Atit – Data Price Floor: Balancing NCC’s regulation against innovation

Data Price Floor: Balancing NCC’s regulation against innovation

Is this a pyrrhic victory for the subscribers or just a shift in the implementation date on the directive to introduce price floor for data segment initially set for December 1, 2016? Was it just an end of year ‘bonus’ for the subscribers following the data price hike suspension in 2016 or a ‘revenue boom’ for the operators by the time suspension is lifted after the consultation and alignment of interests in 2017? Who are the contending forces in this contentious data price hike: the subscribers versus NCC or small operators versus big operators? The matrix of this complex price war is beyond elementary perception of a simple price hike writes Olubayo Abiodun

IT started, initially, as an innocuous announcement about the planned hike in the cost of data services, but by the time ‘citizen journalists’ jumped into the fray, the public angst that it engendered almost made it the cusp for a mass revolt. The intervention of the Nigerian Senate and Umar Danbatta led-Nigerian Communication Commission (NCC), however, helped stem the rising tide of the popular revolt on the Social Media and the traditional media.
What triggered the ‘spark’ was the interim data price floor of N0.90k/megabyte (MB) endorsed by the NCC. By implication, the minimum price that the GSM (big operators): MTN, Airtel, Glo and Etisalat operators could charge for data service is N0.90k/MB. Before then the market was running as follows: Etisalat -N0.94k/MB, Airtel- N0.52k/MB, MTN – N0.45k/MB and Globacom – N0.21k/MB. The smaller operators/new entrants, exempted from the interim data price floor, such as Smile Communications, Spectranet and NATCOMS (NTEL) were allowed to charge N0.84k, N0.58k and N0.72k per megabyte respectively.
By pushing the minimum data price of the GSM operators to N0.90k/MB, the regulator is persuaded that the predatory pricing of big operators would protect the smaller operators/new entrants. Industry watchers are convinced that big operators have been offering cross subsidy from voice revenue to cushion the ‘losses’ from data market. This is a regulatory infraction on its own if NCC were to act within the provision of its enabling Act. Another argument was that big operators already have the comparative advantage of huge subscriber numbers. So they could survive on the strength of their large numbers. Observers are also swayed that by offering lower price, the big operators were able to cream off huge subscriber base which eventually makes up for the lower data prices they are charging. It is not the first time that the industry regulator had intervened in setting data price floor in the market. The price floor of N3.11 kobo per megabyte of data in 2014, it would be recalled, was removed in 2015.
A swift comparison of the subsisting data prices by the major operators with the interim data price floor endorsed by NCC showed that but for the reversal, majority of Nigerians would have had to pay between 90 and 300 per cent increase in data prices. Sensing the tumult generated, it was the Senate that initially stepped up the plate by asking the telecom regulator to immediately halt the proposed data price hike. The leadership of NCC also acted within the ambit of social wisdom to immediately issue a statement directing the GSM operators to suspend the new regime of data price that would have increased the data price of N1000 for 1.5Gigabytes to N3000 at the rate of N1000 per 500Megabytes. Director Public Affairs, NCC, Tony Ojobo, said the decision to rescind its earlier directive to telecom operators to commence charging the new floor price rate for data from December 1, was to allow for further consultation with industry interest groups. “Following concerns that visited the directive to introduce price floor for data segment of the telecommunications sector beginning from December 1, 2016, the Nigerian Communications Commission (NCC) has suspended any further action in that direction,” Ojobo said.
“The decision to suspend this directive was taken after due consultation with industry stakeholders and the general complaints by consumers across the country,” he said adding that “the Commission has already asked all operators to maintain the status quo until the conclusion of study to determine retail prices for broadband and data services in the country.”
NCC, arguably, had good intention on the data price floor. The transition from the current data service pricing and the proposed increment will be essential to meeting future challenges of a sustainable data market where the small and big players compete in the same market for the same opportunities. But the ‘conflagrations’ that greeted the data price hike might have been fuelled by the current hyper-inflation ravaging the economy. This announcement might have come as an ill-timed policy following the outcry that followed a recent proposal by the apex bank prodding government to introduce special tax on phone calls above a certain threshold. Seeking an ingenious way out of the gruelling economic recession, the Central Bank of Nigeria (CBN) had canvassed for a proposal of taxing phone conversations above three minutes. This initiative was estimated to rake a N100 billion in a year for the national treasury. The CBN got knocks for this “insensitive” call. Similar resentment had been visited against the proposed nine per cent Communication Service Tax Bill which is currently in the National Assembly. Putting all these in perspective, some social media activists are accusing the government of using all means to limit citizens’ access to the Internet after the failed attempt to gag social media activism via the botched Social Media bill through the National Assembly. Pundits are worried that while the clamour for ‘Net Neutrality’ is on the ascendancy in other climes, the Nigerian government should not be working contrary to the principles of free speech.
