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Equitable Infrastructure Distribution Will Drive Broadband Penetration

13 Dec 2012

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CEO of Main One Cable Company, Ms. Funke Opeke

The General Counsel, Main One Cable Company, Kazeem Oladepo, speaks with Emma Okonjion the need for widespread infrastructure distribution, if Nigeria must attain sizeable broadband connectivity and penetration

As a cable company, what impact has Main One created in driving broadband penetration in the country?

Main One was conceived as a truly African project to lead broadband revolution in Nigeria. You will notice our initial tagline was: “Bridging the Digital Divide”. Before our entry into the market, connectivity to this part of Africa was limited to SAT3 cable with 10 Gigabytes per second (Gbps) capacity, which was expensive by all means and did not adequately address market requirement given the increasing importance of broadband services and its socio-economic relevance.

Our shareholders saw an opportunity to make a difference, to be change agents. That was the objective. Bringing improved connectivity to this part of the world was our key objective, as we recognised the role connectivity would play in enabling and empowering people especially our youth, boosting productivity, improving and creating access for people, and nurturing a medium that will sustain growth and economic development for the sub-region. It is not just a Nigerian project, it is an African project. So, those were the objectives when the Main One dream was originally conceived.

Main One came with the purpose of bridging the digital divide. Today, the cost is still high and penetration is still low, even with the avalanche of other cables beside Main One.

What is responsible for the slow pace in broadband penetration?

Several factors are responsible for the slow penetration, but there are two broad perspectives to broadband service penetration in our market today; delivering the services and getting people to use it, which is a typical demand and supply factors. From the supply perspective, in some more matured markets, you probably would have multiple layers of service segments, but in Nigeria currently, it’s basically wholesale (the international cables), retail (the Internet Service Providers) and end user. The retail segment should be strong and have access to the end users for meaningful impact, but this has not been the case. There is a key disconnect in service delivery for reasons we have come to acknowledge as infrastructure challenges. Therefore, other than the group of operators who have amassed infrastructure in their voice businesses, the retail segment is not particularly growing or strong and those businesses are not able to create the requisite impact in broadband service delivery.

Prices have actually crashed at the wholesale international connectivity level. Few years back, I worked for a triple play operator that was a strong player in the data segment. We bought IPLC bandwidth off NITEL at rates that were close to $1,500 per meg. Today, you can buy the same capacity at between $300 and $500, depending on the volume and duration of service you are buying. This underscores Main One’s major impact in the market, where we crashed prices to over 50 per cent in the first few months of operation, and today to about 80 per cent of what it then was on an overall basis. Now, that has not dropped to end users because 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. The demand issues are equally pertinent.

What is your take on the National Backbone Infrastructure? Is government supposed to provide it or the operators?

Historically, this market evolved without a functional open-access common-carrier legacy infrastructure. NITEL did not serve this objective, so everybody who came into the market to participate like the GSM operators had to build their own infrastructure to route their voice and data traffic nationwide on an on-going basis. Interestingly, today there is a fair degree of infrastructure on-ground. Some analyst say there is about 30,000 kilometres of fibre optic cables already laid. Recently, we did a survey of federal universities nationwide that we could immediately connect and discovered that we could reach 27 institutions with the existing infrastructure. So, there is a national backbone infrastructure on ground. What we have today is a situation where there are probably six cables between Lagos and Abuja. There are other regions that are touched by one, two, or three cables. Attempting to building a separate infrastructure and calling it a National backbone infrastructure will be duplication; it is not going to save cost of service but add to it.

The current broadband penetration constraints in Nigeria can largely be solved by existing distribution infrastructure and then we need to add to that infrastructure particularly at the metropolitan fibre level, and find a proper structure where infrastructure can be shared by those who need it on a transparent open access basis, with build costs taken into consideration and appropriate margins provided to compensate the people who have deployed future infrastructure, such that everybody is happy. There need to be transparent in cost and non-discriminatory in price treatment by those who own terrestrial cable infrastructure. The current charges for terrestrial distribution services in Nigeria do not reflect cost and are at best arbitrary. This has to stop particularly given the fact that inherent in the right to deploy infrastructure along our highways, for example the right of way, lies in the fundamental public interest, and communications is still ultimately a public utility service, even if provided by private firms.

