Breaking News
Translate

Why we crashed telcos USSD price cap — NCC

…New price, not realistic Telcos reply

By Prince Osuagwu (Hi-Tech Editor)

Today’s global economy is increasingly dependent on mobile technology. This is not just for telecommunications services but also for a number of other services offered by adjacent industries.

NCC
NCC

In this regard, Unstructured Supplementary Service Data, USSD services are playing an increasingly important role in the implementation of value added services across multiple platforms.

However, in recent times  there has been a growing concern that even as mobile and data subscriptions  surge in Nigeria, some of the charges, including the USSD charges remain static, against the law of cost and demand.

NIMASA hints of imminent plunge in freight rates(Opens in a new browser tab)

For instance, in the first six months of 2019, the volume of mobile inter-scheme transactions rose to over 1.8 million, creating a value of over N45.2 billion in the process.

Yet the cost of mobile money transfer between banks costs a user N52.50, utility payments including digital/satellite television subscriptions gulp N105 per transaction among other charges.

Although these charges are distributed across all the platforms involved in the transaction, including the telcos, banks and other organisations involved, technology experts believe that the costs should have gone down as penetration deepened.

But, the Nigerian Communications Commission, NCC, recently in line with its mandate to promoting the provision of modern, universal, efficient, reliable, affordable and easily accessible communications services, issued an order to all telcos to bring down their (USSD) services to not more than N4.89k per session.

The Commission said the order was necessary, to save subscribers from the often high and arbitrary charges on mobile financial services. The regulatory document titled “Determination of USSD Pricing” which is binding on all Mobile Network Operators (MNOs) and takes effect September, seeks a departure from the usual practice involving a negotiation between telcos and financial services providers in determining what the consumers pay for mobile USSD transactions.

The NCC, however, said it waded into the matter to exercise its right of issuing orders on how digital financial services should be done in the country. The Commission aims at issuing new guidelines for licensing finance and getting more Nigerians into the government’s financial inclusion plans. The NCC said that other financial services by the network providers were often high and arbitrary and also expressed belief that banks and licensed mobile financial services providers would comply with the new instruction.

Telcos knock cost

However, the telcos, have taken a knock at the new price cap, arguing that the recommended cost may not be a true reflection of the total costs for the provision of USSD services. They also contend that the recommended cost for a USSD session represents a significant reduction from the going industry rate and could be a disincentive for future investments towards supporting the evolving digital financial service ecosystem.

Representatives of the four telecom operators including MTN, Globacom, Airtel and 9monile, said that the determination of an accurate operative cost for the provision of USSD service would be impossible because USSD platforms, unlike call termination which involves the use of similar resources, is typically bespoke to each Operator in line with their commercial and technical objectives.

There was also the argument that the estimated cost is not an accurate representation of actual cost of USSD service because it does not reflect current economic indices such as the year 2017 exchange rates used in the cost model.

As a result, the operators argue, that opportunity costs effect arises due to the fact that USSD sessions use the same signalling channel for a Voice Call or SMS set-up. Operators also described the additional costs linked to the cost of network elements underpinning provision of USSD services and recommends that the Commission stipulate a pricing regime that allows for sufficient margin between cost and retail rates. The operators recommended a margin of 64% which reflects the same margin between Mobile voice call termination and price floor for Voice.

How it began

Explaining the journey to the new cost regime, The Director Public Affairs of the NCC, Mr Henry Nkemadu, told Hi-Tech that as part of its effort to create an enabling environment for competition among operators in the industry, and ensure the provision of qualitative and efficient Communications services throughout the country, the Commission engaged PricewaterhouseCoopers (PwC) to assist it understand, and determine the cost of USSD services.

Senate committed to healthy financial institutions — Lawan(Opens in a new browser tab)

He said that though there was no obvious market failure in terms of Competition amongst the MNOs in the USSD service market segment, the commission however, elected to intervene pursuant to its statutory obligations to promote affordable Communications services and to ensure that the charges reflect the underlying costs of service provision as required by the Nigerian Communications Act, 2003.

Stakeholder engagements

Nkemadu also said that this consideration supports the appropriate pricing of USSD, being a resource critical to the attainment of Nigeria’s social and economic inclusion imperatives.

Besides, the commission said that it was inundated with complaints of excessive prices by Financial Institution against Telecommunications Operators and not by any identifiable market failure in the segment that would necessitate Regulatory intervention. These inflated and untenable charges according to the commission, created a challenge which affected the acceptance of USSD services by the unbanked/under-banked in Nigeria

Before arriving at the new price cap, the commission said in March 2019, it invited the Operators to review and provide comments on the study on USSD, after which, a stakeholder engagement was held in May 2019, with relevant Telecoms Operators and representatives from CBN, WASPAN, EFiNA AND NIBSS represented and making valuable contributions.

Nkemadu said that “in carrying out the review, the Commission subsequently took into consideration, the indicative results and recommendations of the consultancy, the aggregated operators’ comments, and its understanding and characteristics of the USSD usage/services ecosystem to determine the cost of providing USSD Services on Nigerian telecom networks. “The Commission notes that one of the widest uses of the USSD platform is for the delivery of Digital Financial Services (DFS). However, USSD charge is just one of the many cost components of DFS

Transparent DFS ecosystem

“It is expected that other players in the DFS ecosystem (such as banks and licensed mobile financial services providers etc.) would equally be transparent and ensure that their charges reflect their true cost structures. It is expected that this determination will enable such transparent cost application in that sector. The Commission looks forward to action by the other regulators in this regard to achieve fair pricing to the benefit of consumers, the different players in the ecosystem, and Nigeria as a whole”

Insisting that what NCC did was in order, he said: “The Commission has carefully considered the data/information provided by stakeholders and taken into view its understanding of the USSD platform and associated cost components, the impact of USSD services on other ancillary services critical to Nigeria’s socio-economic growth objectives and the Nigerian macroeconomic environment.

The process of this Determination has been conducted in a climate of openness, with a view to providing maximum transparency to all parties without compromising the confidentiality of commercially sensitive information.

COL LABO (RET.): Deploying soldiers for Internal Security duties in 32 states is recipe for tragedy(Opens in a new browser tab)

“With reference to USSD charges as a component of high charges for Digital Financial Services in Nigeria, it is our expectation that the Central Bank of Nigeria will look into, and conclusively address alleged high and arbitrary charges by financial service sector players, and that all other players in the ecosystem will be more transparent with their charges.

“The Commission encourages the adoption of a revenue sharing model aimed at reducing the overall cost of the service for consumers. We also encourage financial services providers to seek other ways to collaborate with the MNOs to ensure that charges for all DFS platform components are set at reasonable price points which encourage the attainment of financial inclusion objectives” he added.

Vanguard

All rights reserved. This material and any other digital content on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from VANGUARD NEWS.

Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.
Do NOT follow this link or you will be banned from the site!