Telecommunication is an important part of modern society. In 2006, estimates placed the telecommunication industry's revenue at $1.2 trillion (USD) or just under 3% of the gross world product. Its importance on economic and social development cannot be underestimated and it direct effects include;
• Modern telecommunications provide a cost effective and time efficient medium for accessing and diffusion of new ideas and knowledge which have been identified by economists as key elements for stimulating economic growth rate.
• Availability of telecommunication services help to improve information flow between rural and urban regions and help reduce the gap of economic development between them, the same can be applied to developed and developing countries.
• While telecommunication services are to some extent a low cost substitute for information handling labour and have very low substitutability with other traditional inputs such as capital, production, labour and materials, they can however help businesses by increasing the productivity of each of these traditional inputs and thus increasing the efficiency of the entire production process.
• By facilitating information flow and by enhancing the communication between buyers and sellers, telecommunications increases the efficiency of market operations.
• Besides its direct contribution to end-users, telecommunication networks and their use generate significant spill over effects in other sectors of the economy. Once the telecommunication infrastructure is built in any nation, it is available to all sectors of the economy and some of its benefits include the lowering of transaction costs, the ability to search widely or the ability to control a greater pan of production and organizational activities.
As a result, the social rate of return on telecommunications is expected to be much higher than its return just on the telecommunications investment itself. Studies done by the United Nations Economic Commission for Europe, ITU and the World Bank, recognize the role of telecommunications in stimulating efficiency and growth of other sectors in the economy.
• The easy acquisition and transfer of information among economic units, and the facilitation of rapid two-way communications over distance helps in the coordination of economic activity. This provides a platform to improve the capability of business managers to communicate with each other and make better decisions and business plans. Telecommunications help to remove, to a great extent, the physical constraint on organisational communications in all sectors of the economy.
However it is a mistake to view the impact of telecommunication as purely economic. Telecommunication facilitates emergency medical assistance, long distance consultation, and quality assurance to remote locations, easing the cost of providing medical care throughout the nation subject to a tight national budget constraint.
Telecommunications also helps to spread education to remote locations, with voice, data and video services through high bandwidth allowing effective distance learning. Recent development of Inter networks as a layer on telecommunication networks is making this effort more cost effective.
For decades the telecommunications market in Nigeria was dominated by, Nigerian Telecommunications (NITEL), a government monopoly. NITEL began operations in 1985 when the Nigerian External Telecommunications and the Telecommunications Division of the Post and Telegraphs (P&T) Department were merged.
Prior to this development, it was the P & T that was responsible for the provision of domestic telecommunications services, while the Nigeria External Telecommunication (NET) provided international services.
Although deregulation of the telecommunications sector in Nigeria began in the late 1990s with 11 companies given license to provide fixed-line services to end consumers (so-called “last mile services”), it was not until the arrival of mobile phone operators in 2000 that the Nigerian telecommunications market took off.
In a short time the number of mobile phone subscribers surpassed the number of fixed lines and year-on-year growth of over 40% saw the Nigerian telecommunications market emerge as the most vibrant on the African market and the largest ahead of South Africa in 2008, with close to 60 million digital mobile subscribers and just under active 1.5 million fixed lines.
The Nigerian telecommunications sector is one of the better performing sectors of the Nigerian economy and one of the fastest growing employers of labour in the country. As of 2004, the sector had an impact of creating 5000 jobs directly and more than 400,000 indirectly. Its rapid growth has seen some project that the industry will be worth US$ 10 billion by 2010.
Despite the recent boom, the industry is still blighted with relatively high tariffs, poor quality of service including dropped calls, poor voice signal quality and lack of adequate interconnectivity; and poor penetration, serving only a third of the Nigerian population (The more developed South African market has a higher penetration rate of 76%).
Even with operators facing a hostile business environment which includes high operating costs, the constant threat of vandalism to their equipment and a reduction in the Average Revenue Per User (ARPU), the Nigerian market still remains one of enormous potential and growth.
The Nigerian market is probably the most liberal and competitive market on the African continent and is likely to remain that way in the next few years due to the following;
• Globacom, Nigeria’s Second National Operator and the one of the largest mobile operators in the country has announced that it expects to commission its international submarine cable, Glo-1, for commercial services in March 2009. The multi-billion dollar infrastructure will connect the West African region to the United Kingdom, providing a major boost to Nigeria’s bandwidth requirements.
• Main One Cable Company is also expected to start services on it submarine cable in 2010, and the ACE (Africa Coast to Europe) submarine cable by Orange and France Telecom expected in 2011.
• The Federal Government has revived the stalled Rural Telephony Project, which was designed to provide telephone service in 96 rural communities in Nigeria. The project, which is partly funded by a $500 million loan from the Chinese government, was recently awarded to five telecommunications companies in announcement recently made by the Minister for Information and Communications.
