The Nigerian ICT Draft Policy in a Converged Era (2)

05 Apr 2012

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Minister of Communications, Mrs Omobola Johnson

By Olufemi Adeagbo

The ICT  stakeholders forum that recently held in Lagos presented interesting perspectives and focused on issues that are germane and useful to the development of the ICT sector in Nigeria. However, I feel there were a handful of significant issues that  were  not  addressed,  which  in  themselves are thorny issues to leave in abeyance. Before I address these issues and others bordering on local manufacturing support as raised by the president of ITAN, Florence Seriki, and other important issues, let me say this was a welcome and mature move by the Minister, though it was probably always the intention to use the initial draft as a skeletal baseline that robust discussions could be developed upon, to ultimately deliver a very comprehensive policy that would drive the industry forward.

One key feature of the policy framework, even in its skeletal state is the introduction of focus. Regulatory, funding and development functions are being delineated to deliver better focus and efficiency and this is a very useful development. To reiterate the point I made a few weeks ago, the focal point of convergence in the draft policy is welcome. I also welcome the fact that the policy   framework   does   not  strive to bring projects under the Ministry, effectively freeing it to really focus on its powerful but focused role of policy direction and overall monitoring of the sector. Converging Telecoms, IT and Broadcast into one regulatory environment   is   a   global  practice. In the UK, five agencies (with the postal regulators duties) were collapsed into Ofcom. In the US the FCC serves as the super regulator. The pattern is clearly established as the model preferred by most countries as technology convergence blurs the distinctions between Telecoms, IT and broadcast.

In the past, I  have  advocated  for  the  expansion of the NCC’s regulatory purview to include Broadcast, IT and Postal Services as the simplest path to converged regulation and off the bat, the issue of a converged regulator is not something that can be convincingly argued against. In a converging world, many markets have adopted a converged regulator. The policy recognizes this, and it is a welcome development. However, one of the functions of policy  is  to introduce enhanced stability.  By keeping silent on how the policy drafters propose to arrive at filling that office, they may be innocently but unwittingly triggering off significant turbulence within the sector.  There are some who think that the current NCC will be subsumed under a new office of the converged regulator, whilst some believe that the NCC should simply evolve into that role – despite the fact that the NBC- a critical limb in  the  convergence  pillar  currently resides within another ministry.

Given the politics of our environment and the need to ensure that policy enhancements do not lead to systemic dislocations, my own personal view remains that the NCC should simply be legislatively empowered to expand its ambit of regulatory oversight. This is premised on a number of reasons.  First, the NCC has, by far, the most advanced institutional structure, personnel pool, infrastructure and outlook of any regulator within the sector and even within the country; perhaps with the exception of the Central Bank of Nigeria. The institution, despite occasional glitches has also successfully guided a sector from near extinction to a position of economic prominence. Notwithstanding the political considerations of what to do with tenured  DG’s  of  the other pseudo - regulators, that view remains even today, as the industry continues to grow and expand.

The second reason is simple and perhaps peculiar to our climes. The potential for an office that will superintend over the telecommunications, broadcast and IT sectors will trigger off a vicious round of lobbying that the sector simply does not need. And who knows what the outcome of that process will be.  At this critical juncture where our nations investment attractiveness is being threatened by security concerns, nothing will be served by introducing an unnecessary political scramble. It will only deepen uncertainty and damage the sector. It is therefore important for the policy to quickly identify and state this, to head off rumblings and turbulence which may actually turn  a  well intentioned and needed policy thrust into a theater of controversy rather than a catalyst for investment and development.

One of the weaknesses previously identified is  in respect of timelines and measurable outcomes, particularly in areas such as broadband penetration and alternative power provision for the industry. Most countries already have a robust broadband policy document, and this can be developed in parallel with the mother ICT policy so that the mother policy itself can recognize and resolve issues within the broadband policy space that may have dependencies upon it.

Countries with coherent national strategies have tended to be more successful in fostering broadband diffusion. Most of the OECD countries that lead broadband penetration, including Denmark, the Netherlands, Norway, Korea, Sweden and Finland, have well defined broadband strategies. Similarly in the United States, after ten years of debate during which time it has fallen from second to fifteenth in the OECD broadband rankings, the new government has announced the development of a National Broadband Plan, and has kicked off the discussion with a series of discussions hosted by the regulator, the Federal Communications Commission (FCC).

With an impending 10 - Terabytes of data,  a rapidly evolving  national  fibre - optic  network,  gaping  infrastructure deficits - particularly in areas such as  education, healthcare,  and citizen collaboration -  broadband policy is critical for macroeconomic development. The policy should place  broadband correlation to national development as context and address perceived and real challenges, set clear targets and propose mitigating steps, especially in terms of multiple taxation issues, infrastructure security, coverage,  competitive practices and  assessment   of  critical  National cross - sector   initiatives that will rely heavily on, or be greatly enhanced by broadband availability. This way, initiatives and all other inputs can be guided by those timelines and outcomes.

