Wednesday, 30 November 2016

This is why NCC asked TELCOMS firm to increase data rate

Nigerian Communications Commission (NCC) approved a new “floor plan”, or minimum pricing, for data services by mobile operators “to address market distortions, unhealthy price wars and value erosion that could threaten the going concern of service providers”, this is according to an internal working document.

In a letter to the big operators, the NCC had directed that the floor plan for data should be 0.90k/MB effective December 1, 2016 “pending the finalisation of the study on the determination of cost-based pricing for retail broadband and data services in Nigeria”.

As virtually all the big operators were already charging below the new floor rate, the directive meant an automatic increase in charges for data services.
However, small operators and new entrants in the data market, such as Spectranet, Ntel and Smile, are still allowed to charge below 0.90k/MB.
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NCC defines “small operator” as one that has less than 7.5% market share and “new entrant” as one that has operated for less than three years.

NCC believes that without a price floor, the big operators can engage in predatory pricing to drive down other operators, meaning the industry could be moving towards a monopoly.

DATA CHARGES BEFORE NOW:

Big operators average price/MB
MTN 45 kobo
Glo 21 kobo
Etisalat 94 kobo
Airtel 52 kobo
= Average 53 kobo

Small operators/new entrants average price/MB

Smile 84 kobo
Spectranet 58 kobo
Natcom 72 kobo
= Average 71 kobo

A senior NCC official told The Cable that CDMA operators – such as Multilinks and Starcomms – were muscled out of the data business by the Big Four because of their market power.

“At the rate they are crashing data tariffs, there is every chance that they will soon kill all the small operators and new entrants. Part of the functions and duties of NCC is to check monopolistic and oligopolistic behaviours in the telecom market,” the official said.
EXAMPLE: Globacom currently charges 21k/MB apparently because of the economies of scale advantage, compared to Smile which charges 84k/MB, or four times Glo’s rate, in order to break even. 
Under the new tariff regime, Smile can continue to charge 84k but Glo will have to move up to 90k/MB – a 328% increase.
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