Mr Olusola Teniola is the current President of the Association of Telecommunications Companies of Nigeria (ATCON), the umbrella body of all telecommunications companies in the country. In this interview he speaks on the need for digital policy and challenges facing the operators. Excerpts:
How would you assess the state of telecom industry in Nigeria today?
Yes, I'm glad you said today. We are repository of the past. What do I mean by that, we have benefited greatly from an explosion in the mobile telephony space. We now have an industry that you could argue in terms of teledensity, is way above of 100 per cent, some could argue is 120 per cent. But anything above 100 per cent connotes maturity. And maturity has certain behaviour that will happen, that is, customers switching from one operator to another or decongestion of the networks. One of the things that we've really recognised is the changes in consumer behaviour.
One of those changes could be noticed during the recent recession which we just came out of. During that period, some consumers lost their jobs. That means they had less money to feed their families. So naturally, a family that was dependent on using voice and spending a certain amount will review their spending pattern and look for alternative platforms. And those, as you know, are the OTTs, over the top applications.
Those over the top applications ride on infrastructure, that's the normal modus operandi, which means that past infrastructure that was built to support the growth in voice telephoning is now under stress, because it hasn't been upgraded, or hasn't been increased in terms of capacity to manage the explosion in data.
But data is here to stay. In fact, the transition is from voice to data, because as you know, Skype was one of the first applications to demonstrate that you could make a voice call over Internet Protocol IP. Vocal Tech actually made the first commercial call in 1995, that is, Voice over IP and that was the disruption. So, we may have ignored it in the past because when our market was liberalized, we actually adopted technology that had been built before Vocal Tech came into the main domain. So, we adopted GSM and CDMA, which are 1982 technology. We never knew the time and speed at which over the top publications will come to become relevance in our space. Whereas in other jurisdictions, they have much more time to be prepare for this disruption.
Why do I call it disruption? Let me take you back to those persons that I said may have lost their jobs during recession, they would also need to make phone calls. It's easy if you have a smartphone to download an application that you know, as long as you have data, or you're using the Wi-Fi network, you can start to make calls to your loved ones abroad at almost next to nothing. Why I said almost next to nothing is because it isn't really free, you are consuming your data to pay for that voice call. And that has become a trend. So much a trend that WhatsApp and Facebook usage in Nigeria that was around 200,000 is now recording 20 million daily users.
Now, no one would have predicted that that would happen within a short space of time. But it was precipitated by the recession. So you see an explosion, an exponential growth of the use of OTT applications, which has given the traditional operators revenue for data, but that revenue doesn't compensate for the loss of voice revenue that they could have generated if those OTT apps are not being used. And that's the situation we find ourselves in today.
Having said that sir, there are concerns within the industry that the government doesn't seem to have a clear direction yet for the ICT sector, compared to countries like Rwanda, South Africa, and the likes, do you share this view?
I would say that if we need to improve the economy of our country, the government has to listen, and I hope they listen to what I have to say. Every 10 per cent increase in broadband penetration should lead to 1.38 per cent GDP growth. We're now at 33 per cent as of February 2019. Has that actually resulted in the equivalent of GDP growth?
Why hasn't it led to economic growth? It is because we lack a digital strategy. A digital strategy is defined by the government, not by the Nigerian Communications Commission (NCC). NCC is a regulator; NITDA is a regulator and NBC is a regulator. It shouldn't be NCC or NBC, or NITDA defining our digital strategy; that should come from the Ministry of Communications, or other ministries collaboratively and then pushing that up to the presidency. I think it would be good if the President take it upon himself, because that's the case in Rwanda, where the President has pushed through the agenda of ICT penetration in that country.
We are talking about next level, I hope to get to a point where we have strategy that takes us really to the next level, not just relying on the oil and gas, or trying to find oil in the Chad Basin, when you have the population that can help us develop technologically.
