" ITREALMS: Politics of 3G licensing

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Friday, April 06, 2007

Politics of 3G licensing

Features of the week:

Industry regulator, Nigerian Communications Commission (NCC) recently named four licensees for its 3G as successful applicants. REMMY NWEKE examines the politics beneath.

SINCE the news hit the Information and Communication Technology (ICT) wave length soon after the announcement for the commencement of the Unified Licensing Regime (ULR) and followed simultaneously by the Nigerian Communications Commission (NCC) announcement early February 2007 to license 2 Gega Hertz (GHz) also known as Third Generation (3G) and 450 Mega Hertz (MHz) licences in the country, this month, the ICT sector, has witnessed series of objections from the stakeholders.

Proponents of the protest, especially the telecom operators, wondered whether the license is worth granting, when some of them have the wherewithal to offer 3G services technologically without much ado, just as some raised alarm that the licensing fee pegged at $150 million, (about N1,921,575,000 billion) would automatically be transferred to telecom consumers.

Third generation promises higher data speeds and thus higher usage of both data and other multimedia transmissions.

It would be recalled that NCC in a public notice on its website, tagged “Licensing of Spectrum in the 2 Gega Hertz (GHz) otherwise known as 3G and 450 Mega Hertz (MHz) bands,” said it was to inform and update interested parties on the bands in which spectrum is to be made available.

Also, NCC said the notice was to avail interested parties the allocation processes and indicative timetable, stressing the commission would initially auction the 3G licenses on April 2, while the auctioning of 450 MHz bands was scheduled for April 16, this year.

NCC noted the announcement was in furtherance of its resolve to strengthen and develop the telecommunications services in Africa’s most populous country. Thus, it was in accordance with the implementation objectives of the National Telecommunications Policy (NTP) of the Federal Government of Nigeria and the Nigerian Communications Act of 2003.

“NCC is pleased to announce its intention to license spectrum in the 2 GHz and 450 MHz bands. This spectrum can potentially support a wide range of services and technologies including 3G and Fixed Wireless Access,” the notice read in part.

In line with NCC’s goal, the 3G and 450 MHz bands would be auctioned based on satisfaction of pre-qualification criterion by interested parties, even as the commission emphasised that participation in the auction processes would be limited to existing telecommunications operators in the country.

The Commission added that interested parties were expected to submit their memo also known as Issue Information Memorandum (IIM) for 3G on or before February 23, while that of 450 MHz was expected on March 16, 2007, enjoining bidders’ application to reach NCC for 3G interests by March 16, whereas submission date for the 450 MHz application was March 30, 2007 in that order.

However, the auction date for these spectrums have been shifted due to some public holidays, amounting to about five extra days, whereas the auctioning of 450 MHz has been called off as new time table is expected to be announced in May 2007, even as earlier demonstration of frequencies on 3G was conducted through three vendors, namely Huawei, Ericsson and Alcatel.

Telco’s protest
Reacting to NCC’s announcement, telcos, especially the GSM operators supported the idea of licensing 3G but kicked against the licensing fee of $150m.

But welcoming the Minister of Information and Communications, Mr. Frank Nweke Jnr, to his office in Lagos, the chief operating officer (COO), Globacom Limited, Mr. Mohammed Jameel, advocated for a free 3G license to GSM operators in support of the operators’ huge investment in the country given their upgrading of platforms to offer 3G services.

Also, the chief executive of Celtel Nigeria, Mr. Bayo Ligali, while addressing a business forum in the Federal Capital Territory (FCT), Abuja, urged the government to take a second look at the licensing notice with a review by availing the frequencies to the ‘big operators’ who already made investment to enthrone 3G services in the sector without fees.

He argued that for operators in the country to develop 3G optimally, the industry regulator, NCC, needs to forego its bid to auction 3G frequency spectrum, stressing that it could undermine its development and capable of increasing the cost of spectrum, which could translate into high operational costs.

He advised NCC to “implement administrative assignment of 3G spectrum which is less financially tasking on the industry as against an auction.”

