive measure by an umpire to arrest breakdown of law and order in a game. And what is the fuss for? Operators in the telecoms space want and crave for a baseline floor for pricing in data. They desire it because that is the only way to sustain the robust competition that has come to define the globally-acknowledged resilient Nigerian telecoms market.
It also bears restating that the regulator did not act outside the loop of the law. It is statutorily empowered to make interventions of this nature to forestall pricing paralysis arising from an unguided price war. The National Assembly may have acted in defence of the consumers; so it seems. But the greater defence for both the consumers and the operators is to promote actions and activities that would engender competition which the nation’s telecoms sector has been noted for in the last decade and a half. Nigeria cannot afford another relapse into monopoly in a sector that has brought her so much fame, global goodwill and countless job opportunities.
At the2016 Telecom World, the global festival of telecoms organised by the International Telecommunications Union (ITU), in Bangkok, Thailand, Nigeria was a show-stopper not just on account of her majestic Pavilion but more on account of the regulatory robustness of the NCC which ITU acknowledged as one of the best regulators in the world. Such stellar regulatory performance has ensured a steady growth and expansion of the sector. In the last three quarters when the nation’s economy drifted to the umbra of recession and other sectors shrank, telecoms has remained bullish; adding over N4 trillion naira to the federation account, and creating direct and indirect jobs within the same period. It is therefore inconceivable that the same Professor Umar Danbatta-led NCC which has strongly stood on the side of consumers by engendering healthy competition among the operators would turn round to hurt the same telecoms consumers.
Suspending the introduction of a price floor for data services may taste like candy in the mouth of telecoms consumers at the moment but such candy has the capacity to turn sour and even tartarous in the long run. The President of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Mr. Gbenga Adebayo, has passionately pleaded with the National Assembly and the regulator to allow the minimum price base regime for data services because, according to him, it is the only way to protect the smaller operators in the market thereby preserving the status quo of robust competition. Besides, he argues, it is the consumer who would gain in the final analysis.
The Senate and the regulator may have taken a populist decision to suspend the introduction of the new price base but not all populist decisions are for the common good of the larger publics. The truth is that Nigeria needs a price baseline to keep the prevailing sanity and stability in the marketplace. Market forces will compel the operators to offer their services within the region of the floor but certainly not below it. What is needed now is more public enlightenment by the relevant stakeholders on the desirability of a price floor. It is a path the nation must tread lest death strangles out data.
…First published in Sunday Sunday newspapers