In a letter to the GSM operator on November 1, 2016, following the consultative meeting of October 19 with all mobile network operators, NCC had directed mobile operators to initiate a new data tariff regime from December 1, 2016. The regulator stated that the interim floor price for data services was 0.90k/MB for big operators, and that “this rate will subsist pending the finalisation of the study on the determination of cost based pricing for retail broadband and data services in Nigeria.
“In order to provide a level playing field for all operators in the industry, small operators and new entrants to acquire market share and operate profitably small operators and new entrants are hereby exempted for the price floor for data services,” it said.
“For the avoidance of doubt a small operator is one that has less than 7.5 per cent market share and a new entrant is an operator that has operated less than three years in the market,” the letter added.
Social critics and public commentators as well as industry analysts kicked against the proposed tariff rejig which the industry regulator claimed was done to protect the consumers and integrity of smaller operators. “The price floor is not an increase in price, but a regulatory safeguard put in place by the telecommunications regulator to check anti-competitive practices by dominant operators,” claimed Ojobo. While absolving the regulator of any complicit in the uproar, he said that “the NCC does not fix prices, but provides regulatory guidelines to protect the consumers, deepen investments and safeguard the industry from imminent collapse.”
Perhaps, what most commentators failed to critically scratch beyond the surface in their denunciation of the new data price regime was what the Senate President, Bukola Saraki, did in his intervention. Like some other stakeholders, including the regulator, Saraki thinks that there is the need to have further industry consultation on the tariff rejig. He lent credence to this when he admonished the regulator for poor consultations with relevant stakeholders on the new data pricing regime before going public with the policy.
But the alternate arm of the Nigerian Labour Congress; the Trade Union Congress (TUC) did not co-toe the line of thought of the Senate President. The labour body kicked against the increase in the cost of data. Declaring that the price increment was “unacceptable”, the TUC president Bobboi Kaigama, said that the decision of government to jerk up the cost of data could increase insecurity.
Rather than using unfriendly policies to aggravate the sufferings of the citizenry, Kaigama said that government should increase awareness for citizens’ participation in Information Communication Technology (ICT) rather than dampen their spirit to embrace the technology. He warned that increasing the new data price regime could obstruct the drive to increase youths’ participation in ICT.
“We feel worried about the move because data is one of the cheapest ways to empower the learning youth. This move if allowed will make it unaffordable. This is insensitive on the part of the parties involved,” the TUC President said.
“What then will be the benefit of the policy to the self-employed who depend on data for their businesses? Cheap Internet data is a vehicle to economic development. It is very unfortunate and inhuman to come up with such idea at a period of recession,” he said.
His thought tallied with the position of the President, National Association of Telecommunications Subscribers, Mr. Adeolu Ogunbanjo, who is worried that the data tariff hike could be a disincentive for the apps developer community. The President, Association of Telecommunication Companies of Nigeria (ATCON), Olusola Teniola, also reportedly said that approving the new data price increment could indirectly incentivize other telecoms services for price increment.
But the Association of Licensed Telecommunications Operators of Nigeria (ALTON), representing small operators like Spectranet, IPNX, InterC, Smile, Swift, and Cobranet among others, through its chairman, Mr. Gbenga Adebayo said it is important that prices are set at realistic levels which ensure that subscribers are not only able to afford services but operators are also in a position to provide first rate services to their subscribers. While not hiding its support for the stand of NCC, it stated: “ALTON wishes to state that NCC intervened to set the data tariff floor in exercise of its statutory responsibility to promote healthy competition by periodically reviewing voice and data tariffs in the industry and ensuring the sustainability of the Nigerian telecommunications industry.”
Given the poor reading of the intention of the telecoms regulator, it is therefore essential that the NCC appropriates media opportunities to increase public engagement in the process of tariff rework in every segment of the telecoms market. By so doing NCC would seamlessly strike the proper balance between the innovative products, appropriate pricing and regulatory interventions.