…for the good of the society, the way to go is to have a price floor. It may look painful today in view of the prevailing economic conditions and this is regrettable… It therefore bears restating that NCC took that decision to arrest a potential catastrophic consequence in the future. Never again should our nation allow any stakeholder to choke or muzzle its competitors, irrespective of the sector.
After the brouhaha and the exchanges – including the legislative intervention, and the attendant thawing of the ice cold grip of obfuscation of facts and populism – that greeted the introduction of a floor price for mobile data services in Nigeria, it is necessary to dilate the real motive behind the direction, and the debate the matter has generated. I refer to the sociological and economic contexts – the images and metaphors that have shaped both the decisions and the fallouts.
I undertake this engagement with the social process as a patriot and public intellectual to enrich our ever lively national debates.
In doing so, I apply three core principles of relationship management, albeit more applicable in international relations. These are: the Golden Rule, which enjoins that you treat others the way you also want to be treated. The second is the Platinum Rule, which instructs that we should treated people the way in which they wish to be treated. Finally, the Double Platinum Rule which commands us not to capitalise on the ignorance of the people but to treat each other with fairness.
Implicitly, the application of these principles in this instance speaks to our right to know. And we have an obligation to treat others likewise – OTHERS HAVE THE RIGHT TO KNOW. Besides, the spirit of the second principle implies that people should be treated the way in which they want to be treated. One implication of this ‘injunction’ is that people need to be told the truth. The second rule is, by extension and congruity to the third, a challenge to the public intellectual: When others capitalise on people’s ignorance, the rest of us have a duty to put their submissions in contexts that enable the public to see which interests are served by the submissions and arguments of those who seek to deceive the naive.
It is thus apposite that the brass tacks in this exercise starts with a short recall of the transformation of the telecommunications sector. Today, when we speak of the telecoms ecosystem, we refer to an environment that has transformed from an era when people came from many parts of the country to the NET Building in Lagos to make calls to their relations and children resident abroad, because that was the only point international calls could be placed.
It also bears restating that between 1960 and 2001, our country could achieve only 450,000 active telephone lines with a painful teledensity of 0.04 percent – that is four telephone lines per 100 persons.
However, the birth of the National Telecommunications Policy in 2000 opened the floodgate of a seminal revolution. The enthusiasm that greeted the introduction of mobile telecommunications was first evident in the fact that after the first two mobile operators were licensed in 2001, both recorded about half a million subscribers each in the first six months.
As I write, Nigeria has over 153 million active lines, and the teledensity is 109.5 percent. Broadband penetration is already at 21 percent – an impressive mark indicating the sector will surpass the 2018 target of 30 percent. At present, there are over 93 million Internet users in Nigeria.
It is also noteworthy that the ICT sector is the third biggest contributor to the GDP, following the oil (petroleum), and agriculture sectors. It also terrific that 15 years of the liberalisation of the telecoms sector has recorded an impressive cumulative investment of 68 billion dollars.
Why is it necessary to recall this triumphantly? Lee Kwan Yew, a former Prime Minister of Singapore and evidently the most preeminent among the architects of that nation, had noted in the Preface to his classic, From Third World to First: The Singapore Story 1965-2000, that he wrote the book for a younger generation of Singaporeans who took stability, growth, and prosperity for granted. He proceeded to increase the intensity of his treatise by stating that, “We cannot afford to forget that public order, personal security, economic and social progress, and prosperity are not the natural order of things…they depend on ceaseless effort and attention from an honest and effective government that the people must elect.”
Accordingly, the phenomenal growth witnessed in the telecommunications sector, which I had earlier reported, is a product of ceaseless, conscious efforts by the government – the Federal Government, NCC, local and foreign stakeholders in the sector and especially the Nigerian people. The reason the NCC had always expressed appreciation to its stakeholders and why the Commission takes stakeholder relationship management as a central plank of its activities. Indeed, it is the basis for its continuous search for improvement upon the phenomenal sectoral growth already aptly described by pundits as exponential.
Interestingly, the Nigerian story is in congruence with the global trend of how the ICT sector is displacing hitherto notable strongholds of national economies. At the moment, the four most capitalised companies in the world are in the ICT sector – Microsoft, Apple, Google and then Facebook, which recently pushed Mobil, a renowned oil giant to a fifth place.
Therefore, the real motive for the direction from NCC, with respect to the price floor, is to safeguard a reversal of national fortune, protect the entrepreneur (irrespective of the size of investment), save the industry, and prepare the market for the real competition ahead.
