INTRODUCTION TO LICENSING IN THE NIGERIAN TELECOMMUNICATIONS INDUSTRY (PART 1)1
The Nigerian telecommunications industry is one of the fastest growing2 and most regulated industries in Nigeria.3 Following the liberalisation of the previous monopolistic nature of the industry,4 participants of the private sector can now obtain a license to provide telecommunication services in Nigeria. The licence granted permits telecoms operators to own, operate or provide communication services within the scope of their license.5 It is unlawful for any person or entity to operate a communications system or facility or provide a communications service in Nigeria without a communications licence or an exempted order.6 It should be noted that issuance of licenses is not restricted to local entities as foreign entities can be issued a communications license in addition to full equity ownership of their company provided that, they are incorporated in Nigeria and have fulfilled all the requirements for obtaining the requisite communications licence.7 The Nigerian Communications Act (NCA)8 established the Nigerian Communications Commission (NCC), which is the principal body empowered by the NCA to regulate the activities of the communications sector in Nigeria. As part of its functions, the NCC grants and renews communications licences, monitors, and enforces compliance with licence terms and conditions by licensees, proposes and effects amendments to licence conditions in accordance with the objectives and provisions of the NCA, fixing and collecting fees for grant of communications licences and other regulatory services provided by the Commission.9
NATURE AND CLASSIFICATION OF LICENSES
The nature of licenses granted by the NCC is personal to the licensee, such that a licensee is not permitted to operate, assign, sub-license or transfer their licence to any other party without obtaining a prior written approval from the NCC.10 There are two major classifications of licences under the NCA:11
a. Individual Licence; and
b. Class Licence.
An Individual Licence is a category of license which terms, conditions and obligations, scope and limitations are limited to the service being provided. In Nigeria, Individual Licences are granted for the following services: Internet Services, Non-Commercial Closed User Group, Sales & Installation, Unified Access Service Licence, International Data Access, International Gateway, Interconnect Exchange, Metropolitan (Fibre) Cable Network, Mobile Number Portability, National Carrier, National Long Distance Communications, Public Mobile Communications – Trunk Radio Services, International Submarine Cable Infrastructure & Landing Station Services, Value Added Services - Aggregator, Value Added Services (VAS), Infrastructure Sharing & Collocation Services, Automated Vehicular Tracking Service, Open Access Fibre Infrastructure Network (INFRACOs), Wholesale Wireless Access Service, Private Network Links (PNL).12
A Class Licence is a broader category of licence which terms, conditions and obligations under the license are common to all license holders. The NCC usually grants a Class Licence in respect of any matter requiring a Class Licence under the NCA.13 In Nigeria, Class Licences are issued for: Sales & Installations, Repairs & Maintenance of Telecoms Facilities, Cabling Services, Telecentre/Cyber Café and Public Payphone Services.14
It is essential to note that NCC can issue an Exemption Order to exempt specified communication services or class of persons from the requirement of holding a licence.15 However, before an Exemption Order is granted, the NCC is required to ensure that the service to be provided will not interfere or cause harm to the service provider or consumer.16 The NCC maintains a register of all licenses issued and exemption orders granted, which is made available for public inspection upon request.17
SOME TYPES OF LICENSES ISSUED BY THE NCC
- Unified Access Service Licence (UASL): This is a type of licence that permits an entity to provide a wide range of services under a single licence. It permits a licensed entity to build, operate and utilize an International Gateway and a Network consisting of a Cellular Communication System, a Fixed Wireless Access Telecommunications System, Fixed Wireline Telecommunications System or a combination of any of these systems comprising Radio, Cable or Satellite or their combination, in the assigned Licence Area, deployed for the purpose of providing point to point or switched/unswitched point to multipoint Communications for the conveyance of voice, data, video or any kind of Message.18 It also permits a licensed entity to provide all types of access services, construction, operation, utilization of a Transmission Network and connection of terminal equipment for the purpose of rendering the services authorized under the licence.19 The Licence does not permit a licensee to utilize the frequencies assigned to it for any other purpose other than for rendering the services for which the Licence was granted.20 It prohibits a licensee from reassigning its frequency and from providing any other communication services outside the scope of its licence.21 This licence is valid for a period of 10 years and can be renewed at the expiration of the licence period.22
- Internet Services Licence (ISL): This Licence permits an entity to provide and operate internet services in Nigeria.23 It prohibits the licensed entity from offering any other Value Added Network service except with the prior written approval of the NCC.24 The Licence granted to the licensed entity permits it to provide internet services by employing wire line or wireless links provided by the National Carriers or other local loop operators.25 It also permits it to establish its own independent network to facilitate the provision of the service.26 The Licence is valid for a period of 5 years and it is subject to renewal and compliance with the applicable terms and conditions for issuance of the Licence.27
