The directive on the interim price floor for data services, given by the Nigerian Communications Commission (NCC) on November 1, has continued to raise dust among telecoms subscribers, who perceived it as hike in data tariff, but the NCC has maintained that it never gave directive for data tariff increase, writes Emma Okonji
Leveraging its statutory powers to review tariff for voice and data services periodically across networks in the telecoms industry, the Nigerian Communications Commission (NCC), the industry regulator, in October, reviewed tariff charges across networks and on November 1, gave directive to telecoms operators for the introduction of an interim price floor for data services across networks. Although NCC held stakeholder’s consultative meeting on October 19 to discuss the issue with telecoms operators, before communicating its intention to introduce a new price floor for data services, which was expected to take effect on December 1, the action of NCC, however, angered telecoms subscribers, who perceived that the new price floor meant outright increase in data tariff. Their fear was further heightened, when MTN sent short message service (SMS) to its over 61 million subscribers, informing them of its plans to increase data tariff with effect from December 1, 2016, going by the directive from NCC to introduce an interim price floor for data services.
At the instance of the SMS from MTN, subscribers from across networks became furious at the planned data hike and sent words and letters of complaints to the NCC and the National Assembly, protesting the perceived hike in data tariff.
Disturbed by the situation, NCC quickly announced the suspension of the new price floor and asked all operators to revert to the old price floor, and to maintain the status quo until the conclusion of study to determine retail prices for broadband and data services in Nigeria.
The Director, Public Affairs for NCC, Mr. Tony Ojobo, who announced the suspension, said it became necessary, following the general complaints by consumers across the country, who perceived that the interim price floor would lead to hike in the cost of data services across networks. He said the decision to suspend the directive was taken after due consultation with industry stakeholders.
But again, the suspension has continued to elicit reactions from telecoms operators, who felt aggrieved that the reversal to the old floor price for data services, would continue to eat deep into their revenues, a situation, they claimed, could affect the quality of data services across networks, since operators were running at a loss with the old data rate.
In all of these controversies, NCC has maintained that it did not give directive to increase data tariff. NCC insisted that the introduction of the interim price floor was only a template to guide operators in fixing data tariff, and not a licence to hike data tariff.
About price floor
In telecoms parlance, price floor is one of the regulatory safeguards normally put in place by the telecommunications regulator to check anticompetitive practices particularly by the dominant operators. It is therefore a minimum price on a good, commodity, service etc., as stipulated by government or the regulator.
Without a price floor, the dominant operators can engage in predatory pricing to squeeze other operators which could create industry monopoly.
Contrary to the general perception that the NCC gave network operators the directive to increase data tariff, the commission has come out to say that it never gave such directive.
NCC, which made the disclosure at an investigative hearing organised by the Senate Committee on Communications at the National Assembly, Abuja, said all it did was to establish a price floor for all telecoms operators for the purpose of price regulation.
The Executive Vice Chairman of NCC, Prof. Umaru Dambatta, who put up the defence before the Senate Committee on Communications, said the price floor was first introduced in 2014 to serve as a check against “anti-competitive practices particularly by dominant operators”.
According to Dambatta, NCC in 2014 imposed a price floor of N3.11 per megabyte for data services, but eventually lifted the price floor in October 2015 following the request by service providers to waive the price floor for data services, to enable a roll-out of infrastructure and growth of the data market segment.
He added that in accordance with its mandate to promote fair competition in the telecommunications industry and avert monopoly by major operators, it took a decision to re-introduce the price floor with effect from December 1, 2016 following the commission’s discovery that some service providers were actually pricing their services below cost, a situation, he said, could spell doom for the industry.
He described as rumour, the statement that NCC gave the directive for the increase in data tariff, and said such statement was borne out of pure misunderstanding of the intentions of NCC.
Why NCC Introduced Price Floor
Dambatta explained that the need to re-introduce the price floor was meant to avert a price war between major telecoms players and the smaller ones.
Corroborating Dambatta, Ojobo noted that the introduction of price floor for data services in the country was to address market distortions, unhealthy price wars and value erosion that could threaten the concern of the service providers.
In 2014, a benchmark study was conducted and a price floor of N3.11/MB was set for data services for the big operators, because the data market segment became very aggressive in price competition in 2014, thus posing risks of prices falling below costs, which could negatively impact sustainability in the industry.
According to Ojobo, NCC had to introduce data tariff floor that year in order to safeguard investment in the industry; to check and control anti-competitive practices by operators who were dominant in the upstream market; to prevent further value erosion in the industry; to create a level playing field for all operators and to maintain the integrity of the network.
However, in October 2015, NCC took a decision to lift the price floor for data services, having perceived that it would stifle pervasive broadband deployment, adoption and usage, in the country.
