Governmental Intervention needed to Bridge Pricing Gap between Hosting Companies in Nigeria and Abroad- CEO Medallion Communications

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The Chief Executive Officer of Medallion Communications Limited, Mr IKECHUKWU NNAMANI in this interview with Business Remarks Editor, BUKOLA OLANREWAJU speaks on the growth of Nigeria’s Data Centre operations and other raging issues in the telecom space. Excerpt: 

 

Tell us about Medallion Communications?

Medallion Communications is an infrastructure service provider. We provide infrastructure for the telecom and ICT sector of the economy. We mainly operate in two core areas. One is a data centre service. The second one is in terms of providing connectivity and the whole idea is to provide a common platform for various operators to be able to host their infrastructure as well as ensure seamless connectivity across the various networks.

Those are our core areas and we’ve been able to do that successfully over the years.

With the Business world moving at an incredibly fast pace in an effort to match the demand for information, how is the data centre market in Nigeria?

Everything going on requires a data centre. So as the ICT space expands, more data is created, those data have to be hosted at data centres.

As the industry becomes more digital-focused with the introduction of new services and apps, it literally creates data that needs to be stored somewhere. Data Centre is the ideal location where these data are stored. Beyond the storage of data, you also have to realize that seamless connectivity is important because the various service types need to be operated under a seamless platform at a higher level.

What I mean by that is, as an MTN subscriber in Nigeria whether you like it or not, you have to interface with other subscribers on Glo network. So there have to be seamless connectivity between MTN and Glo for that to happen.

If you are a social media person using WhatsApp or Facebook, for that to happen, there have to be seamless connectivity between the platforms of Facebook for instance and maybe your operator, MTN.

This kind of connectivity also happened at data centres. It is both a storage facility, as well as a peering point where different operators cross-connect, peer, and exchange services. So all these will not happen without data centres and in Nigeria today, we’ve gotten very strong data centres that are able to meet that demands, Medallion Communications being one of the major ones.

There has been a lot of complaints from Nigerians on seamless connectivity. What is the challenge?

Poor quality service goes beyond connectivity. You realize that even within the operator’s own network, such as using MTN network to call another MTN subscriber, the quality may not be good. So it’s not only peculiar to when for instance you are using MTN to call Glo. This has to do with the Quality of Infrastructure.

What we’ve noticed in the past is the robustness of the infrastructure is not what it used to be. Voice traffic is being compressed. You can be calling someone within the same city, that call has to first come to somewhere like Lagos to be exchanged before it goes back to terminate in the same originating city. This reduces the quality of the call as it’s embarked on an unnecessarily long journey, you know, instead of it being a local call, it becomes a long-distance call because the infrastructure is not available in the local environment to originate and terminate the call. So that leads to poor quality of service.

You also have challenges where the network is not available. So, when we’re talking about the quality of service we’re talking about when the network is available, but the quality is bad. When there is fibre cut, transmission networks go down. When there’s lack of power, because the public power supply isn’t available when it needs to be, so whatever the operator has put in internally, they’re facing challenges with that. So you have all these going on. And in all this, the subscribers are the one suffering.

Today, not all parts of the country have seamless data coverage. So you try to get online to use data service running on 2G, while operators are advertising operating on 4G. Services like video streaming or high capacity transactions on your mobile are not just efficient because the infrastructure is not well spread out.

Ultimately, there are reasons behind this. One is funding because you need a lot of money to put the right infrastructure. But beyond funding, even in places where infrastructure has been implemented, the services are not available all the time for the reasons I’ve explained, like fibre-cuts or power-related issues.

The challenges are not only terrestrial. If you’re talking about the submarine the situation, we had a case recently where there were fibre issues at the submarine level that affected some submarine providers and by default, it affected everybody depending on them.

What’s your reaction to the role of pricing play in hosting and localization of content in Nigeria?

Lack of local hosting of data is not an option for Nigeria. What we have today is not sustainable. Hosting our data outside has more problem than advantages. Yes, you could get it cheaper abroad, depending also on the hosting package you are going with. And the reason is simple. Let me give you an example. Organizations like GoDaddy, a major hosting company abroad having over 10 million users with their services can afford to charge each user $10 a month and be able to generate over a hundred million dollars as revenue on a monthly basis. This is sufficient to cover their costs and make them extremely profitable. Compare this to hosting companies with services locally hosted in Nigeria, if you check, their subscriber base could be lesser than 100. How much will they charge those hundred clients to be able to handle their operating expense? Therefore, the cost by default is still slightly higher.

This is an economy of scale business, it’s a volume-driven transaction. The more people host locally, the lower the unit costs for everybody. If Nigerians host outside because the cost here is high, we are forgetting that the more we host locally, the lower the unit costs for everybody. If our infrastructure is shared by a lot of people, the cost goes down for each person, but it takes time.

Governmental intervention is needed to bridge the gap between the pricing point that an efficient hosting company wants to operate at and what realistically they can charge to be competitive to the foreign hosting companies until the subscriber base in the local hosting domain has grown. That’s with respect to the economics of it.

