By Adekunle Adekoya

ANALYSIS

ON Sunday, the telecommunications regulator, Nigerian Communications Commission, posted a document on its portal entitled Determination of Dominance in Selected Communications Markets.

In the document, it established the basis for the determination of dominance in the communication market, which it said is in line with exercise of its regulatory function “to ensure fair competition in all sectors of the Nigerian communications industry” (Nigerian Communications Act 2003 (NCA 2003) “as a result of which in June 2012 it embarked on a Study of the Assessment of the Level of Competition in Nigerian Telecommunications Industry.”

The outcome of the study is the document cited above. The document identified six major segments – Mobile voice, Fixed voice, Fixed data, Mobile data, Upstream, and Downstream.

In its assessment of competition in these segments, NCC designated MTN Nigeria a dominant operator in the Mobile Voice segment with 44 per cent market share of subscribers. NCC said: “The mobile voice market is not effectively competitive and is still highly concentrated with an HHI (Herfindahl Hirschman Index) of 3063.

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MTN has a 44 per cent market share of subscribers within this market. There is also a wide differential (of about 300 per cent) between on net and off net calls and this is indicative of the likely establishment of a calling club for MTN subscribers.”

Further, the regulator also designated both MTN Nigeria and Glo as joint dominant operators in the wholesales leased lines and transmission capacity sub-segment of the upstream market. Both MTN and Glo have substantial investments in broadband; MTN has WACS while Glo has Glo 1.

Issue of competition
To address the issue of competition, the NCC resolved that the Dominant Operator in the Mobile Voice market, in this case, MTN Nigeria, shall be required to adhere to the following obligations:

a) Accounting separation: The Commission will immediately enforce and implement accounting separation on the dominant operator;

b) Collapse of on-net and off-net retail tariffs: The differential between the on-net and off-net retail tariffs will be immediately collapsed. The tariff for on-net and off-net will be the same, and subject to periodic review; and

c) Submission of required details: The Commission may require the dominant operator to submit details on specific aspects of its operations from time to time as the need arises in the upstream segment of the market (comprising spectrum, tower sites, network equipment, wholesale broadband/ internet access, and wholesale leased lines and transmission capacity).

The regulator noted that “MTN and Glo jointly control about 62 per cent of the public terrestrial transmission infrastructure which is a bottleneck resource in the provision of voice and data services. There are concerns that operators playing in the wholesale and retail sub segments of these markets have the leverage to “squeeze” the margins of their competitors who are also their customers.”

As a result, NCC designated GLO and MTN “as joint dominant operators in the wholesale leased lines and transmission capacity sub segment of this market.”

In respect of this, both GLO and MTN shall be required to comply with the following:

a) Price cap//price floor: The Commission will come up with a price cap for wholesale services and price floor for retail services, and subject to periodic review.

b) Accounting separation: The Commission will immediately enforce and implement Accounting Separation on the joint dominant operators.

c) Submission of required details: The Commission may require any of the joint dominant operators to submit details on specific aspects of its operations from time to time ass the need arises. The implications of these resolutions by the regulator are not far-fetched.

One, it becomes clear that the telecoms regulator is moving into management regulation of the telecoms firms concerned. By demanding and enforcing accounting separation, the books of the telcos will now be subject to scrutiny by the regulator, and pertinent questions raised, where they arise.

This will have the positive effect of deepening good corporate governance practice where it already exists, and instituting it where it is presently lacking. It is a red card for telcos where decision making processes are vertical and centralised.

On the other hand, the price cap and price floor for wholesale services and retail offerings that the regulator plans to introduce will have a salutory effect on the pricing of services in the industry. More importantly, it signifies a new regime where market forces only will no longer determine prices. In other words, price control will become part of the regulatory activities and hopefully, exploitative tariffs will disappear.