Statistics on Price Floor
As at November 1, 2016, the industry average for data tariff floor for dominant operators including MTN Nigeria Communications Limited, EMTS Limited (Etisalat) and Airtel Nigeria Limited was N0.53k/MB, but the interim price floor as introduced by NCC, which was to commence with effect from December 1, 2016, seeks to increase the industry average for data tariff from N0.53k/MB to N0.90k/MB.
Statistics of the old rate showed that Etisalat offered (N0.94k/MB), Airtel (N0.52k/MB), MTN (N0.45k/MB) and Globacom (N0.21k/MB). It was based on these rates that NCC initially came up with an average data tariff of N0.53k/MB for dominant operators.
But the smaller operators/new entrants like Smile Communications, Spectranet, and ntel, charged different rates. Smile Communications charged N0.84k/MB, Spectranet charged N0.58k/MB and ntel charged N0.72k/MB.
Considering the initial rate of N0.45k/MB, which MTN charged and the new rate of N0.90k/MB as contained in the interim floor price for data services, which was supposed to take effect from December 1, 2016, MTN, went ahead to inform its over 61 million subscribers that it would increase data tariff with effect from December 1, 2016, as approved by the NCC. The information to MTN subscribers, which was sent via Short Message Service (SMS) otherwise known as text message, raised a lot of dust among subscribers across networks, who started calling on NCC and the operators to rescind the decision on data tariff hike.
Following the complaints from subscribers, NCC decided to suspend any further action in that direction.
Sensing that the action of NCC to suspend the interim price floor will continue to reduce their profit margin, telecoms operators, under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON), have expressed their dissatisfaction over the suspension. They have condemned in strong terms, the decision of NCC to suspend the interim price floor, which seeks to increase data tariff. In a statement signed by its Chairman, Mr. Gbenga Adebayo, and its Publicity Secretary, Mr. Damian Udeh, ALTON said the price changes for data services across all networks following any intervention by the NCC were not expected to have a detrimental effect on broadband penetration contrary to some sentiments being expressed in the media. “ALTON wishes to emphasise that while it is imperative that telecommunications operators continue to explore opportunities to provide their subscribers with more value for their money, it is important that prices be set at realistic levels, which ensure that subscribers are not only able to afford services but that operators are also in a position to provide first-rate quality of service to their subscribers,” Adebayo said.
According to him, while ALTON fully understood the public sentiments that greeted the announcement of the introduction of interim data tariff, it should be known that if the situation is left unaddressed, could result in a sustained deterioration in the quality of data services across networks and the attendant poor quality of experience for users.
In order to justify their grievances over the suspension of the interim price floor for data services, the Chief Executive Officer of Etisalat, Mathew Willsher, told the Senate Committee on Communications that following the lifting of the price floor in 2015, data tariffs were forced down by 80 per cent. He, however, added that a situation where the price floor has now been suspended might not be in the best interest for the industry.
The CEO of MTN, Ferdi Moolman, said it was not true that MTN was behind the move for the data price hike, through the manner in which it announced to its subscribers of its intention to increase data price, based on the NCC’s initial directive, contending that the interest of Nigerians was the drive of the telecoms industry.
He added that an industry that is technologically-driven like the telecommunications, needs to apply new technologies, a trend he said was affected by Nigeria’s rising inflation rate.
But Airtel, which was represented by its Director of Legal Services, Sola Adeyemi, during the meeting with the Senate, said telecoms operators would abide by the suspension of the price floor, saying operators will adjust prices to fit the price floor fixed by the NCC.
The Vice Chairman of Senate Committee on Communications, Senator Adeola Olamilekan, who presided over the meeting, blamed the misconception of NCC’s price floor on poor consultations, adding that the ignorance on the directive displayed by the Communications Minister, Adebayo Shittu, was a testimony to the insufficient consultations before the announcement of the new price floor.
The committee, however, threw its weight behind NCC’s submission that it would engage in a scientific study before coming up with a price floor that will be acceptable to all stakeholders.
In his reaction, Shittu appealed for support to both the NCC and telecoms operators, arguing that whatever is necessary must be done to ensure that the telecoms industry, which he described as the most vibrant sector is sustained.
Despite the suspension of the interim price floor, and the Senate’s position on the matter, telecoms subscribers have continued to kick against any plan that would make telecoms operators increase price of data services. The President of the National Association of Telecoms Subscribers (NATCOMS), Chief Deolu Ogunbanjo, told THISDAY that subscribers across networks would reject any increase in data tariff, insisting there is no justification for data tariff hike. According to him, he would mobilise subscribers to seek redress in law court, should operators make any attempt to hike data tariff. “Nigeria is in recession and any plan to increase data tariff, could worsen the situation. Network operators should be planning on how to improve service quality, rather than thinking of increasing data tariff,” Ogunbanjo said.