Case for Intervention Fund in Telecom

In few years, Nigeria has grown from being one of the most under-served telecommunications market in Africa to one of the fastest growing in the world.

 The licensing of digital mobile and fixed wireless operators unleashed a wave of local and international investment for over a decade now with the pace still showing no sign of slowing down.

As a result of this, Nigeria is now the largest mobile telephony market in Africa in terms of subscription figures as the country recently, crossed the milestone of 101million connected phone lines.

However, despite the massive increase in subscribers’ lines, Nigeria’s huge population and land mass has created a situation in which market demand is still running way ahead of supply.

As operators have struggled to meet market demand, one of the most noticeable challenges is the infrastructure deficit that is prevalent in the telecommunications sectors as in many other areas of the economy.

 This led the Nigerian Communications Commission to initiate the Wire Nigeria project, (WiN) under its Universal Service Provision Fund, USPF.

USPF is a special fund set up by the Federal Government under the National Communications Act 2003, designed to provide telecommunications and ICT services to unserved, underserved and deprived groups and communities in the country.

The fund comprises one per cent levy of annual profit of telecom operators in Nigeria. The USPF has been involved in promoting ubiquitous connectivity in Nigeria, facilitating community communication centers in underserved and unserved areas of Nigeria, facilitating among other projects. 

As a scheme under USPF, WiN is a telecom subsidy project aimed at expanding the transmission network across the length and breadth of the country.

The project is focused at cabling the whole country in the shortest possible time with the objective to ensure that no place in the country should be farther than 30 miles from the backbone infrastructure.

 By this, all hinterlands can be connected with the hope of boosting commerce and trade in those places as well as meeting basic communications needs. So far, hundreds of KM’s of new optic fiber cables have been installed under the WiN programme.

This is obviously an unsung story of subsidy success in Nigeria.

Globally, government subsidy has always been a way to aid faltering businesses. During what was called ‘The Great Recession’, the United States government subsidized many vital sectors of the country’s economy.

 To aid the development and exploration of the energy sector, the U.S government provided subsidies for businesses in the energy sector.

A broad variety of tax accounting allowances, credits, exemptions, deductions, depreciation and other financially beneficial tax breaks were given by the federal government to energy producers.

Up till now, in order to assure power availability at lower than market price, the U.S government owns certain dams which generate hydroelectric power.

The government also still provides subsidy to the agricultural sector. Some of the agricultural subsidies include direct cash payments, loans with no penalty, and payments from government insurance.

The U.S government subsidizes many elements of the transportation sector to assure the fast, efficient, reliable, and economical movement of people, commercial goods, and mail from one place to another.

Generally, government subsidies of critical business sectors have promoted profitability in many enterprises and assure a general national prosperity and domestic well-being.

Despite these positive benefits, critics have complained that subsidy gives unfair competitive advantages to some businesses.

With the dearth of telecommunication infrastructure in Nigeria and the need to quickly get telecommunication services to the nooks and crannies of Nigeria industry experts have opined that the move decision by NCC to initiate the WiN project is a welcome development.

One of those who identified the need for telecom intervention fund is the immediate past President of the Association of Telecommunication Companies of Nigeria, Mr. Titi Omo-Ettu. According to him, it is a good thing that subsidy already exists in the form of the Universal Service Provision Fund, (USPF).

He noted that this has helped in taking services to places which would ordinarily have taken some time before being reached.

According to research carried out by Streamz Media, a  Nigerian telecom research firm, while the sector is currently recording impressive subscriber growth and also the introduction of increasing variety of services, further gains can be made if government can sustain subsidy for capacity expansion into underserved and unserved areas. It is also said that a change of the scope of coverage of current subsidy programmes would facilitate enhance benefits under the fund.

Mr. Lanre Ajayi, the President of ATCON, noted that USPF is already doing a lot in bringing access to many deprived communities, adding that this shows success in government-private sector subsidy programmes.

Omo-Ettu, however, added that there is an urgent need to change the workings of USPF to deliver further benefits to Nigerians. According to him, the definition of some areas as unserved and underserved must be changed to promote increasing service usage in the country.

“The existence of telephone service in an area does not mean that it is not underserved. Under the current definition, we cannot use USPF for certain class of projects in Lagos because the state does not fall under underserved areas. But if you take the University of Lagos where there are over 30,000 students, you see that we can put extensive fibre on the school and promote use of telecommunication in more innovative and cost-effective ways. This can be done under USPF.”

Omo-Ettu noted that the need to provide such a service has been realized by Google, the world’s leading Internet Company, which is currently working at putting fibre in a number of Nigerian universities.

He added that the fact that Google is trying to do it shows that there is some form of value in embarking on such subsidized projects. Omo-Ettu advised that government should see the move by Google as a challenge for it to do more in facilitating similar projects.

Another aspect of subsidy that was identified is in the area of taking services beyond basic voice and facilitating access to the most recent technologies.

Mr. Olusola Teniola, the Chief Operating Officer of Phase3 Telecom, noted that while millions of Nigerians now have mobile phones, the shift in telecommunications development must be towards actual number of citizens that have access to broadband services.

He noted that while the country had achieved a lot in bringing basic services to people, adding that the move now must be towards delivering broadband services.

 Teniola called for greater support of USPF in order for the fund to succeed and deliver further gains to Nigerians especially in the backdrop of its potential.

 According to him, subsidy in telecommunications is different from what obtains in the power and transportation sectors.

 “The Nigerian Communications Commission has done a great job by helping to set up the USPF. In the coming days and years, we must all support the fund to record greater success to Nigerians,” he stated.

Mr. Austin Egbunike, chief executive officer of CANE Digital Services, said while USPF is helping to support in infrastructure sharing, if government had helped in providing facilities right from the onset, operators would just utilize for their base transceiver stations and the distress suffered by CDMA operators could have been averted. He noted that subsidy is a necessity in every liberalised economy
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He said: “Every economy, almost all over world, has some form of subsidy programme. In the Nigerian aviation industry, we see an obvious need and the recent events have further exposed this need. In the United States, the intervention of government in General Motors is what prevented the firm from going under during the global financial meltdown. 

“While the telecommunications industry may be doing well today, we must not be fooled into thinking that all is well in every aspect of the industry. If USPF were not set up with the aim of providing finance for the project expansion, many places that have services today would remain unconnected.”

Egbunike added that it is commendable that in the power sector government had also realized the need for some form of subsidy. He however warned that it should not be looked at in the same way as the fuel subsidy which has been badly managed. He commended the new steps taken by USPF management to facilitate infrastructure sharing and construction of new ones, noting that it showed that the NCC was on top of its game in the sector.