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PPPs necessary to increase broadband penetration 19 Nov 2015

Recently the Nigerian Communications Commission (NCC) disclosed that the private sector would drive the $10 billion investment target necessary to grow Nigeria's broadband segment over five years.
    
Ms. Josephine Amuwa, Director, Policy, Competition and Economic Analysis at the NCC was quoted to have said, “with the KPMG estimated investment said to be needed over the next five years, we don't believe it is the government that is going to provide the money for any investment. It is the private sector players that will drive the investment. What we only do as government and regulator is to continue providing and sustaining improved and friendly regulatory regime for their investment to offer them better Returns on Investment (ROI) and value to the final consumers.”

Much of this statement is very right, but a couple of things stand out.  Firstly, it was not KPMG that made the investment projections. They were made by our consulting firm, Business Unusual Ltd, and cited within the funding and investment section of the Nigerian National Broadband Plan 2013-2018, based on the prevailing cost of building out fibre and wireless infrastructure annually (Right of Way fees inclusive). Secondly, not ALL the $10 billion can come from private sector investment for the pace of development required to meet the broadband target. Ms. Amuwa was very right in her statement, however, that an improved and friendly regulatory regime for private sector investments is critical to making this happen. The challenge, however, is that Nigeria oftentimes does not feel very friendly to investors, and even Nigerians.

In last month's edition of this publication, I referred to a statement by the Secretary General of the UN Broadband Commission that said the markets in wealthier nations had done the job of enabling the rollout of networks where the business case had been strong, but the challenge was in connecting the next 4 billion unconnected people living in least developed countries where business cases may not strongly support giving them broadband. And this is precisely where the problem lies; private sector 'altruism' is largely driven by a strong and compelling business case, and some have argued that the case for spreading networks to Nigeria's hinterlands is simply not there. But please note, we are not just talking broadband networks here; we are also talking about voice.

Last year, the Universal Service Provision Fund (USPF) launched the results of its Access Gap Study showing 207 cluster areas in Nigeria where there was essentially no voice service. This study is available for free on its revamped website www.uspf.gov.ng. The Universal Service Provision Fund was enacted primarily to prop up the business cases that have made it economically unviable to service the 'unreachables.' Still, they are getting harder to reach, and this is a big challenge a friendly environment alone does not solve. As a businessman, why would you spend a billion dollars for only a marginal gain of a few hundred thousand more customers? There are easier ways to grow your money.

How friendly is the environment?

Recently, the operations of a few companies struggling with last mile delivery issues had to be temporarily interrupted because of the mode of delivery restrictions of frequency via the likes of microwave or even fibre. But while services were being restored, they argued that last mile spectrum licenses for delivery over microwave had not been released in over two years, and that applying for right of way in some states could take up to two years at very prohibitive costs. Others also argued that even the approval to install new base stations were still prone to several other challenges including finding a willing landlord, site, estate, all without objection from rent-seeking “children of the soil.” These challenges are not being decisively addressed and until they are, we are just paying lip service to the issue of broadband access and even deeper voice penetration.

According to the USPF study, an estimated 55 million of the population (calculated by clusters), have limited or no access to voice services, let alone broadband. Some villages are simply too expensive to reach.

Smart cities and urbanisation

Without aggressive state involvement, there will be no significant traction in the drive towards increased telephony and broadband penetration across the country. Reduced Right of Way fees agreed to by the Federal Executive Council and the National Economic Council need to be implemented across the states, starting with regional hubs. Regional hubs can be regenerated with clearly planned urbanization strategies. Increased Public-Private Partnerships for deploying integrated infrastructure (that includes underground power cables, ICT ducts, water pipelines etc.) need to be implemented, adhering to the Dig-Once policies and road construction guidelines gazetted by the Federal Ministry of Works.

Additionally, state funding and federal funding is required to work together to target those areas that are likely to be left behind. Without some conditions-based and milestone-derived contributions via the USPF, Viability Gap Fund, Infrastructure fund and other funds, there will be no significant increase in the broadband penetration figures. The private sector will spend at least its $1bn anyway, but there will always be a decision between keeping the goose that laid the golden egg alive, and nursing new geese. It must be a partnership.

The regulator doesn't need to be friendly; she just needs to be fair. And there are many within the sector, and within the hallowed halls of the regulator that understand this. Broadband is indeed the future, but are we ready to really address the issues to ensure that no one gets left behind?