Without any iota of equivocation, the public needs to know that ‘price floor’ and ‘price cap’ are regulatory guidelines that are usually not imposed. They are products of discussions and engagement between regulators and operators to ensure the survival of the industries or markets. The former is a minimum price while the later is a maximum price, for a service or product agreed upon by government or organisations in tandem with stakeholders. OPEC does this regularly to protect the interest of its members and the industry.
The telecoms market watchers would therefore recall that a price floor of 3 naira 11 kobo (3.11K/mb) was in place from 2014 until October 2015 when it was suspended to enhance data penetration. Before the suspension of the new price floor on November 30, 2016, Etisalat offered data services at 94 kobo per megabyte, MTN did at 45 kobo, Airtel at 53 kobo and Glo at 21 Kobo. Other smaller operators like Smile and Spectranet also offered different prices but neither of the small operators offered data services at a price above 94 kobo.
As in other jurisdictions, the Nigerian telecoms market is segmented. Operators that control less than 7.5 percent of the market or are recent entrants are encouraged through policies, regulations and guidelines to stay in business. It was therefore necessary to intervene in the market when some of the operators started offering data at prices that do not even cover the cost of production. A scenario akin to dumping in elementary economics.
This is precisely the rationale for nudging the players in the data segment to agree to a price floor because activities of some operators have become anti-competitive and predatory.
Predatory pricing finds expression in offering services at a price clearly below production cost by some operators ostensibly to attract customers to their networks after which they will shrewdly increase the prices. By the time this happens the predatory operators would have succeeded in driving the smaller operators out of the market. An indication of a grand plan to return the industry to the days of NITEL – to create a monopoly or a duopoly or even at the very best an oligopolistic scenario in which a few operators will hold the nation and its people by the jugular and offer data services at possibly 10 naira per megabyte – and the customer will either take it or leave it.
A pointer to this possibility, as the discerning and industry enthusiasts will have noticed, is that there has not been any spectacular expansion of network infrastructure by any of the key operators since October 2015. In its stead, the industry has been signposted by an inordinate scramble and partition of customers – an act that speaks to a clear and present danger orchestrated to hurt the health of the industry.
Expectedly, in the vortex of these challenges, the NCC obviously reflected on the scenario and decided to undertake a benchmark study, especially across Africa. As the Commission embarked on the study, the operators were notified, and some of them confirmed NCC’s findings in the follow-up engagements, that NCC had instituted to nudge operators to an evidence-based direction. Quite expectedly too, there were correspondences between the Commission and the operators preparatory to the advent of the price floor. And it was evident to all stakeholders that the introduction of a price floor was imperative to sanitise the market.
However, in view of the fact that there was no unanimity of position nor a scintila of readiness by the operators to converge positions on an appropriate pricing, the NCC on October 19, 2016 met the operators to convey its position after considering respective responses from the operators and the objective realities of the industry. Consequently, a floor price of 90 kobo per megabyte was introduced, as it was considered a fair pricing. It was also agreed that the floor price will be effective from December 1, 2016.
As we can see, procedurally there is nothing fundamentally wrong with the introduced price floor. The pricing methodology is an instrument to check abuses by operators; abuses, which by my reasoning and many other narratives in the public space, had already set in. Importantly, the price floor is cost oriented in keeping with the ITU’s recommendation for cost-oriented telecommunications services provision.
It is also pertinent to state that the big operators have had their days and are still enjoying economies of scale as well as operational stability. There is absolutely no reason for a gang up because the Nigerian Communications Commission as the regulator of telecommunications services also has a responsibility to ensure the survival of the new operators.
Indeed, the survival of all operators is patently in the utmost interest of the Commission in view of the implications for employment generation, service provision and the growth of the economy at large. This apparently explains NCC’s interest and determination to ensure a level playing field for all operators to enable the country to move steadily at the right pace. The NCC’s core interest is to superintend a robust migration of the whole country to the 4th Generation Networks, invariably to the 5th Generation Networks, and ultimately to the Internet of Things. It is to ensure we all embrace scores of technology lurking in the future to revolutionise how we live.
So, earnestly, the direction on the price floor is a preparation for the future. Interestingly, the future as we can see does not come by itself, it is (as history has taught us) the product of the choices made in the present. The price floor is therefore a metaphor, a historic symbolic pointer to a new vista of blessings waiting to be harnessed. It is a decisive, patriotic and nationalistic decision that will remain seminal in view of its capacity to trigger the outpouring of benefits for all, rather than for a few. Suffice it to say that the intervention by the NCC is altruistic, sincere, noble and commendable.
