The tough climate in which players in the telecommunications industry operate, was once again highlighted as a representative of the Nigerian Communications Commission (NCC) said operators just 10 Internet Service Providers (ISPs) had applied to renew their license in the past five years, of the 103 licences issued .
Applying for renewing a licence means the companies are active. The NCC’s Director of Licensing and Authorization, Mrs Funlola Akiode made the comment at a stakeholders workshop for ISPs held in Lagos.
At the same event, the Executive Vice Chairman of the NCC, Prof Garba Dambatta blamed the struggles which the ISPs were facing on the larger business environment, such as exorbitant operating costs, difficulties getting right of way to lay fibre optic cables,and multiple taxation.
This in turn had led to poor internet penetration in the country. The Central Bank of Nigeria (CBN) and NCC had to intervene to prevent a consortium of banks from taking over Etisalat Nigeria over a $1.2 billion loan the company had defaulted on. ISPs are companies that provide people with internet access. Unlike GSM companies, they usually don’t offer voice services.
Why ISPs are struggling
The internet service providers are limited in terms of coverage, with access mostly in state capitals and big cities. Many ISPs had difficulties expanding because they could not raise the capital required. GSM providers have a wider coverage spread, which gives them access to a large number of customers. Internet users also prefer to patronize networks that have a wide coverage area. The large subscriber base enables them to subsidize data costs with revenue from voice services. Some of the GSM companies also own their own fibre optic cables which makes lowers their cost of operations. The ISPs on the other have to pay for data
The way forward
The NCC had muted the idea of increasing the price floor for data but this was strongly resisted by the public, forcing the Senate requesting them to halt the move. The price floor is the minimum amount, companies can charge for data. Raising the floor would have given ISPs a breather, as GSM companies have been accused of selling below cost to attract customers to their base. The government also needs to enhance the ease of doing business by streamlining taxes across all tiers, and make it easier for companies to lay fibre optic cables.