We are close to 200 million or let's say approximately, we have 190 million. These are generation Z and generation Y, and they have a lot to contribute. But there's a gap. Our leaders are not from that generation. So there is no way a leader that is in his 80s or 70s can think like someone who's in the 19th, or the teens, it is impossible. When Mark Zuckerberg came, even the way he dressed, surprised the President because he's from a different generation. He thinks differently. That is the new world; that is the new order. So I would recommend that the government introduces a digital ministry, just to focus on how the country can move from where it is to become part of the digital realm that is existing right now. If you don't have that, you have silos. And that's what Nigeria is suffering from. Unless you have the president or someone within the presidency, being able to define holistically and passionately, the needs of generation Z and generation Y, who make up the most of the population that this transformation is related to, there will continue to be a huge gap. Right now, we have a government that is struggling to create meaning and understanding. In fact, they focus more on the negatives of technological developments than the positives.
All those OTT players we are talking about, minimum capitalization for each one of them is $500 billion. It's not an accident. That is the minimum and maybe two have hit 1 trillion dollars. So, the economy of America is in the region of $26 trillion. You can see the significance of ICT and tech companies is very real.
There seem to be some challenges facing the telecom industry, like shared services, challenges of multiple regulation, infrastructure protection and cases of the big players not allowing the small players to survive, why do we continue to have these issues?
Some of those issues you've highlighted are sitting with NCC right now, I can’t talk about specific details of what is being done, but I'll tell you the essence of what you're driving at. When there are regulations and directives that are voice centric and infrastructure centric, it is assuming that everyone that picks up a license can afford or has built a business plan that builds infrastructure and provides the service.
Take for instance, the ISPs. In other jurisdictions, ISPs don't even build a single infrastructure. They actually ride on the back of the incumbent network. So the assumption is that the backbone network is there, last mile access is there. And what regulatory bodies in those jurisdictions focus on is unbundling; the opening of those access to allow competition to be real.
In Nigeria, an ISP that is taking a license at a fraction of the cost of someone who took a universal access service license is now, somehow, meant to jump through all these pitfalls to try and capitalise on infrastructure built rightly by the big operators. And those operators have not seen the return on their investment at that point. So those operators, more than likely, will look at the commercial agreements to see if it's viable. And may use their own decisions to say, I will give you access, because its’ basically, on commercial reasons. And why is that? As long as we have regulation that just gives out licenses everyone has human rights to pick up a license.
But telecom is not just about license. Telecom is about Right of Ways; about consumer code of practice. Telecom, in fact, in certain countries, is a utility, is a basic human rights. Even broadband is a basic right. I say these words because it's easier said than done; because the challenge of going to the rural areas not only exists in Nigeria, it exists in other countries. But when you look at the ways and methods, they've solved it, they use subsidy to improve the current backbone network. In our case, we are yet to build the backbone network, let alone the last mile. And as long as you allow private operators to do that work, you have to be reasonable and expect them to get a return on the investment. So it's only natural for the smaller or the late entrants to complain if they're not allowed equal access to infrastructure that will allow them to focus on the line of business.
I will give you an analogy and it's very common. In-between Lagos and Abuja, there are many parallel fiber routes. In other countries, it is probably one and that core fibre is shared by all. In Nigeria, we don't really share because there isn't any trust in partnering with your competitor. This is because the same competitor that you may be giving access to may impact your business model. There aren't any laws, or any provisions to protect your business. And I don't think that the regulator is in the business of running your business. So the risk of you entering the Nigerian telecom space is that you have to have your eyes wide open.
So, sometimes you have to be a clairvoyant with a crystal ball to understand that if you go this way, you're going to get trapped. So, an entrepreneur in Nigeria that wants to demonstrate his or her talent, has to be three times or four times smarter than those that run operations outside the country. So what am I saying? If you are an outside observer, you will say that our current regulations and laws only benefit the strongest and the strongest usually are the biggest because they have economics of scale.
Let’s come to our ATCON as an advocacy group, how have you been able to influence government’s decisions and policies over the years for the good of the industry and your members?
