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EXCLUSIVE: Why NCC asked big operators to raise data tariffs

EXCLUSIVE: Why NCC asked big operators to raise data tariffs
November 29
21:55 2016
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The Nigerian Communications Commission (NCC) approved a new “floor plan”, or minimum pricing, for data services by mobile operators “to address market distortions, unhealthy price wars and value erosion that could threaten the going concern of the service providers”, according to an internal working document seen by TheCable.

In a letter to the big operators, the commission had directed that the floor plan for data should be 0.90k/MB effective December 1, 2016 “pending the finalisation of the study on the determination of cost-based pricing for retail broadband and data services in Nigeria”.

As virtually all the big operators were already charging below the new floor rate, the directive meant an automatic increase in charges for data services.

However, small operators and new entrants in the data market, such as Spectranet, Ntel and Smile, are still allowed to charge below 0.90k/MB.

NCC defines “small operator” as one that has less than 7.5% market share and “new entrant” as one that has operated for less than three years.

The regulator is of the opinion that without a price floor, the dominant operators can engage in predatory pricing to drive down other operators, meaning the industry could be moving towards a monopoly.

Data Charges before now

Big OperatorsAverage price/MB
MTN45 kobo
Glo21 kobo
Etisalat94 kobo
Airtel52 kobo
Average53 kobo
small operators/new entrantsAverage price/MB
Smile84 kobo
Spectranet58 kobo
Natcom72 kobo
Average71 kobo

A senior NCC official told TheCable that CDMA operators – such as Multilinks and Starcomms – were muscled out of the by the Big Four because of their market power.

“At the rate they are crashing data tariffs, there is every chance that they will soon kill all the small operators and new entrants. Part of the functions and duties of NCC is to check monopolistic and oligopolistic behaviours in the telecom market,” the official said.

Globacom currently charges 21k/MB apparently because of the economies of scale advantage, compared to Smile which charges 84k/MB, or four times Glo’s rate, in order to break even.

Under the new tariff regime, Smile can continue to charge 84k but Glo will have to move up to 90k/MB – a 328% increase.

MARKET PRICES

The document seen by TheCable says in line with its mandate of promoting fair competition in the industry, the commission monitored activities in the data market segment “and observed that a significant reduction in current market prices for data services; in addition to complaints by subscribers to re-introduce the price floor for data services”.

It gave five reasons for re-introducing the price floor, which was first introduced in 2014 and suspended in October 2015.

The reasons are:

  1. Some service providers were actually pricing their services below cost, a situation which could spell doom for the industry.
  2. Dominant Operators in the wholesale leased line market, who also operate in the retail market embarked on massive predatory pricing, a conduct capable of substantially lessening competition.
  3. The removal of floor price for data resulted in eroding value in the market.
  4. The need to safeguard investment and ensure growth, development and sustainability of the telecoms industry.
  5. It is important to maintain the integrity of the network as operators lack capacity to accommodate the volume of transaction on their network.

It said: “When markets work efficiently, companies provide customers with more choice, lower prices better quality products and services. However, due to market imperfections, market forces alone cannot be entirely relied upon to discipline the operators to ensure efficient market conducts and promote market efficiency.

“It is in recognition of the above that regulatory intervention is required and has become a veritable tool to facilitate competition and create a level playing field between competitors.”

STAKEHOLDERS’ INPUTS

TheCable understands that the big operators made inputs into the decision-making process.

A stakeholders’ meeting with service providers was held in October to discuss “anti-competitive practices” in the data market and to get their comments and inputs on what the price floor should be.

At the meeting, NCC, according to sources in the know, informed the operators on the need to create a balance by ensuring that the interim price floor “is not too low in order to provide a cushion for small operators and new entrant to offer competitive products”.

It also said the price floor “should not be too high to ensure affordability by consumers” and that the rate should be fixed at a level that “will encourage growth, roll-out services and ultimately attract investments into the telecom sector”.

This the interim price floor of N0.90k/MB for big operators is expected to be reviewed after a study on the determination of cost-based pricing for retail broadband and data services in the country.

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Copyright 2017 TheCable. Permission to use quotations from this article is granted subject to appropriate credit being given to www.thecable.ng as the source.
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Social Comments

22 Comments

  1. I_anselem
    I_anselem November 30, 08:03

    I now understand the reason behind the increase which is cogent but i don’t understand the hurry, why not finish the study first?

    Reply to this comment
  2. Emechris
    Emechris November 30, 10:54

    Lies upon lies NCC is telling white lies, if data cost lower is it not good for consumers at this trying time.

    Reply to this comment
  3. Emmiejay
    Emmiejay November 30, 10:57

    If you want to go into a business where some are already thriving, you need a capital that is greater than the starting capitals of the thriving company… In my opinion NCC is not justified.

    Reply to this comment
  4. Mazino
    Mazino November 30, 11:30

    This no good reason, why do you want to put more hardship on Nigerians. 3k for 1.5GB is sickness. Some family feed on 3k for a week. 3k is not small money in this recession.

    Reply to this comment
  5. Sanwal
    Sanwal November 30, 11:39

    It is a lie that operators price below cost. When dis any of them declare Net loss after a business/financial year? It should be remembered that social media & increased access to information online aided the present government in coming to power. Perhaps they realise that in view of the bad shape the economy has taken under there government, the same tool could be used in their disfavour, hence, the need to shut out many Nigerians from access to information which the current affordable data rates affords subscribers.