Federal Government’s interest in broadband penetration was fully demonstrated when it took the campaign to the International Telecoms Union (ITU) conference in Dubai recently. Could such campaign actually drive broadband penetration?

Government’s effort in driving broadband penetration is being coordinated by Nigerian Communications Commission (NCC) on one side, and the federal government itself on the another side. The NCC has its broadband agenda, which it has pushed for over a year now and it is beginning to come clear as a model based on what Singapore implemented. I believe the federal government has also taken a direct initiative of its own by setting up a National Broadband Planning Committee, headed by the former Executive Vice-Chairman of NCC, Dr. Ernest Ndukwe.

While these are parallel initiatives, we view the objectives as the same, which is all about improving current levels of broadband penetration and usage in Nigeria. From our interactions with the two initiatives, our take is that the broadband committee is focused on quick win and fixes to immediately propel growth. They have a 2015, about 45 per cent penetration objective and have taken an active stakeholder engagement approach, which is potentially value adding in my opinion. The NCC’s programme structure appears equally robust and might take a bit more time to come through in terms of implementation. Between these two initiatives, Main One has participated actively and provided its feedback on the models being expounded.

We are still trying to understand the business model proposed by the NCC, even as information provided suggests that it plans to have three layers of infrastructure providers, for example; active, passive and retail, and no one will be allowed to participate in more than two. This also means that they recognise distribution infrastructure as a main issue with broadband services at the moment. What is of concern is the impact of the model on the existing regulatory and licensing structure for operations in Nigeria, where some operators are already participating in all the three distinct layers. However, we are quite confident that the NCC is fully taking into account the peculiarities of our operating environment as it strategises on these initiatives, and hope that there will be more stakeholder engagements as the recommendations take form towards implementation.

I think government’s intention of the broadband campaign is to move penetration beyond what it is now, and the campaign is a right step in the right direction, because it will yield results. Government wants to bring in investors that will invest in broadband and take the capacity from where it is now to the hinterland so that every Nigerian will have access to it.

As an operator, what do you think are the necessary things government should put in place to attract foreign investment in broadband?

I think the first question to ask is whether there is significant investment in the broadband space in Nigeria today as we speak? And the answer to that will be yes. We just talked about the main challenges. There is a degree of infrastructure in place, like I mentioned earlier. Today, if you need to get bandwidth into Sokoto, you can get it. The reason anyone would not immediately go and get service into Sokoto today is because the cost of providing services between Lagos and Sokoto is twice the value that I am going to charge to deliver service between London and Lagos. London and Lagos is 7,000 kilometres of cable, but Sokoto to Lagos is probably about 900 kilometres at best. So I will pay twice what I will pay for 7000km for 900 km essentially because people who own infrastructure are not sharing it, and when they share it, they share it at high prices that are discriminatory and non-transparent.

The second major factor is demand, to the extent that if you were to take the capacity to everywhere in Nigeria today, there will be no commensurate utilisation. There is a demand issue whereby the level at which people use broadband services needs to be stimulated and one of the quickest ways to fix it is to get all government services online. For example, anytime there is a JAMB examination, internet usage in Nigeria spikes because students need to register and check their results online. Imagine if every time you need to fill a tax form, you go online to do it, or your Power Holding Company of Nigeria (PHCN) bills are paid online, or every essential service, or our educational, health and other public utility systems are e-enabled. Go to all the universities, provide internet services, these are areas where the government needs to come in by funding the provision of broadband services to those schools and encouraging the development of requisite local content that sustain usage and will improve overall productivity. If you provide access to e-learning for students, you will be shocked how much people will realise they could use broadband services to make changes to their lives from a consumer perspective, which is the beauty of broadband.

Have there been significant investments from the private sector in the broadband market?

Yes, they have. Main One has invested significant amount of money, we have invested in the cable, Internet Protocol (IP) network infrastructure, extensive metropolitan fibre in Lagos, and we are developing a tier three data centre now. We are investing more in network based value added services and we will keep investing. Others have also invested.