Now you’ve got challenges with security when you host outside because your data is pretty much under the control of the hosting company. They have access to it without needing to seek your permission. But if it is hosted locally, you control it; you can put your security around it to be sure that no third party can have access to it without your permission. It also introduces a lot of national security risk to the country. And that’s why I said it’s not even optional by now that we’ll be discussing hosting outside the country. By default, we need to host locally. What do we need to do to make it happen that should be the primary concern for everybody involved in this space.

Then, the third part of it has to do with the overall financial state of the country. If you host outside you have to pay foreign companies in dollars or their currency. How do you balance that with if it’s hosted locally and you’re paying in Naira? In this case, there is capital flight, because your source for foreign currency to remit to the foreign hosting companies and that further depresses the economy. Finally, let me emphasize it; there is a balance of the financial flow of money. You pay for foreign bandwidth providers when you host your content outside but if it is hosted locally they have to pay to come and access it here. This affects the economy in a positive way.

Then, of course, we can talk about employment generation for people to manage those services. You also have to build the knowledge base that doesn’t exist. So you have to be able to build the knowledge base. The need for local hosting is a no brainer.

How many governmental parastatals are patronizing Data Centres in Nigeria?

On this side, Government on its own set up a company, Galaxy Backbone that’s supposed to handle government-related services. I believe there is a mandate government agencies should patronize their services. But we’ve seen a lot of government agencies hosting with the private sector, maybe for redundancy or for efficiency. Medallion, for instance, has got a number of government agencies hosting in our data centre.

Nigeria IoT market has been predicted to be a $1bilion industry in five years with a global market currently estimated at $1 Trillion, what are the contributions of Medallion Communication Nigerian IoT industry?

Every Internet of Things (IoT) service has to originate out of data centres. As I explained before, the beauty of IoT is enormous data generation ranging from smart wristwatches used for picking calls, checking chats, messages and ones’ health data to smartphones used to check or control things at home or in the car. Now that data has to go somewhere, it has to sit in a server where it has to be analysed.

How do we know this? Every one of these service providers with the solutions hosts their service and connects with other providers at our data centre. Traditional IoT transaction goes from handheld, which is a subscriber terminal, goes through a network to the operators’ network then to the data centre. At the data centre, you are now interfacing with different kinds of entities that is providing or making sure this service happens. So clearly you can’t have an efficient IoT economy without data centres. Medallion, for now, is the number one peering point for the country in this.

You once advocated for two data centres in every Nigeria states, how visible and sustainable do you think this is?

I just gave the example of localization of data within Nigeria and the benefits. Then the next big question is the localization of data within cities and the various regions. Nigeria has 36 states plus Abuja the Federal Capital. The southwest of Nigeria is several West African countries combined, both in terms of population and size. It’s a big country in terms of landmass and population; people take it for granted. We are actually many nations within one nation or many countries within one country. This for me is a plus, an advantage to us as a nation.

Understanding the state of the country as well as the need to have a high quality of service and the fact that we don’t have very strong National Transmission Backbone on the telecom side, we need to localize services; we need to localize content on a state by state basis. And that is why we said every state capital realistically should have at least two data centres because you don’t want to depend on only one single point of failure. I’m one of those that don’t believe in monopoly in the space because there is a need for diversification.

How do we get there is a whole new ballgame because it’s very expensive to build data centres. This is not something that is going to happen in a day; importantly we do need a lot of companies playing in that space. It will take a while, but ultimately it’s needed.

You planned to have five data centres last two years to ensure unreached parts of the country have access to infrastructure, what’s the update on it?

We have three at the moment, the plan is still ongoing. Getting the right locations is ideal because you don’t just build data centres. We plan having at least three or four more to make it seven in addition to the three we already have. We currently have in Lagos, Abuja, and Asaba; four are coming up in Port Harcourt, Enugu, Kano, and Ibadan.

 

Do Medallion Communications offer Cloud Services?

As a company, we don’t offer cloud services because we operate as a Carrier Neutral. But we’ve got at least four/five cloud providers in our data centre. That’s the advantage because literally, everything is going in that direction. The advantage of the cloud is, it takes away the need to have services installed on your core infrastructure. Every one of us has been using the cloud for more than 10 years but we just don’t look at it that way because it wasn’t a buzzword. Our emails have been stored in the cloud for so long, not stored on your system.

With the advent of Artificial Intelligence, IoT and the lots, how largely untapped is the African Market?

We’ve not really started. We are, in my opinion, less than 1 to 2% of the potentials.

Africa as a continent has lagged behind mainly from an infrastructure funding standpoint. When these services were rolled out in developed countries, they already have a strong National Fibre Backbone. So they have a very strong national and metro transmission network.

