Friday, January 28, 2011

Nigeria - ISPs are not passing on savings from reductions in prices on international links

[the nation] AFTER the fanfare of the launch of Glo 1 and Main One submarine cables –two milestone investments in infrastructures which promised to revolutionalise the telecommunications sector, the prospects of imminent reductions in cost of access and enhanced value added services for Nigerian internet users would seem increasingly forlorn.

Reason? Internet Service Providers (ISPs) apparently do not as yet consider the current time as being ripe for tariff reduction.

At the recent commissioning of Internet Exchange Point of Nigeria (IXPN), the spokesman for the ISPs, Chima Onyekwere, while admitting that the dawn of submarine cables and the functionality of the Exchange Point ought to have heralded a downward trend in the pricing of bandwidth however insisted that price reduction was still far from being on the cards.

According to him, most ISPs have subsisting satellite contracts with international bandwidth operators. His words: "It becomes difficult to automatically stop the ongoing contract in order to take advantage of the recently deployed fibre optic cables from Glo 1 and Main One because the contract must continue to run until it expires".

The summary: any expectations of price crash and the value added services would have to await the expiration of the existing ISP contract. When? Three years? Five years or more?

We shudder at the implication of such attitudes, given what it portends for the otherwise liberalised sector. First, it guarantees that the ISPs signed on to the new infrastructure can go on to maintain non-competitive prices under the cover of the cartel, while pretending that cost structures remained unchanged. Equally, it guarantees that value added offerings taken for granted in other climes can remain on hold here for as long as the ISPs deem fit.

Thirdly, the same would obviously hold true for the much touted last mile investments to deepen internet penetration; it would remain a mirage.

For a body which ordinarily should be at the forefront of extending the frontiers of the usage of the Internet, we find the position of the ISPs as curious as it is disingenuous. Needless to add also that it is defeatist and retrogressive, the very antithesis of competition advertised as driving the sector.

The danger isn’t just that the position ignores the issues of consumer interests, it rather dangerously seeks to subordinate national goals and aspirations to the narrow business concerns of the few service providers.

The central issue remains whether users of the Internet in Nigeria are not entitled to price/cost relief in the circumstances that the undersea cable offers a cheaper and more robust alternative to the services offered through satellite?

This after all was what was promised. Why should an extraneous factor suddenly become an issue, and why should Nigerians be denied the full benefits of the investment only because a cartel took a business decision that turns out to be short-sighted?

Although the Nigerian business environment is often described as high risk, the potential of the country’s telecommunications sector has not only remained a global reference, it remains a barely tapped goldmine. Much as the nation welcomes initiatives to harness the locked-in potential, we must say that the system is ill-served by the business philosophy which puts profits upfront – over and above issues of value delivery.

We expect the Nigerian Communications Commission (NCC) to, in fact wake up to this new regulatory challenge, with a view to detecting whether collusion is in the works. Without question, there are great benefits to be derived from drastic reductions in access charges; but even more is our conviction that the surest strategy to get more and more Nigerians to sign on to the World Wide Web is the lowering of the entry barrier.


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