NCC data price floor was misunderstood

Osagie Ediale

I read with shock and disbelief the article titled “Why NCC’s Failed Data Price Hike Was Flawed”, written by Sina Kawonise on the backpage of THISDAY Newspaper of Monday, January 9, 2017.

I expected to be educated, not inundated by shallow logic; I expected to read clear details of why the data price floor was introduced and perhaps reasons for its suspension by the NCC. Sina Kolawole’s piece disappointed on all counts.

The author did not ask all the questions from relevant authorities on the subject. Besides, the article at best dwelt on rumours and slices of convoluted logic, which is unfortunate. Hence it misled those who read it.

From the perspective of my knowledge of the situation let me put the matter in very clear terms for all to see, by stating that the decision for a data price floor was taken by the NCC and all the operators both big and small after a long meeting on October 19, 2016.

There were arguments for and against by the operators after which a consensus was reached on the way forward. The operators agreed that lower tariffs will not in any way translate to quality of service. Instead it is a disincentive to both subscribers and operators as congestion on networks with lower tariffs means bad and poor service delivery to end users.

Furthermore, it was recognised that the price war among the operators was a race to the bottom which could affect the growing concerns of these operators and the sustainability of the industry at large.

Hence they all agreed that there should be a data price floor towards improving service delivery.
The NCC thereafter took into consideration all the comments of the operators and introduced an interim data price floor of N0.90k/megabyte (MB) pending the conclusion of a study it initiated on the determination of cost based pricing for retail broadband and data services in Nigeria.

By global best practices, it should be noted that a data price floor is not new to the Nigerian telecommunications sector. For avoidance of doubt, a price floor is one of the regulatory safeguards normally put in place by the Telecommunications regulator to check anti-competitive practices particularly by dominant operators. A price floor is the minimum price on a good, service or commodity by a government or other organizations that serve as a guide to check activities of predators. These facts are there for all to see.

Just imagine that if the Organization of Petroleum Exporting Countries (OPEC) had not a price floor, every country would be at liberty to sell their crude at whatever price they liked and this would have encouraged predatory activities, and doom for the oil and gas sector.

For Nigeria’s telecommunications sector, without a price floor, dominant operators could engage in predatory pricing to drive down other operators. If this is allowed, the industry will be heading towards a monopoly and this is not good for the subscribers.

But the NCC has the mandate to protect the subscribers as well as the investors if it must sustain an industry that has made a world of difference for everybody including the government.

In 2014, when the data segment of the sector became aggressive in price competition posing risks of price falling below costs that may negatively impact sustainability in the industry, the NCC quickly moved in to safeguard investments through the introduction of the data price floor at N3.11k/MB;
• To check and control anticompetitive practices by operators who are dominant in the upstream market (Leased line market);
• To prevent further value erosion in the industry;
• To create a level playing field for all operators – big or small;
• The need to maintain the integrity of the network;
Due to a global paradigm shift from the provision of voice telephony services to data and digital services and to ensure sustainability, growth & development of the data market, promote pervasive broadband deployment, adoption and usage, the NCC took a decision to lift the price floor for data services in October 2015.

I am certain, the NCC took cognisance of complaints by service providers to waive the price floor for data service to enable roll-out infrastructure growth of the data market segment. I suspect also that a caveat must have gone to the operators that the NCC will restore data floor price if any distortion is witnessed within the market segment.

The NCC in its mandate to promote fair competition in the industry, monitor activities in the data segment, observed that there has been a significant reduction in current market prices for data as a result of negative price wars among the service providers.

Buoyed by the need to halt this trend which could undermine the healthy growth, development and sustainability of the industry, it was necessary to re-introduce the price floor. The re-introduction of the price floor was also meant to address the following:
• Some service providers were pricing below cost, a situation that could spell doom for the industry;
• Dominant operators in the wholesale leased line market, who also operate in the retail market embarked on massive predatory pricing, a conduct capable of substantially lessening competition;
• The removal of price floor for data resulted in eroding value in the market
• The need to safeguard investment and ensure growth, development and sustainability of the sector; and
• To maintain the integrity of the network as operators lack the capacity to accommodate the volume of transaction on their networks.

These key insights were missing from Kawonise’s fumbling piece.
He should note that his comparison of the Nigerian market with much more matured markets is misplaced. Our market is not as robust yet. Here, the operators are plagued with a myriad of challenges including but not limited to generating power for their operations, right of way issues in states, multiple taxation, increasing high exchange rates among others.

Contrary to the impression Kawonise tried to create, the NCC that Nigerians know is a dynamic, forward looking and transparent regulatory agency that engages stakeholders regularly before taking any decision that has to do with regulations and guidelines.

It has done this over the years and one wrongly crafted article will not change all that. I cannot therefore conceive that the NCC, because of its responsibilities to the various stakeholders and based on the multilayer level of information available to it, can take any decision that is counterproductive to its stakeholders.

For instance, its transparent handling of regulatory activities has been adjudged to be a benchmark for other African regulators to emulate. Indeed, it stood tall winning awards five consecutive years as the regulator with the fastest growing sector, according to the International Telecommunications Union (ITU) and won African Regulator of the year 2016. NCC did not stop there, it was declared the winner of the European Award for Best Practices 2016 by the European Society for Quality Research for its outstanding commitment, support and results in quality management strategies.

The Executive Vice Chairman (EVC), Prof. Umar Danbatta received the 2016 Telecom Personality of the Year award at the 12th Nigeria Telecom Award Ceremony and the African Leadership Magazine African Regulator of the Year 2016 in New York.

Finally, as a stakeholder in the telecoms sector and indeed the “Nigerian Project”, I want to make an impassioned appeal to Nigerians such as Kawonise, the author of the article, to desist from attacking the integrity of Organizations such as NCC in order to achieve ulterior motives. To make allusions of “Corruption” and “Compromise” to describe the well intentioned actions of the NCC is to say the least most uncharitable. For the records, the NCC has attained and still remains one of the outstanding agencies of government whose standard of transparency and probity has been acclaimed both locally and internationally.

NCC’s contributions to the growth and economy of Nigeria are evident for all to see. Please let us seek to build up, not tear down our sterling institutions such as NCC!

– Ediale, a telecom Consultant wrote from Abuja