Why Internet Service Providers Are Declining, By NCC

Competition with mobile network operators (MNOs), harsh business operating environment, and inadequate national broadband infrastructure are some of the problems that have led to the depletion of the generation of internet service providers (ISPs) in the country, according to the Nigerian Communications Commission (NCC).

The regulator, in new study entitled: An Exploratory Study on the Challenges and Survivability of ISP Licencees in the Nigerian Telecoms Sector posted on its website at the weekend, showed that at a time, there were some 170 ISPs in the country.

It said it has 143 licensed as at October 26, 2020.

Other challenges identified by the regulator included multiple taxation; vandalism of infrastructure; disparity between advertised internet speeds and actual speed obtainable on the networks; inadequate provision of redundancy by ISPs to handle network downtime and lack of compensation for downtime; poor quality of service; inexplicable depletion of data services; and auto renewal of service, among others.

“Major operators in the ISP space have identified numerous huddles they have had to cope with and in fact, a good number of them have given in to these challenges to exit the market. Some of these challenges as identified are general to the telecoms sector while some are specific to consumer dissatisfaction with ISPs.

“The challenges have led to the low rate of renewal of licenses by the ISPs which is affecting the internet service segment of the country’s telecommunications sector,” the report said.

Nigeria with a population of over 200 million boasts 151,512,122 million internet users representing a 75.7per cent active internet subscription as at last September.

NCC said it was necessary to note that the 75.7per cent does not represent individual numbers of users, as a number of subscribers with multiple subscriber identity module (SIM) cards also have multiple active internet subscription.

“Therefore, data from statistics indicates that Nigeria has approximately 99.05 million internet users. This figure is projected to grow to 131.7 million internet users in 2023. The internet penetration amounted to 46.6per cent of the population in 2020 and is set to reach 65.2per cent in 2025.

In Nigeria, Internet subscription services are provided by the following technologies: GSM, CDMA, Fixed Wired, and Voice Over Internet Protocol (VoIP).

To solve the issue of artificially low internet/data prices, the study said a regulated minimum price level has to be put in place by the government and the Commission, for big and small telecom operators to compete on the quality of the network and customer services they provide.

The report submitted: “There is an urgent need for the Commission to ensure the conclusion of the study on cost-based pricing determination in Nigeria for retail broadband and data services. The study report will allow the decision on the price of the data floor to encourage a level playing field for all industry operators.

“As investment in telecommunications infrastructure is essential to economic growth, the Commission should encourage adequate infrastructure build out as it contributes to the efficient operation of the sector and the survivability of the ISPs.

“The Commission should provide the best enabling environment that encourages additional Investment in telecommunications infrastructure as essential to economic growth, as adequate infrastructure contributes to the efficient operation of the sector.

“The Commission should conclude a critical review/amendments to the obsolete portions of the Nigerian Communications Act 2003, which is heavily concentrated on the provision of voice services, without much direction on the more relevant emerging technologies. Today, more emphasis should be placed on competition in the sector in a saturated market, the economy and other services closely related to the telecommunications industry, such as finance, technology and media services

It urged the Commission to champion the ubiquitous use of e-services, e-governance and e-business, which would result in an increase in the need for internet services which would invariably lead to more business opportunities, niches, and customers for the smaller ISPs especially in more rural areas which might not be so commercially viable for the MNOs to compete in.

“There is a need to encourage ISPs to improve their general business processes/ practices to ensure long-term growth and sustainability in order to create new revenue streams, recreate existing products, diversify into new areas for which resources and capabilities are available and establish a minimum market price,” the report added.