Knocks, Pats as Operators Dissect Interconnect Rate

Argument swung left and right Friday, as stakeholders in the telecom industry disagreed on terms of measurement used in determining Nigeria’s interconnection rates regime that has caused problems in the sector.

The stakeholders at the forum called by the Nigerian Communications Commission (NCC) to review the 2009 interconnection rates determination for voice services to the regime apart and pointed at the various issues causative to high interconnection indebtedness in the industry.

Under the current regime, which kicked off in December 31, 2009, interconnection rates for mobile voice termination provided by new entrants irrespective of originating network were set at N10.12.

The rates were designed to fall progressively to N9.48 on December 31, 2010; N8.84 on December 31, 2011 and N8.20 on December 31, 2012, from which date all termination rates will be symmetric.

But Alastair Macpherson, partner, strategy consulting at the London based PWC who conducted a study on the Nigeria mobile market interconnection rates regime, noted that their study was based on asymmetric rates for the industry adopted by the NCC.

Macpherson stated that ‘asymmetry was the big issue and said they looked at the cost and scale of operation of each operator based on their capacity.

Their study, he noted was based on a ‘hypothetical operator’ which doesn’t represent any real operator in the country. “It only shows the level of termination regime that should be in operation” and added: “it is not essentially the number of sites (an operator owns) but its operational efficiency.”

Dr. Eugene Juwah, executive vice chairman & CEO of the NCC said the interconnection rates were reviewed every three years since 2006.

“The Commission reviewed the interconnection rates by applying multiple rates for mobile and fixed voice services in recognition of far-end and near-end calls termination principles.

“Notably, the subsisting 2009 Glide Path interconnection rates for voice services is the first time the Commission implemented the glide path asymmetric rates for the industry. This was in recognition of late entrants and the commencement of the unified service licensing regime in order to create an enabling environment for healthy competition in the telecommunications markets among the active players.”

But Macpherson noted that the Nigerian market still has a lot of “growth expectation, especially in GSM voice for 2013.”

He said most 3G networks were essentially urban based and stated that in reviewing the Nigeria interconnection rates regime, comparative analysis was made with countries like Tanzania, South Africa and Ghana.

According to Macpherson, Tanzania does a periodic review, South Africa like Nigeria was in the process of reviewing.

The rates operating in Ghana, he noted were lower than what obtains in Nigeria.

But as if in a rehearsed unison, operators and major industry players queried the PWC methodology used at arriving in their conclusions.

Uche Ojo, director at Visafone, Nigeria’s leading code-division multiple application (CDMA) operator insisted that the PWC presentation didn’t represent their market share of the industry.

“I’d first of like to acknowledge that you guys did a good job, but in doing so I am also going to express my disaffection that you did not represent our (CDMA) operations.

Ojo stated what the Nigerian market environment indicates is that from the very beginning, the GSM operators have ‘marked out’ the CDMA firms.

He stated that it was easy for smaller operators to survive under the current regime; hence their peculiarity should have been factored into the findings.

Steve Evans, CEO, Etisalat Nigeria, which has really captured the imagination of Nigeria mobile consumers with their innovative offerings and managed in the process of garner about 15 million customers in less than five years, said PWC did a good job.

He however noted that the ‘hypothetical’ research methodology adopted by PWC was faulty.

“First, I’d say you did a very good job. Asymmetry is a healthy option, but hypothetical option is vague, because it represents a smaller factor than some real-time operators like mine (Etisalat). There should be symmetry in two or three variances like the small, medium and larger operators,” said Evans.

While agreeing with the Visafone director, Evans noted that “it’s very clear that smaller operators are competing at a very big disadvantage. We pay more to MTN in interconnect rate than we made for ourselves even with our 15 million customers.”

Uche Onwudiwe, chief operating officer of Interconnect ClearingHouse also faulted the PWC report stating that their operation was not factored in the study.

Osondu Nwokolo, director government and regulatory affairs at Airtel Nigeria also noted that PWC should have segmented their asymmetric study into three principal market regimes: ‘very large, 2nd set and 3rd set.”

Rather, he noted that “your presentation reflects on two-lines of operators: dominant and other GSM, plus the CDMAs.”

Reacting swiftly,  Ms. Oyeronke Oyetunde, general manager, regulatory affairs at MTN Nigeria said: “asymmetry should look at operational cost and not necessarily size of operator. Care should be taken in terms of segregation.”

She implored the industry regulators, NCC to give operators time to study the review model presentation and revert at a later date.

Mohammed Buhari, senior manager, Interconnect & Carrier Services at MTN also raised objections to comparisons between Ghana and Nigeria.

He stated that Ghana’s system is sync with the global voice growth (GVG) regime, which means “it has a separation of termination rate.

In Nigeria, such doesn’t exist because it is the NCC based fixes our interconnection termination rate.

“If all of the West African countries are placed on the international rate, then you would discover that what obtains in Nigeria should be far cheaper than in Ghana, or elsewhere in the region.”

He also faulted another aspect of the report which mentioned operators having one alternate power generating set at a BTS.

“In Nigeria, no BTS can be served on one generator. Your analysis should be two generators by BTS because that is what obtains in this market,” said Buhari.

Ikechukwu Nnamani, CEO of Medallion Communications, queried the non-factorisation of fixed wired/wireless operators into the study.

He noted that the new policy thrust of the NCC which gives preference to broadband connectivity implies that fixed operators would become essential market elements.

Macpheson in a bid to save his study said that the study was essentially based on Nigerian market factors with mobile operators has dominant factors.