Harmful dominance on GSM consumers

COMPETITION is healthy for development. But not all forms of competition are beneficial. Healthy and balanced competition is the only form of competition which should be encouraged.

This is clearly not the case in Nigeria as the Nigeria Communication Commission (NCC) noted in its 2013 Determination of Dominance. On the basis of its competition assessment, the NCC noted that ‘the mobile voice market is not effectively competitive and is still highly concentrated…’

The NCC also noted that MTN maintained a wide differential of up to 300% between its on-net and off-net tariffs which it concluded was indicative of the creation of calling clubs; a practice that negates the principle of interconnection which should not ordinarily be a profitable activity for operators. MTN responded that it had not engaged in any anti-competitive.

Given the disruptive nature of fiber deployment involving the digging up of roads and obstruction of traffic and its importance as a ‘bottleneck resource’, international best practice is usually geared towards the mandatory sharing of this facility at regulated rates. The alternative is that each operator will commit huge resources towards laying their own fibre.

This has been the case in Nigeria with operators accruing huge costs which they would have avoided had there been fairer pricing practices.

The end user also feels this impact in the relatively high cost of data services in Nigeria as some part of the cost of either building out thousands of kilometres of fibre or paying exorbitant lease rates will inevitably be passed on to subscribers.

MTN has claimed that it has risen to a position of dominance within the industry on the back of ‘hard work’, its ‘aggressive marketing strategy’ and first mover advantage.

This suggests that every operator who works hard, engages an aggressive marketing strategy and enters a market early will inevitably become dominant in that market.

But MTN’s ‘hard work’ is hardly evident in its network quality over the years. A look at their just published financial reports for 2014 indicates that MTN reduced its CAPEX by 40% just as their Group CEO openly admitted that they have network quality issues.

The company’s vehement opposition to asymmetric interconnection rates is strange, given that for up to eight years, it enjoyed asymmetric interconnection rates against struggling CDMA operators and NITEL.

Asymmetric interconnection rates are widely adopted in other jurisdictions to mitigate the effects of larger networks’ calling club creation on smaller operators.

In this case, it is not difficult to see why a creator of calling clubs will stridently oppose a widely acknowledged remedy to this anti-competitive practice.

Perhaps the most important issue Nigerians must follow keenly is the issue at the centres of the current litigation involving MTN, Etisalat and the NCC.

The suit is challenging NCC’s decision lifting restrictions on on-net and off-net pricing imposed on MTN. Prior to the publication of the Determination of Dominance, the NCC conducted an assessment of the state of competition in the telecommunications industry.

This assessment involved the collation of data from operators, receipt of submissions on the subject matter, one-on-one meetings with operators and an industry session with all stakeholders.

It was on the basis of this assessment that the NCC determined that MTN was dominant, and directed to offer flat tariffs to all networks in order to encourage its subscribers to make outgoing calls to other networks.

MTN claims that the directive has left it at a considerable marketing disadvantage; and that this directive was imposed to allow its competitors gain more customers, whereas the reality is that the smaller operators have most of their tariffs flat across all networks already.

If the smaller operators already do this, how can offering flat tariffs across all networks places MTN at a disadvantage? It is also hard to understand how after going through due process in imposing the directive, the NCC failed to follow due process before setting it aside. MTN is marketing a certain tariff plan which offers flat tariffs to all networks.

If offering flat tariffs to all networks is as inimical to its competitiveness as it claims, it seems illogical that MTN would offer it of its own volition.

Something does not quite add up here. A smart operator should plan for success on the basis of sufficient product and quality of service differentiation.

There has been this widely held misconception that telecommunications operators in Nigeria are returning ‘huge profits’ and that the industry is awash with cash.

This erroneous belief is primarily responsible for the huge taxes and levies operators presently grapple with. This misconception could not be further from the truth, however.

It is common knowledge within the Nigerian telecommunications industry that with the exception of MTN, who corners up to 70% of the industry’s profits, the other operators are barely able to recover cost, making little or no profit – a fact that the regulator has confirmed in the past and can do so.

The reasons for this situation include absence of supporting infrastructure in Nigeria, huge taxes from all levels of government and MTN’s exploitation of its dominant position in the sector.

Serious competition issues exist in the Nigerian telecommunications industry. The NCC should address these issues in the best interest of the Nigerian telecommunications industry and the economy. • Ayobolu is a media consultant based in Lagos