Telecoms Operators Raise Concern Over 400% Increase in Spectrum Price

The Nigerian Communications Commission (NCC) move to increase the cost of spectrum by 400 per cent has raised eyebrows among telecommunications operators in the country

Noting their concern, the operators alleged that the increment as contained in the draft spectrum regulation recently released by the telecoms regulator would hinder network rollout in the country.

Recall, on 5G deployment and roll out, the commission had recently disclosed that each slot of the spectrum would be going for a fixed price of N75 billion, adding that through auction, it could go as high as N100 billion.

Spectrum, the frequencies that are used to transmit sound and data across telephones, is considered as the as the life-blood of a telecom operator.

Speaking at a public hearing organised by the NCC on the regulations, the telecom operators pleaded the regulator to maintain the status quo in terms of spectrum pricing.

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Specifically, Airtel noted that the 400 per cent increment would have negativee impact on the industry, especially with the need for more rollout of 4G networks and the impending 5G.

According to the report of the public hearing, “Airtel requested the Commission to retain the subsisting regime to support expedited deployment of 4G/5G technologies for the continued growth and development of a more robust digital economy.”

Similarly, VDT Communications, another telecom operator, “observed that the unit price per MHz for each licensing region was increased by 400 per cent and opined that there was no clear basis to arrive at the unit price per MHz.”

The company suggested that the second schedule to the regulations should be reviewed to consider and reflect the market value which should be directly proportional to a frequency spectrum size.

However, responding to the concerns of the operators, NCC said the pricing formula was set out in 2004 and the present calculation was based on Consumer Price Index.

The commission noted that the Frequency Spectrum Regulations is a vehicle that enables the commission meets its sole and exclusive mandate in Section 121 of the Nigerian Communications Act by assigning this scarce national resource in an equitable manner.

It added that the purpose of the review was to further ensure that frequency spectrum are assigned and managed in a way that ensures fair pricing and efficient deployment of attendant services.

At the public hearing, the operators also requested that the proposed modification to Regulation 10(2) of the Regulations should align with the provisions of the National Broadband Plan (2020- 2025) (NNBP), wherein it was recommended that the payments of spectrum fees should be spread across the lifetime of the licence to ensure network rollout is not adversely impacted.

According to Smile Communications, spreading the payment for spectrum over years would help operators a great deal in managing CAPEX and cost of sales and will guarantee investment in continued improvement of network infrastructure.

But the NCC in its response to the operators said the provision of the NNBP under reference presumed and proposes the payment plan for new entrants/new Licensees.

“However, the commission will continue to determine the payment plan as applicable. Therefore, the recommendation is not acceptable,” the regulator said.

Meanwhile, the global body of mobile network operators GSMA, which was also represented at the public hearing advised the commission that the proposed amendments to the pricing formula in the regulations should be revised to bring the regulations in line with Nigeria’s policy objectives as enshrined in section the NNBP.

“The amendments do not lower the cost of Last-mile and backhaul spectrum, and do not factor in elements that will encourage rollout in specific unserved/underserved areas.

“This will also have an impact on the other affordability-related targets in the NNBP as it will increase the cost of providing broadband services and, as a consequence, adoption and penetration of broadband services in Nigeria will be adversely impacted,” the body advised.

Reacting to this, Ikechukwu Nnamani, President of the Association of Telecommunication Companies of Nigeria (ATCON), said to get the 5G network up and running in the country will require more than just the spectrum fee by operators.

According to him, the potential bidders for the spectrum will decide if the cost of spectrum is in line with their profitability targets.

“The cost of spectrum is one component of the total cost of implementation of the services and a decision will be made if it is financially viable to run the service before each potential operator bids for it,” Nnamani said.

Asked if current economic realities in the country support business case for the huge investments required to implement 5G network, the ATCON president answered in affirmative.

He stressed that “the services enabled by 5G is an integral part of the Digital Economy. It will enhance all sectors of the economy. From commerce, education, entertainment, security, agriculture, healthcare, etc; and all will be positively impacted by the introduction of 5G in Nigeria.”

As regards balancing of investments between 5G and lower internet service categories including 2G, 3G and 4G, Nnamani assured that these networks will continue to exist and be improved on.

He however said users in one geographical location will be restrained to use the technology available in their area and depending on the services they want to have access to. “It will also depend on affordability,” he added.

In her opening address at the public hearing, the Director, Legal and Regulatory Services at NCC, Ms. Josephine Amuwa, explained that the Inquiry was part of the rule-making process adopted by the commission to ensure wide consultations in the development of frameworks for the telecommunications industry.