In Nigeria, we started with the fixed network but our success in the communications sector was on mobile services. There was no strong fibre-based transmission network. In Nigeria, for instance, NITEL collapsed and we did not take advantage of its fibre network. If NITEL had remained strong, they would have provided the national fibre backbone for the country to ride on. So for most of the operators instead of spending money to roll out services to the subscribers they are spending more money trying to build the backbone infrastructure. This has not helped in terms of the speed of deployment and rolling out of services. Nigeria is picking up much faster than other places. South Africa is the most advanced because they started very early to build on some of these infrastructures. They’ve got well-established data centres and a lot of these services are well established over there.

Just as we’ve noticed in the voice network, Nigeria started very late but was able to surpass every other part of Africa. Similar stuff is going to happen in the data space and a lot of these new emerging technologies. Definitely, Nigeria is still going to be the number one market in Africa.

What other measures can Nigeria take on the issue of cybersecurity?

Cybersecurity challenges are not peculiar to Nigeria. Even in the advanced countries, there are data breaches all the time; much more extensive than what we have here that’s the truth. This will shock you, but because here we anticipate that a lot of people would want to commit fraud, our system in some of the sectors is actually more robust than what you have outside the country. That is the truth.

Our people by default fear that somebody would always try to be smart and gain the system. The level of authentication we have in Nigerian banks, you don’t have it in some developed countries. The minimum authentication here is beyond what you have in some countries abroad. If you go to some shopping sites abroad, you can still do transactions without password or any authentication, you simply process your transactions the easiest way possible. Some of what you see here they don’t have there, but cybersecurity remains a big threat here in Nigeria.

I publish the annual Nigerian Cybersecurity Report under Demadiur Systems and Serianu. In the 2018 report which focused on cybersecurity skills,  we discovered Nigeria has the lowest number of certified cybersecurity experts per citizen. For a country of about 200 million people, we have just 3500 experts. But Kenya, with one-quarter of our population, has about 1800 cybersecurity experts. We are actually lower than the rest of Africa. And that is a challenge because cyber-crime is on the rise, especially for financial gain.

The truth is we have to continue creating awareness; teach people how to have the best cyber habits to reduce the number of victims.

We also have a challenge with the legal system. The security agencies don’t adopt the right procedures to conduct the investigation, gather the right data that if they take the offender to court they will get the desired judgement. Last year we conducted some training for the security agencies just to be able to teach them some of the guidelines and process to follow. Forensic investigation (the procedure and the process) for cyber-crime is different from other crimes. If somebody has committed a cyber-crime and he’s smart enough to wipe out the trace, how do you start the investigation? With cryptocurrency, gone are the days where somebody commits cyber-crime and move the money to their bank account. Now they move them to cryptocurrency, where it literally disappears. So how do you tackle that? These are some of the challenges because advanced technologies have come to stay.

I will not want to subscribe to the notion that cybercriminals are winning, they make more noise when they do, then it appears as if they are winning, but a lot has been done in that space towards curbing cybercrime.

What impact do government policies have on the ICT industry?

It’s still a walk in progress, as you know the minister is less than a year in that portfolio. I support his intention to move the country into the digital space, promote digital economy. This means a lot of traditional processes have to be digitized, including the financial sector and the way government is run. That is the objective.

There is need for more collaboration between the government and the private sector. Sometimes the good government policies would not be fully implemented because of lack of coordination between the public and private sectors.

Following the trending issue of Coronavirus, what effect will it have on the sector aside from the hike in prices of phones and accessories?

We are going to have lots of delay in new services being rolled out. Reason is that a lot of the technology comes from Asia, China in particular. So when factories are shut down, then new equipment won’t be produced. We’ve already seen that effect. I am personally expecting this depending on how long it takes to find a solution to the virus, the longer it lasts, the longer the problem is going to be. So this year for sure, it’s not going to be a good year for the telecom sector. There’s going be a lot of challenge because of it.

READ ALSO: Digital Technologies, Path to ‘Generation Equality’ – ITU

How is the industry bridging the skill gap?

Few years ago, we were one of those pushing that students who are studying ICT and Engineering should be posted to ICT and Engineering based organizations for NYSC, instead of being posted to teach in remote villages. We believed that this would help expose them to industry trends and open their minds to what is needed in the industry as a young graduate.

As one of the board members of Association of Telecommunications Companies of Nigeria, we are pushing to make it an industry’s practice or standard that every engineering graduate is posted to an engineering organization for their NYSC.

The second thing we are trying to emphasize is practical based training. Gone are the days where people just want to go to school for certificates, with nothing significance to offer. We’re working closely with organizations like NIRA to see how to bridge the skill gap by training people to make sure they are useful in the ICT space through corroboration with the NIRA Academy.

What are your organization plans for the year 2020?

To remain relevant by always adding values to our clients and Nigerians at large. We don’t deliver service directly to subscribers, our client base are the operators. We want to be sure we continue to support them so they in return are able to offer good service to the subscribers. That’s why we are carriers’ carrier and also carrier neutral. We will just keep doing that and be on the forefront of new and emerging services and making sure that whatever the industry needs as much as possible, we are able to play a role in providing them.

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