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The Nigerian Communications Commission (NCC) has said foreign exchange issue, high operating cost and the need to protect smaller operators from closing shops have made data price hike inevitable in Nigeria’s telecom industry.
A week after data tariff increase was suspended, sources claims this won’t last for long as data tariff increase will surely take place and here are…
…the reasons why data tariff increase is inevitable!
Disclosing this at a press conference in Abuja yesterday, three top NCC officials said the current data price regime was unstainable as “it could kill the industry.”
Josephine Amuwa, Tony Ojobo and Abubakar Yakubu, who are the NCC’s Directors of Policy, Competition and Economic Analysis, Corporate Afffairs and Tariff Competition respectively, said the introduction of price floor for data services was also to address market distortions, unhealthy price wars and value erosion that could threaten telecoms business in Nigeria.
Explaining further why hike in data price is inevitable, Amuwa said an unnamed dominant operator was engaging in predatory pricing to drive down prices and drive out other operators.
“Where this is successfully executed, the dominant operator will then increase prices to the detriment of the subscribers. If this is allowed to happen, the industry could be moving towards a monopoly”, the NCC Director said.
On the belief that market forces should be used to determine the prices, Amuwa said due to the Nigeria’s telecom market imperfections, market forces alone could not be entirely relied upon to ensure efficiency.
“Based on the comments from service providers, we observed that small operators were not able to compete with big operators (MTN and Globacom)at their average price per Megabite of 0.70/MB. Even Airtel and Etisalat could not compete with these two service providers because of the added advantage of operating in the wholesale transmission market segment. Most of the small operators also complained that at the N0.75/MB (which is the upper limit of industry average) they were not able to properly cover cost and make profit”, Ojobo said.
Speaking further, Ojobo said it was not true that Nigeria’s data price regime was one of the most expensive in Africa.
He said in bringing out the new data price floor, NCC consulted widely with all stakeholders in the industry before it pegged it at 0.90kobo/megabite for big operators and 0.49k/MB for smaller operators.
On his part, Yakubu said some of the operators had capacity issues and the introduction of price floor was one of the ways to correct that.
He said between October last and now none of the operators expanded their networks as it should be expanded and this was dangerous for the market.