Why NCC’s Failed Data Price Hike was Flawed

GUEST COLUMNIST: SINA KAWONISE

The now suspended Nigerian Communications Commission’s (NCC) directive to telecommunications companies (telcos) to have a floor price for their services was premised on the goal of protecting competition in the sector. The directive purported to protect small telcos such as Smile, Spectranet and Natcom by fixing a floor price that would guarantee that they recover their cost and make profit at their small scale of operation.

The current price of data per megabyte among the big four is as follows: Glo – 21 kobo, MTN – 45 kobo, Airtel – 52 kobo, Etisalat- 94 kobo; average price – 53 kobo.

For the small telcos, the price structure is as follows: Spectranet – 58 kobo, Natcom- 72 kobo, Smile – 84 kobo; average price – 71 kobo

To ‘protect’ the small telcos, NCC directed that the floor data price for all Telcos (big and small) should be 90 kobo /Mb – an increase of 328 percent on the Glo price of 21 kobo/Mb.

Here is why the NCC was absolutely wrong to have reasoned and acted the way it did: One, it runs counter to the logic of capitalism and principles of free enterprise to fix price in order to protect some operators (big or small). Anti-trust laws are never designed to stymie efficiency but to promote it through competition. For any new entrant or small operator to survive and thrive in an established market/sector, it must DISRUPT the market/sector through innovative technology and/or business model. For Glo to enter and survive in the GSM market more than 2 years after MTN and then Econet had been dominating the market, it disrupted the sector with per second billing which MTN and Econet said was impossible.

Currently in the United Kingdom, Virgin Telecoms entered the crowded telecom sector by disrupting it with the technological innovation of launching internet vehicles into space. That innovation enables Virgin to charge a mere £15 per month for a subscriber to have 5,000 minutes to call UK lines, 5,000 minutes to make international calls, and 5 gigabytes of data all in one month. The resultant effects is that hundreds of thousands subscribers hitherto paying other telcos an average of £60 per month for less benefits have migrated to Virgin. Now, that is disruption for entry and thriving! It is therefore wrong for a regulator to seek to protect so-called small operators by fixing an inefficient price floor for them to continue in efficiency.

Two, to protect three inefficient telcos, owned by probably less than 100 Nigerians and foreigners and which have among them less than 5 percent market share, 100 million Nigerian subscribers must subsidise their inefficiency by paying more than 300 percent more for data (especially for Glo subscribers). And that was to happen during a biting economic recession that continues to pauperise our people! Competition was conceived and promoted to serve man, not man to serve competition for its own sake.

Three, since GSM operations started in Nigeria 15 years ago, there hasn’t been any evidence of price fixing by the telcos to suggest an oligopolistic situation. Rather, they continue to compete among themselves by rationalising their operations and embarking on cost saving measures (such as infrastructure sharing), all to the benefit of subscribers and the economy in general. The fear of getting to a monopolistic/oligopolistic situation is therefore unfounded, at least for now.

Four, empirically speaking, one of the small telcos, Smile, is already disrupting the market by selling its voice service for 5/min. This is currently the cheapest in the market. Smile is able to do this by using a technological disruptive internet App for its subscribers to make voice calls to all GSM lines in Nigeria, and to pay the same rate even while abroad. This is disruptive of the local and international roaming voice rates of the big Telcos. Would the NCC seek to protect the big telcos against ‘small’ Smile?

So obviously wrong are the assumptions and actions of the NCC on this matter, and given the pervasive corruption in Nigeria, that it is difficult to resist the temptation to suspect that the NCC must have been compromised to come up with that economic-sabotaging and anti-people directive. No thanks to the current economic recession and all thanks to popular uproar, the NCC failed in its bid to return telecommunications to the David Mark era when they weren’t for the poor.

· Kawonise is a former Information and Strategy Commissioner in Ogun State