Mr. Ligali emphasised, “Telecommunications holds the promise of achieving even greater gains and will continue to perform a crucial role in the transformation of the economy and the lives of Nigerians. The next level of growth will witness deeper penetration into un-served areas, wider range of services, enhanced data offerings and optimal quality of service.”

Similarly, at the 36th edition of Telecom Consumers Parliament held February in Lagos, the President, National Association Telecommunications Subscribers (NATCOMS), Chief Deolu Ogunbanjo, solicited NCC to revisit the 3G licensing guidelines, alleging the amount involved could translate to high cost of service delivery to the consumers.

Industry observers also pointed out that already some telcos have begun to offer 3G services on their networks, even as one of the operators cited a cyber café where Voice over Internet Protocol (VoIP) demand has been high, asking what service is that if not 3G.

NCC’s position
Responding to the request of free 3G licenses for existing operators, NCC said that they could kiss the Third Generation licenses goodbye, if they expect an allocation to them for free.

Explaining why 3G licenses should not be free for existing telecom operators, recently in Abuja, NCC through its Executive Vice-Chairman (EVC), Dr. Ernest Ndukwe told the visiting Association of Licensed Telecommunications Operators of Nigeria (ALTON) led by its chairman, Mr. Gbenga Adebayo, “There is nowhere in the world that frequencies are granted free to operators.”

He also said that the essence of the fee is to discourage speculators and charlatans in the process, stressing that the fixed fee of $150m is to deter operators especially those who do not have anything to do in the industry to come for license, even as the reserved price charged by the Commission was arrived at via scientific process.

“As a listening organisation, if there are serious suggestions from anybody that could convince the NCC board that the rate we have are not competitive or represents something that is different from international norms, then we can look at it again,” Dr. Ndukwe promised.

In a related event organised by the Nigeria Society of Engineers (NSE) in Lagos, Dr. Ndukwe affirmed that almost all the mobile operators have approached the commission for 3G licensing.

“I think what we are doing now is to finalise how the spectrum will be allocated. They even approached us for demonstration frequencies. But we decided to give the demonstration frequencies to the equipment vendors because if you give it to the operating companies they might start rolling out the service. So, we decided that it was safer to give it to the equipment vendors for a limited period of time,” he said.

Dr. Ndukwe disclosed recently at a media parley that four licenses would be on offer as the momentum for the Third Generation (3G) licenses increase.

He also said that the money generated from the auction would be paid into government account in the Central Bank of Nigeria and in turn be used for developmental purposes. He expressed optimism that with the growing fibre optic infrastructure in place as being deployed by the likes of MTN Nigeria and Globacom, the 3G services would be well offered to the teeming subscribers in the country.

He stressed that why the commission decided to auction the 3G was to make it as transparent as the 2001 GSM auction, which was widely acclaimed to be successful and transparent.

“Auction removes all argument; no kick backs and no long story,” he declared, underscoring the fact that the commission has all it takes to ensure that the auction of 3G licenses becomes a success.

Merits of 3G
Ndukwe, who described 3G as a farther enhancement of telecommunications services to Second Generation (2G) and enhanced 2G, that is 2.5, said it enables the user to transmit and receive voice, data, and picture signals simultaneously on portable mobile phone while in motion.

Referred to as triple play or quadruple play when Internet is incorporated, he pointed out that the relative speed of the user with respect to the base station or source of transmission, affects the data rate at a given quality of service, at the same time as it increases bit rates up to 2 Mega Bites Per Second (Mbps).

On the service point of view, Dr. Ndukwe said, 3G provides toll quality telephone service, compact disc quality music, picture and video offering, internet access and location based services as well as high end games in addition to electronic commerce with rich content.

“A 3G video service, for example, generates over 500 kilobits per second (kps) data rates compared to 13 kps generated by a GSM user,” he explained.

Eventually if 3G takes off in the country, new subscribers to the platform, he said, would require new handsets since most present handsets being used are not compatible with 3G technologies.

“The operating environment also needs to be prepared for the network resources that 3G services would demand,” he said, noting that presently, the GSM 2.0G/2.5G networks may have to undergo some technology upgrade to an all Internet Protocol (IP) network for greater efficiency and throughput. This much the telcos said they have achieved.