There’s a current frustration, we have members that are no longer in existence, talk of those CDMAs, ISPs and others, and there's a pattern of why they died. The same issues that caused their demise are still present but the demographics of our membership has changed; we now have younger people who don't accept the old ways. So, the challenge we have is that we as ATCON are sometimes frustrated by the language we use with the regulator. This is because a lot of the issues we are dealing with are emotive, emotive in the sense that if you go to a bank and collect a loan, the bank doesn’t want to hear stories about why you cannot operate. And if the only feedback you're getting is that you should evolve, you should change your business model. And when you do that, you still hit the same problems, then people run out of options. So we need a listening government, truly listening government. I have had some tough discussions because there are jobs, lives and investments at risk. We need to decide the size, shape and form of the industry going forward.
Digitisation will happen there's nothing stopping it. In 10 years time, we will be talking differently as we're talking right now, that's called evolution of mankind. But as we're going through that transformation, would we still have the same operators playing? Would the same issues we're talking about now still be prevalent in 10 years time? So, it's our job as ATCON to face government fully with the issues, no matter how tough they may be and that we are able to walk side by side with government to address the issues because whether I am here as president or not, the real issues are threats to investments. They are threats to the fact that there is not as much FDIs coming as before, and even more glaringly obvious, there is no domestic finance committed to the sector. And we cannot ignore the fact that domestic finance created the industry. It wasn't just the MTNs, the Econets, Globacom is there, it is a Nigerian company. There were other companies that are dead today like Mobitel, Intercellular among others. So, that shows you that there is a problem of continuity and we need to address those issues with expediency.
ATCON has been an advocate of 70% broadband penetration in the next five years, how is that possible with the current challenges in industry?
Someone with wisdom told me something, he said, ‘Mr President, the only way we are going to achieve broadband penetration beyond the current 33% is through mobile’ and I believe that. So, if the multitudes of subscribers that we have on voice are migrated to owning a mobile broadband device, then there is every likelihood that we can achieve 70 per cent within five years. I said if, because there's still the business case to be met for the MNOs to upgrade the networks to 4G, and then go on to 5G. If issues like OTTs are not addressed, then it is very hard to justify the business case to rollout infrastructure, when you cannot predict the revenue that will get you your return on investment. So what am I saying? I don't think that any regulator can hide from the statement I've just made, you might want to pretend it does not exist. So you put your head in the sand like an ostrich. But the reality is that as Sunday comes before Monday, Monday will come after Sunday. And that is reality. So we need to have the regulator review and updates the regulatory tools to address those kinds of issues. We also need to set a path that is fair for an equal playing field for all players, because it is not only the larger operators that have contributed to the increasing mobile broadband, but the smaller players as well.
NCC has been talking a lot about how the licensed Infrastructure Companies (InfraCos) will help drive the broadband penetration but until now, none of them has been able to roll out service, what do you think is the problem?
The problem is funding. They need to get a bank loan because they can’t use their working capital; that will kill their business. So, if they are able to get a bank loan, they implement a certain number of routes. It is then technically assessed by NCC auditors before subsidy payment can be made.
How long does it take to get that back-ended funding from the USPF? I don’t know. Is 28 billion Naira sufficient to run all the fibre we need in the six plus FCT regions to cover everywhere? Again, this is what NCC needs to inform us about. But what I do know is that we struggle to rollout a single kilometer of fibre under this program. Why, because it is late. There have been frustrations in Lagos. And then the return of the license for North Central didn't help anything. So, the issue still lies with infrastructure sharing. If the MNOs were sharing, we wouldn’t need InfraCos. It would encourage them to expand their metro network.
So look, we started this industry with V-sat being the predominant means of communication, at $10,000 per megabit per second, that's no longer the case. We now have OTT players coming in who want to drop the price further, it's good for Nigeria. The issue that we really want to be addressed is to ensure that local content remain not only to protect current investments, but to ensure that those that have viable business cases are given a window of opportunity to survive the disruption that OTTs brings to play.