Strengthening Nigeria’s submarine cable system operations
Constructing, maintaining and upgrading submarine cable networks require significant amounts of capital.Nigeria currently has active submarine fiber optic cable systems connecting the country to the world through Europe deployed by different organizations with huge Internet bandwidth capacities, at least over 40 Terabytes. Today, Nigeria can boast of about five submarine cables system. They include SAT 3; MainOne, Glo1, WACS and ACE. These cables cost $600 million; $300 million; $800 million; $650 million and $700 million respectively.
The World Bank has found a direct correlation between rise in broadband penetration and increased economic growth, citing China, where a 10 per cent increase in broadband penetration boosted GDP growth by 2.5 per cent.McKinsey & Company also noted that bringing broadband penetration levels in emerging markets to today’s Western European levels could potentially add $300 billion to $420 billion in GDP and generate 10 million to 14 million jobs.
A prominent official of the Cable Operators of Nigeria described the five submarine cables as vital communication infrastructures, which were unseen, unheard, hard at work, and with capacity of over 40 terabytes of Internet traffic capacity.Though, the average Internet broadband penetration in Nigeria is rising but consumption is not yet commensurate to the capacity the fibre optic cable systems can offer. According to Internet World Stats, Internet penetration is 61.4 per cent of the country’s population. Nigeria’s population is put at 200 million. In other words, less than 122 million people are online, given the reality that many consumers have multiple lines, while the rest are offline. This means that operators still need to adopt strategies to deepen utilisation and penetration.
While those challenges remain, there is now a huge threat from the Over-The-Top (OTT) players. The challenge the OTTs present is enormous, especially because of the free nature of their services.OTT is where a telecoms service provider delivers one or more services across the public Internet. It embraces a variety of telco services including communications (e.g. voice and messaging), content (e.g. TV and music) and cloud-based (e.g. compute and storage) offerings.
OTTs are already on-ground delivering services like WhatsApp, Messenger, Google maps, G-station wi-fi and the likes. In advanced market, up to 80 per cent of the traffic on the Internet flows to and from their data centres, generating huge revenues for them from various advertising, cloud and other data-centric-services, while access to basic connectivity services running over telecoms providers networks are offered for free.
While some may rejoice at the ‘free’services being provided due to the perceived ‘good-will’ of the OTTs, there is need to remember that while a subscriber may not pay directly to use maps or WhatsApp (beyond data usage), on the backend of these free services, the global OTT companies are collecting data on all the sites and places one visits and are reselling that data for advertising revenues.
Statistics showed that those revenues currently amount to over $100 billion per year for the largest OTTs, which are today valued at over $1 trillion, contrasting this figure with Nigeria’s yearly GDP of $400 billion, the notion of a free service is thrown out of the window if it can in disguise be that lucrative.
The government of France recently approved a 3% tax on revenues generated by OTT. Similarly, the Spanish Treasury is mandating OTTs to contribute 5% of their operating income to finance European cinema and 3% of their gross income to finance public broadcaster RTVE. This applies to most European countries as they make bold and brave attempts to tax these virtual but significant players in their domestic economies.
In Africa on the other hand, most countries are sitting on their hands. While the Europeans, at the highest level of government, are concerned about OTTs delivering funds to government, Africa is not learning much from this stance.According to market analysts, the influence and dominance of OTTs will grow, especially with planned landing of both Google and Facebook submarine cable systems called Equiano and Simba respectively. This move, according to them could impact local market in the country, where operators have invested over $1 billion, but yet to recoup their investments.
The cable, which is Google’s 14th subsea cable investment and the third international cable funded entirely by the company, is expected to cost around $300 million. When phase 1 is completed by 2021, Equiano may have used between 12 fibre pairs (large for a subsea cable) and 16 fibre pairs, coupled with the latest optical networking technology, to deliver a design capacity of about 120Tbps (terabyte) or 360Tbps far in excess of anything that has been built around Africa to date.
Simba, according to the Wall Street Journal, is to build the cable in three phases with around 300 to 400Tbps.Both Equiano and Simba will add nearly 1Pbps (petabyte) of capacity. Google said in June 2019, that the Equiano system will have 20 times the capacity of the more recent cables laid along the route..
Call for OTT regulation
According to the Chairman, Association of Licensed Telecommunications Companies of Nigeria (ALTON), Gbenga Adebayo, at a telecoms forum in Lagos, the time had come for the regulator to dump its technology neutral era of licensing, which meant it licences for services and not for technology. He said the reality is that technology is driving the market. It is no longer services. There is a need for the regulator to begin to look at issue of regulating technology and not services, he stressed.
For example, OTTs, such as YouTube, Facebook, and WhatsApp, weren’t part of the core services for which telcos were licensed.“Those kinds of services have social implication, economic implication, security implication and if they are not licensed, that means they are not regulated and if they are not regulated, there is no limit or scope to what they can do. And no control over other services and content they can provide.
“We are, therefore, saying there is a need for the regulator to begin to look away from the neutrality of technology and technology certification and regulation than just licensing for service not only because of the social security implication but also because of the economic implication for the operators.
“Today, more people send WhatsApp messages, they send messages over the social media platforms than they do on the conventional SMS platform.
“Operators have been licensed to provide voice, SMS and data services for which they are licensed and being charged annual operating levy. OTT don’t have such and there is even loss of revenue to the regulator of the country too because they are not paying for rendering those services.
“That is why we are saying that our regulator must begin to look away from technology neutrality.”
To weather the storm
The Founder and Chief Executive Officer, Open Cables, Sunil Tagore, at the South Africa Network Operators Group (SafNog) conference in Johannesburg, South Africa, said except Africa’s submarine cable system operators unite, the arrival of Equiano and Simba cable systems could impact negatively the huge investments already made by the local operators, which he put at over $1 billion.
According to Tagare, the concerns about the two cable systems are that there will be too much capacity coming into the market, which will significantly lead to a drop in prices. “Though it is a good development if it would help the customers, it may not be good if, of all the carriers within the countries of branching, only one of them gets low price from the foreign operators, while others are getting high prices because they are not investing. This will force others out of business. So what Equiano and Simba will do is to create a monopoly in every country along the route to one carrier, which will be really bad for the industry from a long-term perspective.’’
According to him, Google will spend around $300 million to build the Equiano, which is coming from Portugal, and expect revenues from the carrier to the tune of between $390 million to $610 million, after it must have kept 50 per cent of the bandwidth for own use.For Simba, Tagare disclosed that it would cost Facebook $800 million, and about $720 million revenue is expected from the carrier in the first year of operations after it must have kept 10 per cent of bandwidth for its own use. He said the Simba would potentially earn $21 billion as advertising revenue.
Tagare warned that if the regional players failed to unite and pursue the same agenda, the plan by the Google and Facebook would likely see them pay 100 per cent for the CAPEX of the branches of foreign cables, and another 100 per cent for the operations and maintenance (O&M) of the branches, in addition to their share of the main cable.While calling on African regulators to look critically into the matter and guard against exploitation, Tagare further warned that ‘‘under no condition should any indigenous player accept to pay 100 per cent of the CAPEX and O&M for any branch, rather they should walk away.”