Four firms scale through NCC hurdle on 3G
However, two weeks before the auction date for 3G slated for April 2, the industry regulator, NCC announced that four companies successfully scaled through the first hurdle on the proposed plan to license the 2 Gega Hertz spectrum in the country.

The four included Alheri Engineering Company Limited, Celtel Nigeria Limited, Globacom Limited and MTN Nigeria Communications Limited, were chosen out of the 17 companies that responded.

Affirming this, Head, Public Affairs at the NCC, Mr. Dave Imoko, said that the four applicants’ submissions were critically evaluated with respect to the compliance details outlined in the Information Memorandum.

“Each applicant was found to have been fully compliant,” he asserted, highlighting that in these circumstances, where the number of applicants matches the number of lots, that NCC has no other option than to pronounce the application successful. As such, the NCC is pleased to announce that each of the applicants has been successful in its bid for a 10 Mega Hertz (MHz) lot in the 2 GHz band,” he said.

Mr. Imoko said that NCC looks forward to receiving the license fees of $150 million, within 14 business days, that is, on or before tomorrow, Thursday, April 5, 2007, which was extended by seven working days to Tuesday, April 17 this year, reiterating that NCC is only obliged to grant the license on clearance of the receipted funds.

“Upon receipt of cleared funds, the Commission will award the Spectrum Licence,” he said, even as investigations showed that the four companies would scale the final hurdle.

Mr. Imoko explained further that the purpose of granting licenses in the 3G by the commission is to efficiently allocate spectrum to those who value it most in an open and transparent manner, following international best practice.

NCC, therefore, congratulated the four top applicants as it looks forward to their contributions to farther develop in the Nigerian telecommunications sector and the economy.

Controversy on 3G licensing
As noted earlier that some telcos are already offering 3G services, such as GSM firms and Code Division Multiple Access (CDMA 2000-1x) companies, which has continued to generate some controversies, one of the Unified Licensed Operator (ULO), Starcomms Limited, has said that why it did not go for the 3G was because its Unified Access License covers this and enables it to offer 3G services to subscribers.

The chief executive, Starcomms, Mr. Maher Qubain, was unequivocal that the telco is the only CDMA 3G operator optimising its license in the country of date.

“We have spectrum for 3G license in the 1900 Mega Hertz (MHz). Yes, we’re 3G mobile company and that was the reason we did not apply for 3G when the bid opened,” he said, stressing that the current spectrum allows his company to offer 3G services.

“We have the technology and frequency and GSM doesn’t have that. So, GSM operators if they want to offer these services have to go for the license. Our CDMA 2000 1x is by standard a 3G technology,” he said.

Another point of controversy has been that NCC in its notice stipulated that only existing telcos would participate in the 3G auction, however, Alheri Engineering Company Limited, reportedly a subsidiary of Dangote Group, is not known to have rolled out based on its license as the National Long Distance Operator since 2005, even as it is yet to register with the umbrella body of telcos in the country, the Association of Telecom Companies of Nigeria (ATCON) or ALTON.

Consequently, NCC weekend, announced the suspension of processes leading to the licensing of 450 MHz, saying that a revised timetable will be communicated to interested parties in May 2007.

Kudos for Nigeria
While reacting to the emergence of four successful telcos for 3G licenses as announced by industry regulator, ALTON chairman, Mr. Gbenga Adebayo, joined hands with NCC to congratulate the licensees, noting however, that the telecom market in the country is no longer for small players.

“Now that they have gotten the frequency, it’s time for deployment,” he said, pointing out that the challenge is for smaller operators to see where they would come in and be active.

He expressed optimism that the nation as well as the industry is moving forward faster than expected.

“I am quite excited about this. It goes to show that NCC process is acceptable since no one has gone to court to challenge the bid process,” Mr. Adebayo said, even as it would be in the best interest of the subscribers.

Last line:
Although, NCC prides self as an independent national regulatory authority for the telecommunications industry in Nigeria, the question industry observers are now asking is if actually the regulator is selling mere spectrum or regulating technology, as well as how transparent has the 3G auction been? Only time would tell as politicking on 3G unfolds.

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