NCC/Operators War: Who Wins?
The ongoing cold war between the Nigerian Communications Commission (NCC) and the four GSM operators in the country over poor quality of service and subsequent fine of N1.7 billion last week deepened further by the refusal of the commission to shift ground after a meeting with the operators' top echelon. The commission insisted its either the operators pay or expect stiffer sanctions.On the other hand, there is real anger among the top executives of the operators that NCC will not engage in the face of a sharp decline in revenues from traditional services such as voice and text messaging and the need to increase capital expenditure to update networks for next-generation services.
The nation's Big Four GSM operators: MTN Nigeria, Airtel Nigeria, Globacom and Etisalat Nigeria, who are beneficiaries of varying sums of punitive fines, warned that excessive regulation hampers the ability for the industry to react to new challenges and will simply squeeze their ability to invest. There is a conflict given the desire by the regulator to see an improved quality of service but also services delivered at an affordable price.
Executives of the group say they need to generate decent profits to be able to invest in superfast mobile and fixed line broadband networks given little evidence that investment in such areas will generate a return for shareholders.
Dr. Eugene Juwah, executive vice chairman of NCC, also insisted that the commission has set up key performance indicators (KPIs) which must be met by network operators to ensure a more robust telecom sector for the country. "While protecting the operators by creating the right environment and regulations for them to thrive, it behooves on us as a regulator to ensure subscribers' interest are guaranteed through quality service,'' he said.
Initially the position of the commission was that it would not have any discussion with the service providers until the penalties had been paid but on a second thought the management felt that there was need to listen to the service providers to see if there were going to be any new issues to be raised in regard to the issue of sanction. The CEO's were all in attendance with some of their staff. After the remarks from the chief executive, the EVC we sort to find out the reason for their coming to the commission. They indicated that they wanted to see if the NCC would review its position on the sanction and probably see whether there can be some form of reprieve for the service providers indicating that the challenging circumstances in the environment have contributed to the poor quality of service. They mentioned the issues of power, cable cuts and multiple taxation and all of that. But according to the commission, these challenges are not new. ''They have been on and the issue of quality of service has been in discussion for six years until finally January this year the quality of service guidelines were gazetted and then there was need for the commission to apply sanctions to the service providers that did not meet the key performance indicators as indicated in the guidelines. There have been questions before now as to why NCC had not sanctioned service providers but NCC had indicated that until January it didn't have the regulations. ''We had some guidelines that the commission had operated before now and also we depended on what is called the Consumer Code of Practice which will indicate that we first give an intention to issue direction and then a direction is issued and then there is sanction, those sanctions were not stringent enough to cause deterrent on the part of the service providers so there was an industry that had worked on this with the commission and we came up with those KPI's which were gazzetted in January this year,'' the commission said after the meeting in Abuja.
After the presentation from the service providers and requesting the commission to review its position on sanctions, the commission was of the view that there was no need to review the sanctions in the sense that these key performance indicators have not been met and because the quality of service guidelines have specified that there will be penalties where these Key Performance Indicators are not been met and therefore the Commission is not going to change its position and indeed there would not be any further discussions until the penalties are paid. ''The position of NCC still stands and the sanctions and penalties will have to be paid,'' the commission insisted.
But what of if the fine is not paid? The commission said there are specifications in the guidelines that after the deadline for the sanctions, there is going to be N2.5 million for each day of default and ''we are already in default period and it is expected that the sanction as well as the default penalty will have to be paid. Juwah insisted that as a responsible regulator, it has provided listening ears to the industry and the most important thing is that the commission was not ready to shift ground.
On why the fines could not be paid to the subscribers as initiated by the operators, Juwah said for the purpose of emphasis, there is a distinction between compensation and fine. A sanction is a fine. Fines are paid to government and compensation is paid to subscribers. What the guideline specified is fine and that fine is paid to government through the commission. The issue of compensation has to do with specific infractions on consumers for which the consumers have made representation to the service providers. In the case of 2005 when they paid 175 per subscriber, some of their networks were down for a particular period of time and people could not use their phones for that period. Juwah said in this case, it is about poor quality of service which happened over time. There was need for the regulator to address it squarely. Before now there was this perception that the commission was not doing enough to protect the consumer. The regulator is like a referee who is there in the middle of a game but is guided by rules. Those rules mean that when there is infraction or infringement, the referee calls for a foul or a penalty as the case may be. ''That's exactly what has happened in this case,'' he said. He said there are options that are open to the regulator in the event where the service provider is not ready to obey. The regulator has the choice of withdrawing regulatory services such as the issuing of new numbers or entertaining any request whatsoever from the service provider. There is no way a service provider can do without the regulator there are so many things a service provider cannot do without approval of the regulator. The regulator has a number of regulatory tools to get the service provider to conform or obey the regulatory rules.
Juwah also disclosed that the measurement for quality of service is quarterly. ''Our engineers will still conduct drive tests and if we observe that there is very remarkable degradation of QoS, the attention of the service providers will have to be drawn. The type that we have to publish publicly will most likely be at the end of the second quarter of the beginning of the next quarter,'' he said.
The Sanction
According to NCC in its April 2012 Audit Report, MTN, Etisalat and Airtel failed to meet the Commission's target during the months of March and April this year when the regulator undertook the review. The general performance by the operators was poor on the KPI (key performance indicators) in the period under review. ''Etisalat recorded the worst performance when compared with others and commission's minimum threshold in the period under review," the report said.
