Mounting Concerns over Dwindling Activities of ISPs

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The continuous drop in the number of active Internet Service Providers in the country has become a source of worry to industry stakeholders and the regulator, writes Emma Okonji

The role of Internet Service Providers in the provision of internet services to people across cities, rural communities and underserved communities, is key to internet and broadband penetration in the country. Over the years, ISPs have been involved in taking affordable internet services from the shores of the country to the hinterlands where demand for internet service is high. But recently their business has been challenged by harsh market competition, involving under-pricing, bandwidth costs, vertical integration of mobile network operators, as well as the growing uptake of leased line services by corporates.

 

Concern

 

Available data indicates a downward slide in the number of active ISPs present in the market and the scope of services they offer, a situation that has raised serious concerns among industry stakeholders and the regulator. In order to address the situation, the Nigerian Communications Commission, the industry regulator, organised a stakeholders’ forum in Lagos last week, where the challenges of ISPs were highlighted.

NCC said the sharp decline in the number of active ISPs in the country had become worrisome, stressing that the situation poses an economic threat, especially in the area of broadband rollout. Executive Commissioner, Stakeholders Management at NCC, Mr. Sunday Dare, represented the Executive Vice Chairman of NCC, Professor Umar Garba Danbatta, at the ISP Stakeholders’ Forum. Dare said The ISPs were faced with series of challenges that needed to be addressed through collaborative efforts.

At the forum, a roll call was taken and it was discovered that among the 50 registered ISPs for the stakeholders’ forum, only 13 were active and still providing services to customers.

 

Awful Statistics 

Between 2001 and 2010, Nigeria had over 200 registered ISPs in the records of NCC. But the number kept diminishing year-in-year-out, such that as at today the number is less than 50, with only about 13 active and still providing services.

The current 13 active ISPs were made known after a roll call was taken on the number of ISPs that registered for the ISP forum organized by NCC in Lagos, recently.

The active ISPs include the big five GSM operators – MTN, Globacom, Airtel, 9mobile, and ntel. Although the GSM operators were licensed to provide voice service, they decided to play as ISPs by providing data services because their universal licence allows them to do so.

Other active ISPs include Spectranet, Swift Network, Smile Communications, MainOne, IPNX, and eStream, among few others.

The inactive ISPs include Pinnet Technologies, Linkserve Network, Direct On PC (DOPC), Cobranet, Syscomptech, Tedata Limited, Bio Links, Datatell, Netmax, Simbanet Nigeria, Cue Net, and Blue Fox Media, among many others that have gone under.

While some went under for lack of funds, others failed as a result of harsh market competition occasioned by imbalance in regulation, under-pricing and sharp practices by the bigger operators.

Dare said, “As we all know, the larger telecoms industry, of which ISPs are an integral part, is beset with numerous challenges. The issues with power, accessibility of foreign exchange, multiple taxation/regulation, infrastructure vandalisation, as well as high cost and long delays in obtaining rights of way and permits not only degrade the quality of services provided by our licensees, they also negatively affect the attainment of critical national objectives on the speedy rollout of broadband networks to power socio-economic growth and the enhancement of our industry’s contribution to national GDP.”

He said taking affordable internet services to the last mile required a healthy and robust ISP sector. Dare expressed worry at the huge decline in the number of active ISPs in the market as well as the scope of their services. “The commission sees this gap as a major risk to the Nigerian economy in attaining ubiquitous broadband for every Nigerian, hence the essence of the stakeholders’ forum, in order to chat the way forward,” he stated.

The ISPs and stakeholders present at the forum blamed the situation on regulatory lapses, undue market competition, under-pricing, and sharp practices carried out by the bigger operators, especially the GSM operators that also offer data services to customers.

 

Challenges 

Head of Post Licensing at NCC, Mr. Philip Eretan, who was represented by the commission’s Senior Manager, Licensing and Authorisation, Mr. Solomon Igbayue, in his presentation at the forum, identified the challenges the ISPs faced to include harsh operating environment, inadequate infrastructure, multiple taxation, and tough approval process.

