Broadband Policy Imperatives In Nigeria

This is  a Keynote Address by Funke Opeke, CEO MainOne Cable Company,at ATCON’s Broadband Investment Summit We address the summit with this connectivity objective in mind based on …

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Funke OpekeThis is  a Keynote Address by Funke Opeke, CEO MainOne Cable Company,at ATCON’s Broadband Investment Summit

We address the summit with this connectivity objective in mind based on our experience having raised and invested $240m in the Main One Submarine Cable system to facilitate this same objective.

Having had one year of successful operation behind us, we have proven our ability to deliver what we promise and during this first year, we have connected the majority of the large telecom operators and internet service providers in Nigeria and Ghana to the Main One network. But this is not enough!

We are not pleased with the progress we have made in bringing

broadband services to the overall population in Nigeria because we

hear feedback from consumers daily that they are not feeling the

impact of our network. Nigerian consumers tell us in very clear

terms that they want faster speeds, lower prices and improved

quality from their retail Internet service providers. Recently, a

senior official of a National institution described how he

experienced faster access to the institutions’ web page from

outside Nigeria, than from within Nigeria and how disappointed he

was that critical web sites of National significance are currently

hosted offshore. This is the opportunity that we are here to

address today. Main One as a pioneer in this area has removed the

bottleneck of limited international bandwidth, high cost, and

unreliable connectivity, and Nigerians and the Nigerian economy

need to feel more impact from what we have done.

Why is it important for Nigerians to feel the impact? Drawing on

the example in the United States, which is the most

technologically advanced nation in terms of ICT, the country in

2010 published a National broadband policy because “broadband is

becoming what electricity was to the industry and for economic

development to take place, and to ensure that the United States

remains competitive, we must have easy and affordable broadband

access for all citizens”.

Likewise, the International Telecommunications Union (ITU) has

called for a multifaceted national broadband policy in Nigeria

because they see that it as critical to development. As

stakeholders in the broadband economy of Nigeria, we could not

agree more that there are critical policy imperatives to

increasing broadband penetration in Nigeria which if not addressed

will have an adverse impact on the nation’s development

objectives.

So, what are the development objectives for broadband and how

exactly do we define broadband?

We choose to adopt a World Bank definition which describes

broadband as an interconnected, multilayered ecosystem of

high-capacity communications networks, services, applications.

These elements create an ecosystem because:

–          Investments in high-speed networks improve the quality

of service and promote the creation of even more complex or

bandwidth-intensive applications.

–          Applications attract more users by increasing the value

of broadband and supports wider investments in networks and

quality of services.

–          Wide spread access to services allows users to create

their own content, again driving the demand for high quality

services that can do more than simply download’ content, but also

allow sharing among users. The World Bank has found that in low- and middle-income countries every 10 percentage point increase in broadband penetration accelerates economic growth by 1.38 percentage points-more than in high-income countries and more than for other telecommunications

services.

Developing other elements of the broadband ecosystem also provides economic benefits. For example, the growth of Internet-related

services and applications has created jobs and led to the creation

of new businesses. For example, in November 2009 Google had a

market capitalization of $168 billion ($199 billion July 2011) and

employed 19,000 people in 20 countries. China’s leading Internet

search engine, Baidu.com, has a market capitalization of more than

$14 billion and over 6,000 employees, and in 2008 had revenues of

$460 million.

Annual sales of applications for Apple’s iPhone exceed $2.4

billion, as well as stimulating additional hardware sales.

Needless to say, broadband creates significant economic

opportunities for users, service providers, application

developers, and network operators alike. McKinsey estimates that

?bringing broadband penetration levels in emerging markets to

today’s Western European levels could potentially add US$300-420

billion in GDP and generate 10-14 million jobs.

But perhaps we have heard these statistics before, so let us take a look at some country examples:

Starting close to home in Kenya:

The Kenyan Government recognized the role of ICTs in the social and economic development of the nation and promulgated a national

ICT Policy based on the Economic Recovery Strategy for Wealth and

Employment Creation from 2003. The policy is based on four guiding

principles: infrastructure development, human resource

development, stakeholder participation and appropriate policy and

regulatory framework.

The policy set goals to create a comprehensive policy, legal and

regulatory framework to:

–          Support ICT development, investment and application;

–          Promote competition in the industry where appropriate;

–          Ensure affordability and access to ICT nationally;

Examples of policy objectives include:

–          Providing all primary schools with affordable internet

access by the year 2015; and all secondary schools and tertiary

institutions to have affordable internet access by the year 2010;

–          Encouraging Kenyans to participate in the sector

through equity ownership. Consequently, any firm licensed to

provide telecommunication services is required to have at least 30

percent Kenyan equity ownership.

–          Facilitate shared infrastructure, right of ways etc.

Needless to say, Kenya is already reaping benefits as a

destination for new ICT investments in Africa today and is being

billed as Africa’s Silicon Savana. For example, within 3 days of

Seacom launching in 2009, Kenya reported an increase in Internet

speeds, Safaricom reported a 200% increase in data traffic and

international bandwidth supply increased by 700%. When Google was

seeking to open a head office for sub-Saharan Africa, it chose

Nairobi with one of the few reasons cited being that the

Government has adopted the Internet as few African nations have.

Same for head office of Airtel Africa and the story goes on.

