Nnamani: Operators use interconnect to perpetrate anti-competitive practices
Many are just hearing about the N165b interconnect debt. What are we really talking about here, and how did it get to that level?
Based on data available from the Nigerian Communications Commission (NCC) the interconnect debt in the Nigerian telecom market is estimated at N25b.
However there is an additional N139b debts owed to infrastructure providers and that is where the estimated N164b debts are coming from.
It is not all interconnect debt. Interconnect debt represents about 15 per cent of the debt in question.
Having clarified that, it is important to state that on the interconnect debt area; N25b is a lot of money and it needs to be addressed.
This debt has risen over the past 12 years from an initial N5b in 2005, to the present amount and if it is not addressed, the debt could rise to over N50b in the coming years.
Operators have simply not been remitting the payments due to their interconnect partners in a timely manner, and this is what has lead to this situation.
The fact that over 95 per cent of all voice traffic in Nigeria is prepaid by the subscribers means that operators have already collected this money before the calls are originated by the subscribers.
The operators not paying the interconnect partners therefore would indicate they have used the funds for operations within their network.
Which set of players must have been seriously impacted by this debt, and how crippling is this on their activities?
The debt has affected all operators in the industry. No operator type is exempted from the impact of this.
On how crippling it has been, I would say that it has made sustaining efficient operations difficult.
Operators that are owed interconnect fees are not able to meet their financial obligations to their stakeholders and funding partners.
Consequently, they have had to resort to seeking external funding to keep operations going.
What repayment options are there for these operators?
Operators that owe have to source for funds and make the payments.
Realistic repayment plans need to be drawn up amongst them.
For some operators, it may be necessary to recapitalise in order to have enough resources to settle their obligations.
To avoid future accumulation of interconnect debts, an interconnect settlement scheme needs to be developed for the industry similar to what obtains in the banking sector. This is the way to prevent future interconnect debts.
How imperiled would the industry be if the operators fail to settle the matter in great time?
Already, there are negative implications for the industry. Operators are already using interconnect debt as an excuse to promote anti-competitive practices.
Dominant operators are deliberately cutting off interconnect circuits of smaller operators leading to poor quality of service on the networks of smaller operators.
Insufficient switching capacities are provisioned by operators being owed and this further worsens the quality of service issues at the terminating network.
At the end the subscribers are being punished with poor quality of service.
Has the NCC ever granted approval for any operator to be disconnected?
In the past when the NCC granted approval for the disconnection of operators networks due to their inability to settle interconnect debts, it led to the collapse and folding up of those networks.
A case in point is Zoom Mobile, which went out of business when approval was granted by the NCC for it to be disconnected due to its inability to settle its interconnect obligations.
What is the position of the law regarding interconnect debts, and what can the regulator do?
The regulator has been trying to find a lasting solution to this problem.
The last option for the regulator is to mandate that operators that have not settled their interconnect debts should be disconnected from terminating traffic on other networks.
However this also has the effect of potentially forcing the affected operators to close shop.
Is this issue of interconnect debt peculiar to Nigeria? If not, how is it resolved in other climes?
It is a peculiar problem to the Nigerian telecom market, and the solution should be homegrown.