Regarding the operating environment, Eretan said the big service providers were operating in both the wholesale and retail segments of the market, thereby pricing out the smaller operators and taking their customers.

Other identified challenges included disparity between advertised internet speeds and actual speed obtainable on networks; inadequate provision of redundancy by ISPs to handle network downtime; lack of compensation for downtime; dedicated internet access users mostly offered shared internet access; service rollover of unused data; auto renewal of service; poor service quality; and compliance with regulatory obligations only during renewals.

It was suggested that NCC should manage the prices for internet services, to avoid under-pricing and ensure that all vendors have uniform prices given to the end users.

 

Tips 

Eretan, in his presentation, gave useful information that could help ISPs remain in business, despite stiff market competition. He reminded ISPs of the Internet Corporation for Assigned Names and Numbers (ICANN) notification on the upcoming changes to Root Zone DNS Security Extensions, scheduled to take place on October 11. He talked about other issues, like awareness on Internet code of practice to aid Internet governance functions, as well as the need for ISPs to standardise their operations by migrating from Internet Protocol version 4 to version 6 (IPv4 to IPv6).

Stakeholders called for the deployment of more telecoms infrastructure and the need for allocation of more frequencies to expedite deployment of data services.

 

Survival Strategies

In order to address the myriad challenges threatening the survival of ISPs, NCC challenged them to develop new business models in line with current market trends that would help them remain in business. NCC said the need to develop new business models became necessary following the challenges confronting ISPs.

NCC said the decline in the number of ISPs would continue to affect broadband penetration and growth in the country if not addressed.

The Director, Licensing and Authorisation at NCC, Ms. Funlola Akiode, in her presentation at the forum, said between 1996 and 2001, NCC licensed over 170 ISPs to provide internet services to Nigerians. But Akiode said from 2002 to date, the number of ISPs issued licences had dropped drastically and the number of renewal of licences had also dropped heavily, a situation, she said, raised serious concern among the regulator and the industry stakeholders.

According to Akiode, “NCC has witnessed a tremendous decline in the number of applications for the ISP licence. The renewal rate of the licence category also dropped drastically. In the past five years, the commission has licensed a total number of 103 ISPs nationwide, but only about 10 per cent have applied for renewal of the licence.

“That is one of the reasons why we decided to hold a stakeholders’ forum to find out why about 90 per cent of licensed ISPs are out of business, and why some ISPs have not rolled out services in accordance with the condition of their licences.

“After listening to ISPs and industry stakeholders, NCC feels moved to advise the ISPs to develop a new business model that will help sustain their business and remain competitive in the market.”

She said as a responsive regulator, the sustainability of ISPs in the telecommunications business in Nigeria remained the primary interest of NCC.

“Apart from guiding us in making appropriate regulatory interventions for the enormous investment in the sector, the stakeholders’ forum would also offer NCC the opportunity to ensure that Internet for all Nigerians is achievable,” Akiode said.

 

ISPs’ Submission

 

ISPs present at the forum called for uniformity in the cost of right of way, access to funding, reduction in the cost of spectrum for ISPs, approval of spectrum trading and sharing, tough regulatory sanctions for unregistered ISPs who usurp contracts and businesses of registered ISPs, among others.

The ISPs were of the view that uniformity in cost of right of way among federal, state and local government agencies, which often impose arbitrary charges on ISPs before allowing them to lay broadband fibre cables in certain locations, would help to promote their business across the country. They were also of the view that approval of spectrum trading and sharing would enable them obtain spectrum from operators who are yet to make use of their spectrum licences.

 

Assurance

 The NCC management team at the stakeholders’ forum assured ISPs of the readiness of the commission to work on a framework for spectrum trading and sharing, as well as the uniformity of cost of right of way. Director, Enforcement and Implementation at NCC, Mr. Efosa Idehen, said NCC was collaborating with some state governments to try to achieve uniformity in the cost of right of way.

Having identified the challenges, many believe NCC needs to move fast to address them in order to save the business of ISPs from total collapse.