Can there be more investments?

Certainly yes and this should not just be left to the private sector alone. Government needs to play its role in investing and protecting existing investment. It needs to put in place specific broadband policies to address some of the critical demand and supply issues, and the regulator should then play its role in implementing and enforcing it.

Having invested this much in broadband, what impact has Main One’s investment created in the Nigerian economy?

In an on-going basis we try to analyse the impact of the Main One project. As a Nigeria investor-led project, comprising of over 75 per cent Nigerian investors, we have essentially led the growth of broadband services delivery in Nigeria to the current level that it is today from a price, availability and efficiency perspective. We have become a reputable brand and have the best quality of service and customer satisfaction rating, not just in our segment, but the entire industry. Our customers no longer worry about quality of service because we have maintained a network that has for instance operated at 99.99 per cent uptime from inception till date and 100 per cent uptime this year. Given the impact of broadband service to economic growth, we believe we have exponentially helped to improve national productivity and we are helping to create opportunities for every Nigerian, where there was none years ago.

We have directly and indirectly contributed to employment, supported educational institutions through our Corporate Social Responsibility (CSR) initiative, brought credibility and strategic technology relationships to Nigeria, and we have supported series of initiatives locally at developing entrepreneurship through the opportunities that our services afford. Through our various partnerships, with international operators and technology providers, we have developed local skills and expertise. For a technology company, I believe our current technical team is over 95 per cent local and locally led. This is a distinction in this clime. We have brought investment and infrastructure to Nigeria, built, maintained, and operated by a local operator who has been running for two and the half years at world-class quality levels, contributing to investors’ confidence in the broadband market

How have your services empowered Small and Medium Enterprises (SMEs). Do they have access to Main One?

Main One is the only truly open access submarine cable network in Nigeria today. Our model is actually tailored towards supporting SMEs and small operators as a wholesale player. Our value proposition is to enable small businesses in Nigeria to grow, in targeted markets, without the objective of playing in that retail mass market. We did not set out to be an end-user provider like our competitors with submarine cable infrastructure. We provide an opportunity for the medium to large ISPs to grow, and in some cases even provide incentive capacity for them from our bandwidth, while we deploy our expertise to support some of them operationally, recognising the roles that the SME’s play in the overall economy.

We have been building metro fibre optic infrastructure into core ISP locations just to support small businesses. We have supported initiatives that drive content development so that it could encourage and unlock potential in young people to do some of these viable businesses and develop initiatives that help us to ramp up demand for Nigerian content and our own services. We did the Nerds UnITe event recently where we tried to promote networking and interaction among innovative young people to showcase their skills, initiatives, content designs and web applications. We also supported the National Software Competition of the Institute of Software Practitioners of Nigeria (ISPON), an event that seeks to encourage indigenous participation in software development.

What impact could Main One create in terms of connectivity in the educational sector?

We did a CSR for the University of Nigeria, Nsukka (UNN) for over a year where we gave them free internet capacity. We can do a lot more of these models in Nigeria today but there is a cost to these services, particularly in terms of distribution to the universities and the on-going operation and maintenance. To a large extent, we are willing to support more of such initiatives, but cannot do it alone and cannot operate such a model to sustain our business, so we need more support. We are engaging with the stakeholders in the education sector at the moment including the Ministry of Education and we are currently trying to work with the Nigerian University Commission (NUC) on some project opportunities for delivery of bandwidth into certain universities nationwide.

Typically, Main One will give priority to educational institutions since it is one of the easiest ways to drive demand. It is also a way to open up our educational system to a world of research and educational materials, to facilitate the quality of education in Nigeria, which is one of the key objectives of having broadband services in any economy at all. This however is one area where government intervention is paramount for any meaningful impact.

What kind of support do you expect from government?

Funding, subsidy, special broadband services grants to universities and government funded institutions to drive broadband. Someone needs to buy bandwidth into the government owned educational institutions, and that is the role of government. We need to get the distribution infrastructure opened up so that there is access to it at fair, reasonable and transparent prices, and other network distribution resources, such as spectrum, need to be better administered for the most efficient usage than it is currently deployed by beneficiaries.