Korea:

– Korea is another classic example of a country that pulled itself

up from poverty in the mid-1950s to a booming economy based on

heavy industry and manufacturing in the 1970s and 1980s, then a

pioneer of the information society in the 1990s and 2000s and has

moved from being a middle- to high-income country. The exceptional

success in developing broadband, and ICT generally there is also

based on a mix of highly competitive private-led markets and

government leadership, use, support, and regulation.

The country has seen a transformation from less than 1 Internet

user per 100 inhabitants in 1995 to one of the world’s most highly

penetrated broadband markets. By June 2009 fixed broadband

penetration was 32 percent, and market penetration of 3G services

was 77 subscribers per 100 inhabitants and the highest broadband

penetration in the world.

The rapid growth of demand, driven both by the market and

government use, played a key role in accelerating broadband

development in the early stages of its market development. The key

services that drove the take-up of broadband in Korea were online

trading of shares, Internet-based school education, and online

interactive games. E-government, e-commerce, and e-learning

applications were also important drivers of the high broadband

adoption pursued by the Korean government. For example, all

procurement producers are handled online through the Korea Online

E-procurement System (KONEPS), introduced by the central

procurement agency for access by all public organizations,

including the central and local governments and public

organizations. Since its introduction in 2001, KONEPS has become

one of the world’s largest e-commerce markets, with total

transactions of $34 billion in 2007, when 92 percent of all

bidding was done electronically. ICT also plays a significant role

in education: EDUNET, introduced in 1996, had 5.8 million members

by September 2008.

Another mechanism for government intervention was the

Informatization Promotion Fund, which was introduced in 1993. This

is a Government fund set aside to finance projects fostering

information use. The primary objective of the fund is to ensure

that profits from the ICT industry remain in the ICT industry.

Money from the fund is used to support ICT-related R&D, to develop

and diffuse standardization in ICT industry, to train ICT human

resources, to promote broadband network rollout and to promote

e-Government. The Informatization Promotion Fund includes

contributions from both the Government and the private sector,

through spectrum licensing fees, revenue-based contributions from

operators and earnings from the operation of the fund, including

loans.

Finally, these actions were supported by a dynamic regulatory

policy that mirrored the evolution of the broadband market

-By initially providing light regulation to promote competition in

the early, growth, and market maturity stages of broadband,

through 2005.

-This was followed by a period of increased regulation from

2005-07, in response to the growing dominance of KT and operators’

financial crisis.

-Finally, the market saw a return to lighter regulation in some

areas as the market matured in 2007.

Singapore:

Finally, we focus on Singapore where the Infocomm Development

Authority is guiding the implementation of a National Broadband

policy that includes the implementation of a new national backbone

network that will reach every household and business in Singapore

with fiber with a 1 Gbps connection by 2013. The project is

partially funded by the Singapore government and on top of the

pyramid sits a service company to provide wholesale and backbone

services on an open access basis and level playing field to all

comers at the retail level. The service company is a private

consortium with government funding.

Needless to say, there are numerous models with further examples

of broadband strategies from countries including France, Japan, UK

and neighboring Ghana.

So, where does that leave us in Nigeria?

Given our broadband penetration rates of less than 3% or no

significant measure, we believe there is an urgent need to develop

and implement a National Broadband policy under the auspices of

the new ICT ministry.

The policy needs to:

a.. Create demand and drive promotion strategies by allowing

government intervene in market creation and facilitation, by

promoting broadband adoption and use; make broadband access and

services more attractive and accessible to potential subscribers

and users by helping to lower prices, putting public services

online, and encouraging the diffusion of access devices such as

computers.

b.. Establish an enabling environment for competition and

investment by removing market entry barriers with supply-side

policies that enable the development of access to

broadband-enabling network operators and service providers to

enter the market easily, operate on a level playing field, and,

where necessary, provide financial support to reach high-cost

areas. We believe the situation where calls from Lagos to London

cost less than calls within this room in Lagos must stop. Bulk

capacity has no valid economic reason to cost more from Lagos to

Abuja than Lagos to London. Based on global best practices,

policies that facilitate competition are the most typical and

important and have been implemented consistently and

compellingly from the initial to maturity stages of market

development to drive growth. Such Government policy support

allows new market entrants to compete effectively with dominant

incumbents such that economies of scale and network

externalities do not play significant roles in determining the

success of communications providers.

This is the broadband policy imperative for Nigeria.

First, for visionary leadership to set ambitious goals for

broadband penetration and devise and actively implement strategies

to achieve e.g. 40 % penetration nationwide, Access to all

geo-political zones and indeed all local government areas and

interconnection of educational institutions, especially from

secondary to university level.

Next, is for competition policies to promote market growth by

facilitating shared access and fair pricing of terrestrial

backbone networks which dominant operators leverage to block new

competitors. Indeed, the collapse of Multilinks shows that

building a national backbone is no assurance of commercial

success, though lack of access proves a high barrier presented by

existing facilities based operators to block out new players.

Recall the battle between GSM companies at inception and NITEL

over interconnect; and

Finally, for the government to facilitate demand through the

funding of initiatives in ICT adoption, e government and e

commerce in order to create local content and jobs.

We hope that in 2020 when ten years of Main One cable’s operations will be celebrated, the implementation of these policy initiatives

will have reshaped the history of broadband in Nigeria.

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