NIGERIA: OPERATORS STILL AT ODDS OVER INTERCONNECT RATE

Telecoms

Despite locking themselves away in a separate room during the Telecom Summit in Abuja, Nigeria's operators were unable to reach agreement on interconnection rates. After so much argument, with each speaker citing authorities and telecom experience to prove his case, no decision was reached. There were two broad market positions. The GSM operators who are the reigning champions, and the private telecom operators, the PTOs, who are challenging the status quo. Standing as umpire was the Nigerian Communications Commission (NCC).

At the end of debate, the NCC asked the parties to go back and decide on what they wanted. They must reach a consensus, otherwise the NCC would have no option but to make a declaration. In other words, impose a settlement on the fractious parties.

The existing rates favour the GSM operators who take N11.52 from fixed networks for any call originating from the networks and terminating on the GSM network. If the calls were originated by the GSM operator and it terminated on the fixed network, the former only needed to pay the latter N5.52. When these rates were first decreed by the NCC, the GSM operators contested them at the courts and lost.

The PTOs are however not at ease with the situation anymore. They made several representations to the regulator who had earlier promised that the rates are subject to periodic review. Now with the Unified licencing regime round the corner, they can wait no more.

A senior official of a fixed wireless operator told THISDAY that PTOs would not take anything less than what they pay to the GSM operators. According to him, in other countries where telecommunications has had deep roots, the dominant operator is the one who subsidises the small operator. Not so in Nigeria, the small operators subsidises the big boys so they can live the expensive lifestyle they are used to. This had always been the case right from the time of NITEL on one hand and Multi-Links and Intercelluar on the other.

But shouldn't there be a definition of who a dominant operator is? No such definition exists yet. NITEL used to be. Now, it should be MTN, Vmobile, Globacom and Mtel. However, that has not become official. And so these companies continue to dodge the responsibilities associated with being a "dominant market player".

Now, the PTOs are saying that if they cannot get subsidy from the dominant operators, at lease they should not subsidise the operators. So, at the minimum, they would settle for equal rates for originating and for terminating.

There is a way in which the inability to arrive at a consensus would affect the unified licencing regime expected from February/March next year. The first has to do with the definition of mobility. From that time, operators would no longer be classified according to the technology they use in deploying service. There won't be a GSM operator or a CDMA operator. An operator would be an operator. If it is GSM the guy uses to deploy his mobile, all well and good. If it is CDMA, that is just as fine. So who is a mobile operator from then? That list would certainly include MTN, Vmobile, Glo Mobile and Mtel. That same list would include Multi-links, Starcomms, EMIS, Reltel, Intercellular, Cellcom, MTS and many others. So, if it is a matter of terminating mobile to fixed, then there may not be any operator really to fall into that definition of fixed, depending on what 21st Century Technologies and VGC have in mind. Note that at the time, there won't be any such thing as limited mobility.

This would mean that at the very minimum, EMIS, for instance would get from MTN what MTN is paying Vmobile per minute for interconnection.

Inability to arrive at a uniform rate would also encourage all operators to offer all the services available under the unified licencing regime. Although chairman of Independent Telephone Network, Chief Bayo Akande, told THISDAY that under UL, an operator need not provide all the services, providing all the services is really they might just do, especially if that puts them on the same interconnect pedestal as the GSM operators.

It is clear as anything would ever be by now that many operators are just waiting for the post-exclusivity to come to an end in February before they roll out mobile services more aggressively.

But that competition would also have a rub-on effect on the infrastructure segment. Many more would want to build transmission infrastructure to accommodate their expanding deployment. But competition in the infrastructure market, as Roger Britton, the Managing Director of Unitel Consulting Limited said, is not a good thing for the industry.

According to Britton who presented a paper at the just-concluded telecom Summit, this is because competition in this sector leads to price pressure; price pressure reduces the revenue streams of the competing operators and therefore reduces the resource that would be available to fund network expansion, leading to business failure and consolidation, a situation of survival of the fittest. Already there are signs that infrastructure are being duplicated on the popular routes, like the Lagos - Abuja or even Lagos - Ibadan road. On the latter route, there is MTN, Globacom, Vmobile, and Multi-Links. Others are just getting ready to dig the ground to bury their fibre optic cable.

Britton further said that for a company to be successful, it needs to be single focussed. It needs to operate in a specific business segment. "Companies that try to do everything rarely succeed. A cellular company or a fixed line local operator should focus on what it does well and buy the services that it needs to support its activities, such as long distance connectivity from others who specialise in those areas," he said. A lopsided interconnect rate would not allow people take his advice.

But as he himself also pointed out, what he was advising demands a stable, predictable and well-regulated environment. "Leasing capacity from a competitor may be a risky and uncertain strategy unless there is adequate protection from the regulator." He said it may be risky and uncertain strategy. In Nigeria it is surely a risky and costly strategy.

A private telecom operator conducting round his new switch in Abuja said he had to buy the whole premises before installing his switch lest after a few years the landlord decides to increase his rent astronomically. That explains why the next race would be the infrastructure race in Nigeria. You bet everybody will also go for fibre optic. Then the ensuing redundancies would litter the whole place.

A new just and acceptable interconnect rate would breathe fresh air in the system. It would enable operators move toward the UL regime with encouragement. It is one thing that would enable the PTOs get the much - needed international funding. No investor is ready to invest in a network that makes money and pay it into the bank account of GSM operators as a result of a lopsided interconnect rates.

With this hinderance out of the way, even the NCC would not be able to believe what would happen in the next few months. There would be an explosion of service, of technology and a sure tariff crash. An operator like EMIS, on the verge of signing a multi-million dollar investment deal would do probably what no other operator had ever done in this industry in Nigeria. With the experience of being the first PTO to rely on, the company definitely would be one of the operators to watch out for. It has a robust technology, expert hands, the right equipment supplier, an excellent business plan and a perfect strategy. And quite contrary to earlier reports that it may be having operational difficulties, new information shows that it is one of the few investment destination for international finance.

For a company which continues to received rare industry commendation for the transparency that attends its dealings, EMIS is a company many believe would take the industry by surprise.

But how fast the likes of EMIS improve the lot of Nigerian subscribers and indeed how successful the UL regime turns out would depend on how fast the industry tackles the albatross: the lopsided interconnect rates.

This Day