What are some of the challenges with broadband in the country?

The challenges are numerous, among which are the distribution issue, and the need to also drive demand for services. There have also been a lot of concerns lately about the market structure, competition, which the NCC at the moment is reviewing. While our objective is to beat prices down for consumers, we must drive requisite volume for the price benefit. If at the end of the day we have to sell bandwidth at a very low cost and we do not have the volume that helps recover our cost, plus a decent margin, then the model will eventually collapse and our objective of providing services for consumer benefits would ultimately have failed. We have actually seen some operators erode value in services through unfair market practice and cross subsidisation, and some of these anti-competitive things need to stop, particularly where these operators are also those who with large vertically integrated voice and data businesses that are responsible for maintaining current clutches on distribution infrastructure. So, we have seen some of these things and we have complained to the regulator with high expectation that the NCC will look at it.

I’m aware that the Main One project is in phases, and that the phase one is completed. Does that mean you have achieved your vision for phase one, and when are you entering into phase two, and what are your strategies?

We have delivered the phase one project but delivering the project is not necessarily the ultimate objective. We have built a cable to Portugal connecting London, Ghana and Nigeria and we have delivered 1.92 terabits of capacity to the shores of these countries. We have built a cable within budget and timeline, service has been up 100 per cent on the submarine cable for two and a half years. We have not had a major outage on the network. However, if we were to look at the objective of bridging the digital divide, I will say we have not succeeded in doing that to our aspiration.

At less than 10 per cent of broadband penetration in Nigeria today, depending on the stats you are looking at, we have not met our expectations. But we believe we have made significant strides in this market, we have created the level of efficiency we hoped for as a company, even though there is room for improvement. We have impacted on Internet productivity. We are not satisfied with the broadband penetration level yet. The next level is to try to help push more of the broadband services inland, while developing access, even in Lagos where we have made significant in-road, and get more of the services to the people who need it. We want to accomplish our ambition as the change agent as far as broadband service is concerned. This is not just in Nigeria. We are already in Togo, Benin and Burkina Faso, in addition to Ghana, and we are in discussion with some other landlocked and coastal states in the region.

Can you make some clarity between broadband and internet services and which of them are you actually involved in?

You know I am an attorney, so I cannot give you a technical distinction. However, my understanding is that broadband is essentially faster internet access. Your access is better, the services and productivity levels are a 1,000 folds better than basic internet services. Some people would say if you do not get 2,000 kilobytes per second (kbps) speed, then it is not broadband service, but if you look at it from that perspective then most people in Nigeria do not have broadband services as it is today.

What is your market projection in the next two years?

Main One has evolved into more than just a cable company. We have become a communications services company, a socio-economic enabler of a sort. We do not just provide access to internet, but our objective is to provide access to the benefits that broadband services bring. We are moving more into value added service platforms as well, where people can converge, run their businesses more efficiently through us, through managed services that we provide. Through our data centres, we will provide a bouquet of services that goes beyond just internet but allows business and government establishment to ride on superior technology, infrastructure and expertise that are based on global best standard in service delivery. The connectivity pipe is always going to be an integral part of our business, but we are becoming a much more dynamic converged services provider. Within a year or two, we should be there.

Bio Data

Kazeem Oladepo is an Ahmadu Bello University trained lawyer, with Master’s degree in Information Technology and Telecommunications Law from the Glasgow Graduate School of Law (UK).

Currently he is the General Counsel at Main One. Prior to his appointment as the General Counsel in 2009, he was the Director of Corporate Strategy at Starcomms Plc, a Code Division Multiple Access (CDMA) company that was recently merged with two other CDMA operators to form Capcom.

He has over a decade of experience in commercial, corporate and regulatory practice in core Information Technology (IT) and in the telecommunications sector in Nigeria. He is also a member of the Board of Trustees of the Association of Licensed Telecoms Operators of Nigeria(ALTON).

Tags: Business, Nigeria, Featured, Equitable Infrastructure Distribution, Broadband Penetration

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