- Metropolitan Fibre Cable Network Licence (MFCN): This is a type of license issued by the NCC which permits an entity to build and operate access tandems and fibre optic transmission facilities/backbone upon land and water in Nigeria; to utilize other cost effective transmission media other than fibre optic in topographical areas where difficulty may be encountered in deploying fibre optic; to undertake intra-city traffic within the assigned zone; to interconnect multiple metropolitan areas to transmit inter-city traffic, and to establish points of presence for the purpose of interconnecting with private networks and the networks of access providers.28 The Licence does not permit the licensed entity to transmit and switch telecommunication services outside Nigeria, its switching function is limited to provision of Access Tandems within the approved metropolitan areas in Nigeria.29 The Licensee is prohibited from operating as an Access Provider and from switching Internet traffic for the purpose of delivery of IP packets to end users.30 The Licence is valid for a period of 20 years subject to renewal.31
- Infrastructure Sharing and Collocation Services (ISCS) Licence: This type of license authorises the licensed entity to provide collocation and infrastructure sharing services to qualified network service providers in Nigeria.32 It also permits the Licensed entity to construct, acquire and own telecommunications infrastructure and facilities available to sharing by network service providers on the condition that such infrastructure and facilities are not core network facilities.33 The Licence does not permit the licensed entity to provide service providers with active infrastructure for the purpose of sharing, for instance, switching systems and radio network systems or other infrastructure.34 The Licence is valid for a period of 10 years and is automatically renewed for a further period of 10 years subject to the Licensee's provision of satisfactorily rolled-out services, and payment of all the renewal licence fees and charges due, within a period of six months preceding the first expiry date.35
- National Long Distance Operators (NLDO) License: This type of licence authorizes an entity to build, maintain, and operate access tandems and transmission facilities using its desired medium of transmission and transport protocol; carry long distance traffic locally and establish points of presence in anywhere in Nigeria for the purpose of interconnecting with private Networks and networks of Access Providers.36 Like the MFCN Licence conditions, the licensee is only authorised to provide transmission or switching of telecommunication services within Nigerian borders, it is prohibited from disseminating such messages internationally.37The Licensed entity is also prohibited from operating as an Access Provider and from switching Internet traffic for the purpose of delivery of IP packets to end users.38 The licence is valid for a period of 20 years and is renewable for a further period of 5 years subject to the fulfillment of the conditions required for renewal of the Licence.39
- Sales and Installation of Terminal or other Equipment Licence: This type of License permits an entity to install cellular and other terminals, sell telecommunications components and accessories utilized or intended to be utilized for the installation terminal equipment like simple telephone handsets, modems, fax machines telephone extenders, cordless phone sets, switching equipment up to 100 lines capacity, HF, VHF, and radio terminal equipment.40 The licensed entity is not permitted to install any other kind of equipment that it is not authorised to install under the licence.41 The license is valid for a period of 5 years subject to renewal and compliance with the applicable terms and conditions for issuance of the Licence.42
EFFECT OF OPERATING WITHOUT A LICENSE
An entity which seeks to provide a communication service in Nigeria is mandated to obtain the required licence, failing which, it would be liable to severe sanctions by the NCC.43 Also, a telecoms provider is prohibited from providing a telecommunication service after the expiration of its Licence. Reg. 13(2) of the Licensing Regulation provides that: "Any person who continues to provide a telecommunications service after the expiration of a Licence duly issued by the Commission shall be liable to an administrative fine equivalent to the initial fee for the relevant licence and an additional fine of N100, 000 for each day that the contravention persists after the expiration of the licence."44
Sequel to the increased growth of the telecommunications industry in Nigeria,45 it is an ideal sector for both foreign and local investments. However, obtaining the requisite telecoms licenses is relevant to the ownership of a communication facility, operation, or provision of communication services in Nigeria. An entity that fails to fulfil this requirement before providing communication services would run afoul of the licensing regulation and would consequently be faced with severe sanctions that could affect the growth of its business.46 It is therefore a wise business decision for entities seeking to enter and profit from the telecoms market in Nigeria, to obtain the requisite telecoms licenses required to provide its desired communication services. It is also essential for such entities to conduct proper legal due diligence on its potential partners to ascertain whether the entities have acquired the requisite telecoms licenses needed for them to provide the communication services that they claim to be authorised to provide. In conducting a proper legal due diligence, a variety of relevant factors are needed to be ascertained to protect a potential investor from liabilities and regulatory sanctions, thus, it is advisable for entities to retain the services of a well experienced and knowledgeable telecommunications regulatory lawyer or law firm in this regard.
1. Sandra Eke, Associate Intellectual Property & Technology Department, SPA Ajibade & Co., Lagos, Nigeria.
2. In the second quarter of 2020, the telecommunications sector contributed 14.30% to the total GDP of Nigeria. See NCC, "Percentage (%) Contribution of Telecoms Industry to GDP," available at: https://www.ncc.gov.ng/statistics-reports/industry-overview#view-graphs-tables-8 accessed 30th November 2020.
