Can 2.3GHz auction set stage for broadband revolution?

By Prince Osuagwu
Twelve years after liberalisation, the telecommunications sector in Nigeria has transformed into a money spinner and arguably one of the country’s known economy boosters .
The mobile segment being the most active and fastest, has also shot the country into limelight among world’s most prospective technology economies.
With a subscriber base of about 121.3 million and a penetration/teledensity of
86.62 percent as at the end of the third quarter of 2013, there could just be insignificant arguments against the country’s status as a world leader in terms of technology.
This is most particularly, when judging from its position in 2001, with about 400, 000 fixed lines and a teledensity of about 0.73 per cent. However, a peep into the secrets of other world economies that have sustained their successes over decades, shows that data segments have also grown side by side with voice segments. But in Nigeria, while the voice growth experiences astronomical growth, the data segment only manages a mere crawl.
As at 2004, Internet penetration, based on percentage of Internet users per population, was at only 3 percent. As at the end of 2011, it climbed to about 28 percent.
In 2012, percentage of internet users moved to 32.9 and as at the end of December 2013 it was pitched at 36 percent, judging by the over 55 million people connected to the internet.
On a rough estimate, the average growth rate has been on 6 percent and at 6 percent growth, internet penetration is still low. There is also a wide gap when comparing 121.3 million active telephone subscribers with a paltry 55 million people connected to the internet, in a population of about 160 million
It becomes more worrisome against the backdrop of massive investments in international submarine/ fibre cables, which has seen over 10 terabytes of bandwidth capacity available but under-utilized in the country.
Both MainOneCommunications, Glo One and the West African Cable Systems which make up that capacity are yet to use ten percent of their huge capacities respectively.
Chief Executive Officer, Main One, Ms Funke Opeke, in a recent chat, specifically lamented that due to hurdles in the process of last mile broadband deployment, the MainOne cable capacity was yet to see off more than 5 percent of its total capacity.
She argued that other operators suffer same, if not worse fate. For her, the 95 percent of capacity lying fallow in the shores are not only her company’s loss but greatly a disservice to the country which would have leveraged on these huge capacities to deepen penetrations.
Faced with these challenges, the Ministry of Communications Technology and the Nigerian Communications Commission, NCC, are battling with strategies to keep the ship afloat.
First, they came up with a self target of raising the 6 percent internet penetration by five-fold by 2017.
Secondly, they have decided that the actualisation of that target depended on the auctioning of the the remaining 2.3 GHz spectrum available to a preferred bidder who will use the resources to beef up penetration.
From available information, the auction has earnestly taken off and Nigeria’s telecoms industry will witness another revolution, but this time around, not on the voice market but in data and broadband areas.
The auction has been touted as having the intensity to lead a broadband explosion that would make high-speed internet services more accessible to Nigerians, government and it’s businesses.
However, a few knocks have trailed the auction plan with some industry stakeholders believing that making the spectrum free for serious operators would signpost government’s renewed vigor in seeing an explosive broadband Nigeria. But the Commission seems unfazed by the criticisms. It holds dear to its determination to auction, saying it represents the only “fair, transparent and efficient process of assigning the spectrum.”
It also clarified that throughout 2013, it embarked on wide consultations on the best approach to license the remaining block of the 2.3 GHz spectrum in a way that will produce maximum economic value for government and the telecoms consumers. Besides, NCC may have also considered how best to yield to several demands by operators for additional spectrum in the 30MHz of the 2.3GHz spectrum, without being accused of favoritism.
According to the NCC-released Information Memorandum, the auction is in furtherance of the objectives of the Federal Government, as set out in the Nigerian National ICT Policy 2012 and the National Broadband Plan 2013, towards driving broadband penetration. Executive Vice Chairman of NCC, Dr. Eugene Juwah, said, “Based on the positive outcome of the consultations, and the direction of the National Broadband Plan, the Commission has decided to undertake an auction to award a spectrum license to build and operate networks in this spectrum band to provide Wholesale Wireless Access Services, WWASL, in Nigeria.”
Spectrums given on auction
In any case, since the deregulation of the telecoms sector, the NCC had chosen auction process as the transparent and fair way to allocate spectrum, and not through arbitrary allocation.
In 2001, the Commission licensed three digital mobile operators through an auction process that is widely adjudged to have been highly successful and transparent. This was followed by the licensing of a second national carrier and the fourth digital mobile operator in 2002.
By the end of 2004, there were two national carriers, four digital mobile operators and 24 fixed telephony providers of which six were Fixed Wireless Access operators.
In 2006, the NCC introduced the Unified Access Service Licensees, UASL, regime, to enable operators to take advantage of convergence in services and technology in order to offer better services.
In 2007, the Commission awarded a further UASL and spectrum licence to Etisalat, bringing the number of parties with national mobile licensees to five. Also in 2007, the Commission awarded licenses to Visafone in the 800MHz band; Alheri Engineering Company Limited in the 2100MHz; Celtel Nigeria Limited (now Airtel Nigeria) in the 2100MHz band; Globacom Limited in the 2100MHz band and MTN Nigeria Communications Limited in the 2100MHz band.
In 2008, the Commission issued International Submarine cable Infrastructure and Landing Stations Services licences to Main One Company Limited and subsequently to MTN as Leader of West African Cable systems, WACS project, in 2010.
In 2009, the Commission awarded the 2.3GHz spectrum to Spectranet Limited and Mobitel Nigeria Limited.
Auction time table
Already, the NCC had released the timetable on the auction process, which actually began last year with the issuance of Public Notice on November 15, 2013 and continued with the release of the Information Memorandum, inviting parties to participate.
In the line of process, the licensee of the spectrum is expected to emerge by March 14, this year.
Meanwhile, the NCC had placed a minimum offer price of $23 million (about N3.6 billion) on the spectrum band to be auctioned to a sole provider of wholesale broadband services this year.
The commission says that it does not take only licensed operators in Nigeria to qualify for bid, apparently, meaning that the door is open for foreign investors. The tenure for the WWASL license will be 10 years, subject to renewal.NCC promised that “all additional information including the answers to questions raised during the process will be made available on its website as part of the information memorandum.
The spectrum is considered to be a valuable national resource for which commercials opportunities exist. According to the timetable the opening bid will be determined by the Commission as a reserve price plus the bid increments for the first round. The opening bid shall be the minimum acceptable bid for the license in the opening round of the auction.
On completion, the successful bidder will be deemed to have been awarded a provisional license. The successful bidder will, then, be required to pay the balance of the spectrum license fee to the Commission within 14 days from the date of the Award of the Provisional Licence on March 14, 2014.
Ensure fair auction, stakeholders warn
Meanwhile, different stakeholders, including leaders of industry Associations like the Association of Telecommunications Companies of Nigeria, ATCON, Association of Licensed telecoms Operators of Nigeria, ALTON and the Nigeria Internet Group, NIG agreed that auction is a better way of allocating such resources but warned NCC to ensure that the process is fair to all bidders.