• 2008 saw another player, Etisalat, throw its hat in the Nigerian market as a mobile phone operator. Etisalat is a telecommunications service provider in the United Arab Emirates since 1976 and has operations in 16 countries traversing the Middle East, Asia and Africa. In Africa, Etisalat’s operations span 10 African nations including Sudan and Zanzibar. Since its entrance into the Nigerian market, the company has gone a nationwide marketing blitz to advertise it services and win over customers of its more established competitors.
• In October, 2008, Daar Communications launched its direct-to-home digital satellite multi-channel television platform, DAARSat. The digital TV platform, which has the capacity for 120 channels, started off offering about 45 channels from around the world to consumers. Its entrance into the market is expected to introduce competition and reduce the prices for consumers, as well as speed the transition from analogue to digitalised terrestrial broadcasting in line with the global deadline of 2015 set by the International Telecommunications Union (ITU).
One major drawback for the telecommunications industry however was the loss of the Nigerian space satellite to a solar flare. The satellite is expected to replaced by insurers, but an exact date of when that will happen is not known,
Before looking at the individual services offered by the telecommunications sector in the country, we look like to put forward some proposals to maximise the potential of the Nigerian market and take advantage of the recent growth spurt in the industry.
Energy Reforms
Telecommunications operators in Nigeria are faced with the high cost of doing business in the country and one of the major challenges they face is the erratic power supply. The operators have cited this as the singular most contributory cause for the poor quality of service (QoS) offered by all operators. Operators have to generate their own power and that adds a significant cost to their overhead costs, which they then pass on to consumers. For instance MTN, the leading mobile phone operator in the country, has a power generation in comparison to the public power supply, of 3 to 1.
There are also the added costs of providing security for their power generating equipment as there is a high demand for them in the country. The equipments are a target for armed bandits who already have an establishment market to sell on to.
By prioritising energy reforms, the Federal Government can ensure constant power supply to many of the operators’ infrastructure leading lower costs in operations and an increase in the quality of service offered.
Education Reforms
Industry leaders have cited that an emphasis on the provision of science and mathematics education provides an edge in closing the technology gap between develop and developing countries. The global call has been spearheaded by Bill Gates, founder of technology giant, Microsoft, who through his foundation, the Bill and Melinda Gates Foundation has made philanthropic contributions to educational causes around the world.
Technological advancements, and indeed the telecommunications industry, are dependent on the basic understanding of mathematics and science and then applying them to solve complex everyday problems. By placing an emphasis on the teaching of sciences at all levels of education, it is possible for a nation to make it competitive on the global stage and indeed challenge many of the more established nations.
Indeed this was one of the approaches of the Asian Tigers (Malaysia, The Republic of Korea, Taiwan, Hong Kong, and Singapore), who increased the student enrolments in science, engineering and technical-related courses so as to intensify the production of manpower with scientific and technical knowledge.
A similar approach in Nigeria is likely to have the same effect and provide a steady flow of talent from which technology related industries, including the telecommunications industry could benefit immensely from. More importantly, Nigeria can replicate the success of these countries in providing value added services, not only for the local Nigerian telecommunications market but the global market as well.
Prioritisation of ICT
The Federal Government will need to place more emphasis on the use ICT to promote its use in the Nigerian society. Though the government some moves towards providing e-Government services to its citizens, a majority of its dealings are still non- electronic, and it has been slow in implementing some of the earlier promises made under the National e-Government Strategies.
Embarrassingly, even the Government’s official website (www.nigeria.gov.ng) was shut down for several months in 2008. Perhaps even more disheartening for many IT practitioners in the country are the plans of the Federal to merge the IT sections of federal ministries with the departments of Planning and Statistics.
By aggressively embracing e-government, the Federal Government can easily place itself as one of the largest consumers of telecommunication services in the country. Given the role that technology has to play in today’s modern economies, it is imperative that the pushes a technology initiative as much as it would any health, education or agriculture initiative.
At this stage we would recommend splitting the Ministry of Information and Communications into two distinct organisations;
• Ministry of ICT – This would oversee regulation of all information and communication technology activities in the country, including telecommunications and postal services. It will also implement all of the Federal Government’s ICT strategies.
• The Press Office - This would be under the supervision of the Office of the Presidency and will be merged with the Office of Public Communications. The new body will handle all the public relations for the Federal Government.
Stimulate Local Telecommunications Manufacturing Base
Developing a local telecommunications and computer manufacturing base in Nigeria will go a long way in developing and maintaining growth in Nigeria’s telecommunications market.
Creating a conducive environment for foreign investments (tax breaks, enabling environment, constant energy, adequate security and quality graduates from the educational system) for the local manufacturing of telecommunications equipments will not only help in reducing the cost of operations for many of the service providers in the country and provide cheap communication devices such as mobile phones to the Nigerian consumer, but possibly create a new line of export for the country, bringing in valuable foreign currency.
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