The  other  critical  issue which mitigates against cost reduction objectives on all fronts remains our power dilemma.  It is time for government to look at how it can guide the Mobile network operators – notwithstanding their real and perceived profitability - to adopt alternative methods of powering their infrastructure, as they are now huge consumers of power within the economy. Views are divergent on the viability of alternative power sources, but the evidence from other climes and even from developments at home is compelling.

According to mobile experts LLC, “Economics has favoured diesel generators due to their low capital cost, but as the cost of diesel fuel has risen and the cost of solar panels and wind turbines has dropped, the return on investment (ROI) equation is changing. It is now set to flip in favour of renewable energy by 2014 – when the payback of the cost of an off-grid renewable power plant will have dropped to less than a year.

Government agencies around the world are proactively promoting the use of renewable energy and such programmes are expected to create a supply chain with sufficient scale to bring down costs, create high-quality products, and eventually export green power solutions to developing nations.

By 2015, an installed base of 1.9 million mobile telecom sites will be candidates for green power upgrades or retrofits, with a compelling ROI driving operators to choose solar and wind power.”

Airtel Nigeria, according to its Chief Operating Officer Deepak Srivastava  will   soon conclude the first phase of a project putting in place 250 solar energy base stations across the country in February 2012. The project according to Airtel is part of the company's efforts to reduce carbon dioxide emission by eliminating the use of diesel and petrol to generate power at the stations. According to Srivastava, the new solar energy base station is expected to handle about 1,200 subscribers receiving and making calls at the same time. He further asserted that the poor power supplies across the country were "responsible for over 70 percent of downtime, resulting in poor quality of service". Significantly, Airtel reports that  it has  teamed up with Ericsson to upgrade 250 diesel powered stations in Nigeria to green sites.

Therefore it is clear from the above that alternative power sources are potentially viable in Nigeria as they have proven to be in India and other environments tat have power challenges. According to mobile experts LLC, The Indian government will allow accelerated depreciation of solar assets, so that 80% of the investment will be depreciable in the first year. The Indian Department of Natural Resources has established a subsidy pool of $50—60 million to draw upon, with companies  expected  to  be reimbursed by 30%—50% of the cost of solar arrays. Therefore, the policy needs to offer an overall incentive framework to ensure operators can move in this direction for their own benefits and ultimately, the benefit of subscribers.

Finally, an economy that does not produce cannot grow. This is trite knowledge and as we continue to see the uptake of ICT services, and develop broadband penetration strategies, we must now start looking aggressively at how we scoop more of the manufacturing functions and jobs to our own shores, riding on the experience of companies who have been active in this field for many years, and who have gained good insight into the end – to - end production cycles  employed  in  China and other ICT manufacturing hubs. If we do not, all the promise of our ICT development will deliver some benefit, yes; but by and large will also serve as an effective conduit for capital flight stifling our job creation potential and lubricating the coffers of other countries.

Let’s look at the implications on the mobile phone market for some context and I am being conservative. If we agree that there are some 80 million handsets on the market today ( ignoring  those we have purchased and discarded in the past) at an blended average cost (low end and high end) of $100 (USD) and also agree that there are some 10 million computers at an average blended ( laptop and desktop) of $400 (USD)  we arrive at $8b (USD) and $4b (USD) respectively. A  total  of  $12b (USD). Therefore, it is clear to see that any percentage we can claw away from the foreign countries providing us with these devices translates into significant economic resources that can support jobs, innovation and overall development.

If we extrapolate the figures across the entire value chain in terms of peripheral devices etc it is easy to see that we  are  hemorrhaging money and job opportunities, notwithstanding the portion locked down in the retail chain and local support services (which depend on imported parts).  Since government has failed to provide a strong base to support local production, it is imperative that a progressive policy clearly articulates   ameliorative inputs that will encourage and support local production or end stage assembly, to ensure that Nigerian brands do not continue to face the impossible barriers they have to overcome to compete against brands manufactured n highly efficient environments.

It is surprising that in Zambia, the Melcome Group, in collaboration with the Zambian government and the Japan International Cooperation Agency, started a project in 2006 with only  $3.5 million to put up a local mobile phone manufacturing plant. By the time another $7m was invested, the factory has since started churning out $25 handsets featuring FM radio, GMS, and a colour screen, among other features.

Whilst the difference in size and complexity must be appreciated when contrasting the Nigerian situation, that size must be viewed within the prism of opportunity, not challenges. The Omateks and Zinoxs can excel, given the right inputs and support. A market  of  Nigeria’s  size  as an organized purchasing block represents a huge capital flight enabler which can deplete any gains  hitherto  acquired.

In all the dialogue is useful and I am certain the Ministry will continue to critically study the industry inputs in its quest to put in place a policy and supporting legislation to transform the economy through ICT’s.

Olufemi Adeagbo writes from Abuja.  Feedback to

Tags: Nigeria, Business, Featured, Omobola Johnson

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