Suffice it to say that the imagery of upheaval and impropriety painted of the price floor by those who wish to reinvent the ugly past, and the characterisation of the regulator as insensitive by emergent populists and latter-day apostles of the free market, is uncharitable and preposterous. The experimentation with the free market doctrine, hook line and sinker, led to the disappearance of the cybercafés. Today, the CDMA operators – Starcomms, Multilinks, Reltel, ZoomMobile and Visafone – have become history, with attendant job loss and painful consequences on the economy. How much are we going to lose to free market? Who says markets are the primary means for achieving public good?
Ever since Michael J. Sandel, the American professor of moral philosophy at Harvard and a global public intellectual published What Money Can’t Buy: The Moral Limits of Market, “the era of market triumphalism had come to a devastating end”. Of course markets have their beauties but any responsible government or regulator must know when to intervene in the market to restore public good. As Sandel asks in that seminal book, we need to think through the moral limits of markets. We need to ask whether there are some things money should not buy. This is precisely the questions that the NCC has reiterated and offered to resolve in this instance through the price floor.
If the Nigerian Communications Commission did not act in the public interest as it had done by nudging stakeholders to fix a price floor, the Commission will be blamed ultimately for not acting timely and properly when the bigger problem presents itself. And there is a historical lesson as Sandel had reported.
Sandel had noted that following the spectacular failure of financial markets, a 2011 surveys found that the American public blamed the federal government more than the Wall Street financial institutions for the economic problems of that era. By this time the exponents of Thatcherism and Reaganism – the other names for free market – had disappeared because their edification of free market as the panacea to all economic problems had been repudiated and shattered. If it were so, why didn’t the American government leave its battered aviation sector to market forces redemption after 9/11? Why didn’t the US leave the mortgage crisis to the market forces? Are the Thatcherists and Reaganists still blushing?
One online media commentator cited Betrand’s Price War Model and Game Theory to demand that NCC should leave the competing firms to find their appropriate price levels. I read the opinion and chuckled as I found it hard to process the thought. It tasted so unsavoury. I mean, these are theories already contested and practically consigned to the bin with the emergence of better paradigms, even in the West where they were propounded.
Of course Sandel’s and many more perspectives of more objective ideological orientations are better guides to a responsible world class regulator like NCC than lame theories and doctrinaire market philosophers whose pontification and magisterial stance are meant to pave the way for predators to overrun the telecoms landscape.
Yet another ridiculous opinion opposed the price floor regime simply because IPNX, Smile, Swift, and the rest of the small operators are only in a few cities, while the big operators are everywhere. Well, truth is there is nothing in the Nigerian Communications Act 2003, or any subsidiary legislation or guideline that mandates an operator to cover the entire country at once, in fact some licenses are regional in scope and operation.
Just last week (December 5, 2016), Cobranet and Swift won the NCC’s earlier advertised bids to deploy specific internet services in Lagos in the 5.4 GHz band. Importantly, none of the big operators covers the entire country. Just recently an NCC study identified 217 spots that have not been covered in Nigeria by telecom services. That study showed some 40 million of our countrymen and women inhabit parts of the national geographic space that are painfully bereft of functional telecommunications infrastructure. The NCC in its characteristics responsiveness has already instituted processes that will ensure connectivity to those spots in 2017.
The NCC may not be the global best but it certainly aspires to be. In fact, in many respects it is a model. It is on record that NCC is the first regulator to introduce The Consumer Parliament. This concept has been replicated in other climes, just as NCC also do benchmarking. Indeed, one of the several studies NCC undertook recently also revealed that Nigeria is not doing badly in terms of pricing. The Continent-wide study showed that only eight countries had cheaper data pricing than Nigeria. These include Tanzania, Egypt, Mozambique, Uganda and Ghana. Nigeria is actually number nine.
However, if we reflect objectively on the operating environment and some peculiar challenges, we face as a nation we will see that in no distant time Nigeria can improve on her position as soon as it is able to arrest some of the environmental issues bedeviling the telecoms industry.
My conclusive note is the admission that the greatest lesson in the contrived controversy is the centrality of a robust stakeholder engagement process for which the NCC is renowned. Although in deference to the Senate, the new data pricing regime has been suspended, the NCC has promised to undertake a more comprehensive study. The regulator also planned to expand the spectrum of consultation with its ever increasing array of stakeholders.
However, for the good of the society, the way to go is to have a price floor. It may look painful today in view of the prevailing economic conditions and this is regrettable because the customers have always been at the heart of considerations by the NCC whenever decisions are to be taking. It therefore bears restating that NCC took that decision to arrest a potential catastrophic consequence in the future. Never again should our nation allow any stakeholder to choke or muzzle its competitors, irrespective of the sector.
Chris Panti, a social entrepreneur, writes from Abuja.