3. Asides the Nigerian Communications Act 2003, which is the primary legislation governing the communications sector, there are other subsidiary regulations and guidelines governing the communications sector. Some of which include: Licensing Regulation 2019, Quality of Service Regulations 2013, Universal Access and Universal Service Regulations 2007, Type Approval Regulations 2008, Mobile Number Portability Regulation 2014, Registration of Telephone Subscribers Regulations 2011, Annual Operating Levy Regulations 2014, Guidelines for Dispute Resolution 2004, Guidelines on Technical Specifications for the Installation of Telecommunications Masts and Towers 2009, Commercial Satellite Communications Guidelines 2018 etc.
4. Prior to 1992, the Nigerian telecommunications sector was ruled by the Nigerian Telecommunications Ltd. ("NITEL"), a monopolistic government owned provider. When the government headed by President Olusegun Obasanjo came into power in 1999, it introduced a new National Policy on Telecommunications which was officially published by the Ministry of Communications in May 2000. The purpose of the policy was to lay the basis for a new telecommunications sector regulatory regime, remove arbitrary restrictions in the telecoms sector and reduce the largely unfettered discretion of the Nigerian Communications Commission (NCC), to foster rapid growth in the telecommunications sector and enable substantial improvement in access to telecommunications services. The policy formed the basis for two separate legislative initiatives that led to the promulgation of the Nigerian Communications Act, and which became the root of the liberalisation and reform of the telecoms sector.
5. Section 9 Licensing Regulation.
6. See section 31(1) of NCA.
7. See the list of requirements for obtaining a communications licence in Nigeria here: https://www.ncc.gov.ng/licensing-regulation/licensing/licensing-procedures#individual-license accessed 30th November 2020. Please note that by virtue of S.78 of the Companies and Allied Matters Act 2020, a foreign entity that intends to carry on business in Nigeria is required to be incorporated in Nigeria. Also, Reg. 10(1)(a) of the Licensing Regulation 2019 provides that an application for a licence shall only be valid, where the applicant is a corporate body registered under the laws in force in Nigeria.
8. Cap. N.97, LFN 2004.
9. See section 4(1) (e) - (g) NCA.
10. Section 38(1) NCA.
11. Section 32(1) NCA.
12. See NCC, "List of Licenses" available at: https://www.ncc.gov.ng/licensing-regulation/licensing/licensees-list
accessed 30th November 2020.
13. Section 49(1) NCA.
14. See NCC, "List of Licenses" available at: https://www.ncc.gov.ng/licensing-regulation/licensing/licensees-list
accessed 30th November 2020.
15. Section 7(1) Licensing Regulation.
16. Section 7(2) Licensing Regulation.
17. Sections 50 and 7(3) Licensing Regulation.
18. Condition 24.1 UASL.
19. Condition 24.2, 24.4 - 24.5 UASL.
20. Condition 38.1 UASL.
21. Conditions 38.1 and 38.2 UASL.
22. Paragraph 2, UASL.
23. Schedule 2, Condition 19 ISL.
24. Condition 22.2 ISL.
25. Condition 22.3 ISL.
26. Ibid 25.
27. Paragraph 2 ISL.
28. See Condition. 22 of the MFCN Licence.
29. Condition 32.1 and 32.3 MFCN Licence.
30. Condition 32.2 and 32.4 MFCN Licence.
31. Paragraph 2, MFCN Licence.
32. Condition 16.1 ISCS Licence.
33. Condition 16.2 ISCS Licence.
34. Condition 26.1 ISCS Licence.
35. Paragraph 2-4, ISCS Licence.
36. See Schedule 2, Condition 22 of the NLDO Licence.
37. Condition 34.1 NLDO Licence.
38. Condition 34.2 and 34.4 NLDO Licence.
39. Paragraph 2 – 4, NLDO Licence.
40. Paragraph 4 Sales and Installation of Terminal License.
41. Condition 8.2 4 Sales and Installation of Terminal License.
42. Paragraph 2 Sales and Installation of Terminal License.
43. Section 13(1) Licensing Regulation.
44. The NCC has undertaken several enforcement actions against telecoms providers operating with expired licenses. For instance, in the 3rd Quarter of the Compliance Monitoring and Enforcement Report released by the NCC in 2015, the office of Messrs. General Data Engineering Services Nigeria Limited (SKANNET) was sealed for operating with an expired ISP license and failure to fulfill its financial obligations in line with the terms and conditions of the licence. Also, in the 1st Quarter of the Compliance Monitoring and Enforcement Report released by the NCC in 2019, the Commission carried out enforcement exercises against Licensees operating with expired Licences in Lagos, Kano, Jigawa and Rivers States. In Lagos, enforcement actions were carried out on Xnet Security Technologies Limited which led to the sealing of its office. Following the exercise, the Company paid Six Hundred Thousand Naira (?600, 000.00) as part payment of its AOL in the sum of ?2,400, 000:00 and agreed to spread the remaining payment over six months. See NCC, "Compliance Monitoring and Enforcement Report (Quarter 1 – 2019)" available at: https://www.ncc.gov.ng/enforcement-reports/631-compliance-monitoring-and-enforcement-report-2019-q1?ml=1 accessed 15th December 2020.
45. Ibid 2.
46. Reg. 13 Licensing regulation.
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