Nigeria: Impact Of NCC's Removal Of The Data Floor Price On The Internet Data Market

Last Updated: 20 July 2016
Article by Perchstone & Graeys

The Nigerian Communications Commission (NCC) had earlier, on October 13, 2015, lifted the data floor price, giving the telecoms operators and the Internet Service Providers (ISPs) the freedom to reduce their data tariffs below the set lowest industry prices. It would be recalled that the regulator had in May 2013 imposed a price floor on telecoms operators in the country as a means of controlling anti-competitive behaviours by operators considered to have attained the dominant status in the industry.

Simply put, the removal of data floor price was implemented by the NCC to promote and ensure sustainability, growth and development of the segment of the data service market. It was designed and perceived by the regulator as a way of ensuring that smaller Internet Service Providers (ISPs) and telecoms start-up companies had the chance to compete with the bigger, already established companies.

The philosophy behind the removal is to enable ISPs to bring down their internet data price as low as possible so as to gain more subscribers as well as make it cheaper for Nigerians to access the internet. In light of the removal, it becomes necessary to analyze the impact it has had on the behavior of the telecoms operators as well as its beneficial impact to the relevant stakeholders particularly the subscribers?

In a nutshell, a price floor is the lowest legal price a commodity or service can be sold at; i.e. setting a minimum price for a good or service. The term when used in the telecom sector is the limit to how low ISPs in Nigeria could fix their prices. A price floor, though share some similarities with price ceiling as form of price controls; however is different from the latter. A price ceiling simply refers to setting a maximum price for a good or service. This was exactly what the Federal Government did recently by the removal of subsidy and placing a ceiling of N145, above which oil marketers cannot sell petrol.

Thus, a price floor is a government-or industry-imposed price control or limit on how low a price can be charged for a product or service. Price floors are usually used to protect manufacturers and ensure that they get a fair price for their produce. By necessary implication, the NCC is of the firm view that the removal is necessary given that the market is now sufficiently competitive and no industry player can suffocate the others. In any case, in the event of an occurrence or any sign of occurrence of anti-competitive behaviours by any operator against the other, the NCC had stated that it "will restore the floor price if any distortion is observed within the market segment".

The Impact

Inevitably, the telecoms operators reacted to this removal by reducing their data prices considerably. Thus we can observe that prior to the removal, a subscriber will purchase a 6GB of internet data on Globacom's network for a sum of N3,000. Today, same amount will get you 12GB on Globacom's network while ₦3,500 will today get you 7GB on the Airtel network. Both MTN and Etisalat have also revised their data plans in a bid to compete on this front. This reduction in prices has also had a significant effect on the reduction or increase in the number of internet subscribers amongst the telecoms operators.

In September 2015, a month before NCC removed the data floor price, MTN had the highest amount of internet subscribers among the four (4) major telecoms operators. Going by the NCC's Internet Subscriber Data report of May 2015 – April 2016, MTN had 41.8 million internet subscribers – that's almost 100% more than Glo's 21.9 million subscribers. Airtel was third with 17.7 million and Etisalat fourth with 15.6 million. One month after the floor price removal, in November 2015, MTN lost 1 million subscribers (N40.8 million), Glo gained 3 million (N24.9 million), Airtel lost close to 1 million subscribers (N16.8 million), and Etisalat lost close to half a million (N15.2 million).

By April 2016, MTN had lost almost 10 million internet subscribers (N32.4 million), while Glo had gained almost 5 million (N26.3 million). Airtel's internet subscriber base fell from 17.7 million in September 2015 to 15.3 million in April 2016, while Etisalat's internet subscriber base rose to 17.2 million from 15.6 million. Looking at these figures, it's obvious that Glo has been the big winner so far while MTN has been the big loser in the ongoing data fight.

Moving away from the impact of the removal on the operators, there is also the positive impact the removal would have on the behavior of the users of these data; Nigerians. The removal of the data floor will make it cheaper for Nigerians to access the internet. This, in turn, will increase online economic activities such as online shopping, online banking and as well other economic activities which are transacted over the internet.

The most obvious benefactor in this regards has been the entertainment industry which has seen the rise of such online entertainment outfits like NdaniTV and IrokoTV. On the other side, however, is the reduction in the quality of internet service delivery which many data subscribers are now having to cope with. This is due to the increased traffic loads the internet facilities of these telecoms operators would now have to carry as more people subscribe for increased internet data services.

In conclusion, there is no doubt that impact of the removal of the data floor price has been good so far. In this time and age where people are becoming increasingly reliant on the internet for their day to day activities, a policy guide that improves internet penetration and accessibility is always a welcome development. Nevertheless, the increasing low quality internet access services flowing from the data price crash is very worrisome and should be a grave concern to the regulator. Hence, it is recommended that the telecoms operators should continually expand their infrastructure networks by adopting and utilizing the latest technology in order to ensure that they keep up with the growing demands for internet access in Nigeria. Perhaps this may be one area MTN can exploit to restore its lost dominance in the data segment of the market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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