    Reply to this comment
  6. mikesofts
    mikesofts November 30, 11:57

    what’s consumer’s business with their competition.

    their deregulation brought prices down, who wants to buy 10MB for 100naira again… this government self. the downstream petroleum industry is there to deregulate completely but you want to enslave telecom consumers again.

    Reply to this comment
  7. CaLLio
    CaLLio November 30, 12:31

    Oh… Now NCC pity service providers… What about the masses… Everything done in this country is never in favor of the masses… You have taken almost everything away with the current recession, now you want to take the internet that makes us feel a bit connected too… That reason is the dumbest I have heard in years for anything… The Airtel we know today changed their name several times, because the former couldn’t keep up… Shame on our leaders!

    Reply to this comment
    • Lamade
      Lamade November 30, 13:06

      I tire o,every biz is meant to be competitive. U try hard to satisfy ur customers not that u report to big brother to fight other sellers so you can sell. This country is full with people that reasons backward.imagine some.Nigerians saying its ok

      Reply to this comment
  8. lamade
    lamade November 30, 12:59

    But there are still cheap data tariffs in other countries. If smile,spectranet and d rest of them don’t make profit let them go to other form of business,after all who did they help. This country is done for. Some country’s govt provide free WiFi for their citizens n we re here talking of ncc

    Reply to this comment
  9. Fat one
    Fat one November 30, 13:07

    Is that the major issue we are facing? Why not tackle the pressing issues before considering the irrelevant ones….

    Reply to this comment
  10. Dajaypraizy
    Dajaypraizy November 30, 13:16

    They should not even think of it

    Reply to this comment
  11. DeejayBaba
    DeejayBaba November 30, 13:18

    Nawoooh. This is unfair

    Reply to this comment
  12. geoff
    geoff November 30, 13:49

    This is not a good development; especially this current economic meltdown. It dies not have any benefit on the customers at all.
    If a new company doesn’t have what it takes to stand in the competitive market, let them hold on till they are fit for the business. It’s not wise to increase a data tariff to encourage new entrants; at the detriment of the poor, average and rich consumers.
    No reason will be justifiable in this case!
    NCC, please think of consumer satisfaction: that’s your primary function to Nigerians.

    Reply to this comment
  13. mtimmy33
    mtimmy33 November 30, 14:25

    This is uncalled for & it is total rubbish

    Reply to this comment
  14. Desmond
    Desmond November 30, 14:33

    Why must the “floor plan” be so high that the consumer will have to hire ladder to climb in?

    NCC is protecting the telecom operators please who is protecting the likes of SCOA, Mr. Biggs etc from bigger competitors.

    Awkward people in charge of affairs.

    Reply to this comment
  15. Dr Spikey
    Dr Spikey November 30, 14:47

    Who is NCC protecting.Are we really on the same page.The operators should be left alone to compete among themselves and let the consumer be the one to choo se who is the best and most effective operator.I hope NCC goes back to the board room to find out why and what is their purpose for existence.I think this will help them critically in their decision making.One man once said,”If the purpose of a thing is not known then you can’t stop that thing from not being destroyed”.Consumers should be protected and not advocate profit making for the operators to the detriment of the consumers.

    Reply to this comment
  16. Muyiwa
    Muyiwa November 30, 14:53

    So already we are been changed high by Etisalat already meaning there had to come down now or what will happen pls bcous all this while I had been on Etisalat data plan pls advice

    Reply to this comment
  17. Konya
    Konya November 30, 16:16

    Now I believe somebody collected N500m bribe from MTN and is prepared to help them recover the money by ripping off Nigerians

    Reply to this comment
  18. prinzy
    prinzy November 30, 16:17

    Let them do what the want to do to the less previlege,how can someone just sit there an start increasing data when there know the condition of the country.is that not wickedness.

    Reply to this comment
  19. paragon
    paragon November 30, 19:04

    So awkward. Our leaders and representatives are so insensitive in their decision making. All that they could think of in everyday of their lives is how to exploit the poor masses. If our learned CBN Gov. could propose a tax to be implemented on phone calls made. It clearly shows how the govt of the day is hell bent in enslaving the poor masses.
    insensitivity of the highest order.

    Reply to this comment
  20. Man P
    Man P December 02, 08:31

    This is plain dumb. It’s like fixing minimum price of rice to say N60k per bag to protect local farmers.
    Why should the masses pay extra Billions of Naira just to protect three companies? I smell a rat..EFCC should investigate the shareholders of those companies, to see if there is any connection with NCC officials.
    It’s common business knowledge, that to compete in an existing industry, new entrants should offer something different, be more efficient, or target a different market segment. Price fixing is ancient, bad and anti-progress.

    Reply to this comment
  21. val
    val December 04, 00:01

    the Ncc ought to protect the consumer with whatever “floor plan” they are talking about…. They are giving the service providers direct licence to extort the poor masses……. if the new entrants can’t survive the competition, they should pack up….. if they don’t pack up then they are making profit…… so Ncc increase their tax and stop talking about Tariff increment

    Reply to this comment

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