According to NCC, "Whereas the Commission had noted the performances in the months of January and February 2012 as being below the specified thresholds however, for the purpose of enforcement of the new Quality of Service Regulations, the Commission had taken these periods as grace period"
In the case of MTN Nigeria, the telecoms market leader by subscriber numbers, the network service quality audit report revealed that it failed to meet the threshold set by applicable regulations of NCC which "is in contravention of the provision of Section 104 (a) of the Nigerian Communications Act, 2003."
NCC says that following the default by MTN Nigeria, the operator became liable for the sum of N15 million for each parameter for a service contravened in the month of March, 2012 and a further sum of N2.5 million for each parameter for a service for each day the contravention continued throughout the month of April, 2012.
The regulatory agency further directed MTN Nigeria to pay a penalty of N360million on or before May 25, this year for failure to meet the Network KPIs for the months of March and April 2012 adding that, "upon failure to settle the said penalty within the stipulated period, such penalty shall attract a further sum of N2.5 million per day for as long as the contravention persists."
Etisalat Nigeria, jointly-owned by Etisalat and Mubadala of the UAE and Nigerian investors also suffered a similar fate as its South African rival, MTN Nigeria.
Etisalat Nigeria will also pay a penalty of N360million under similar terms imposed on other operators for default in meeting service quality thresholds within the two months audited by NCC, the regulator said.
NCC said the same default was also applicable to Airtel Nigeria, owned by Bharti Airtel of India, that is also to pay a penalty of N270million latest by May 25, this year with a condition that, "upon failure to settle the said penalty within the stipulated period, such penalty shall attract a further sum of N2, 500, 000 (two million five hundred thousand naira only) per day for as long as the contravention persists."
On its part, Globacom, the Second National Operator (SNO), will pay a penalty of N180 million latest by May 25, this year or face additional sanctions, "upon failure to settle the said penalty within the stipulated period, such penalty shall attract a further sum of N2, 500, 000 (two million five hundred thousand naira only) per day for as long as the contravention persists."
Stakeholders Opinion
Engineer Lanre Ajayi, president, Association of Telecom Companies of Nigeria (Atcon), was of the view that the challenges in the operating environment should be adequately addressed to pave way for efficient service delivery. Ajayi said since those problems still exist and remain unresolved, it would, to some extent, hinder the smooth operation of telecom companies. He pointed at the issue of right of way, vandalisation and multiple taxation as very critical and must be addressed by the relevant authorities In the same vein, Engineer Gbenga Adebayo, chairman, Association of Licenced Telecom Operators of Nigeria (Alton), reiterated what has always been said in the sector, that the sanction was not proper, as the telecom companies are still building their networks to meet with the growing demand on communication. "We are not saying that there shouldn't be good quality of service, but the operating environment is not conducive, and since the operators are doing their best in terms of investment, rolling out infrastructure across the country to eliminate congestion and other associated difficulties, there should be some considerations for the operators," he said. Engineer Banyo Banjo, president of the Nigeria Internet Group (NIG), explained that the service from the network providers are poor, below expectation and that it is difficult for a call to be made even within the same vicinity. "The service is very bad, and unacceptable," he said but enjoined the government to give more power to NCC to be able to remove chief executives and chief operating officers of telecom companies where they perform below expectation, and not just imposing sanctions, like what is obtainable in the Financial sector, where the Central Bank of Nigeria (CBN) has the authority to remove a managing director of a failed bank.
Facebook IPO - Four Lessons For Nigerian Tech Startups
Facebook has been through a tumultuous period in the last few days consequent upon its Initial Public Offering and the shareholders' lawsuits against the company. Though Nigerian Technology Start-ups have their own unique challenges like limited access to finance and a scarce number of Venture Capital (VC) companies that can invest in them, there are lessons to be learnt from the Facebook IPO fiasco.1. Hype
Hype (or marketing) is good. It serves to make your service / product popular and raises awareness among potential users and investors / financiers, but marketing is much like (sometimes) propaganda. The problem starts when you believe your own propaganda. In the case of Facebook, the majority of Facebook staff and shareholders believed that their company was worth over $100 billion, thanks to the pre-IPO marketing. Understand the purpose of marketing and hype, and use it to your advantage, more importantly you must be able to back it up should circumstances require you to do so.
2. The Suits
The Suits - investment bankers - should only be part of your plan if they fit in with your company's strategy. Also, it is important to ensure - just like anything and anyone else you introduce to your business - that their goals are aligned with your business goals. Morgan Stanley's goal (in the case of Facebook) seems to have been solely to cash in their chips as quickly as possible, by any means necessary, irrespective of the consequences that Facebook will experience.
3. Timing
Four years or more ago, Facebook was the dominant social network. It had just overtaken MySpace and had also started attracting an older user base than the typical MySpace user. There were under 500 million users registered on Facebook; and Twitter, Instagram etc. were nowhere near as popular then as they are today. With the potential upside of potentially more users joining Facebook and their potential competitors still in their infancy, this was an opportune time for Facebook to list given the potential growth; but then again, this is all in hindsight.
4. Mobile
The facebook user experience has always been much richer and better on a Desktop than on a mobile phone. Given that we carry our mobile phones everywhere we go and use them for internet access most of the time, one would have thought Facebook would invest heavily in the early stages in a mobile plan that ensures that the Facebook experience is richer on the mobile device as opposed to a desktop. This also explains why the likes of Twitter have slowly been creeping up on Facebook's territory because they seem to execute a mobile plan first as opposed to a desktop plan (the Twitter Desktop experience is less desirable than the multitude of Twitter mobile apps). As a Nigeria startup this is very important because most most Nigerians first experience with the internet is via a mobile phone.