Wednesday, November 30, 2016

Price increase in mobile services in Nigeria due to government policies

Around a year ago, Nigeria’s mobile internet subscriber base had nearly hit at a landmark figure: 100 million. But, due to unfavorable government policies, that trend is likely to be reversed.

Last year, the Nigerian Communications Commission (NCC), the country’s telecoms regulator earned praise for deregulating data prices. The removal of a data floor price allowed local telcos to set lower mobile data prices making them cheaper than ever before and enabling more Nigerians access to the internet.

But, in a surprising move, the NCC has reinstated its data floor price, forcing telcos to jack prices back up. In a letter sent to telcos, the NCC claims the price increase is necessary “in order to provide a level playing field for all operators in the industry.” The prices will take effect from Dec. 1.

The NCC cited the need to allow “small operators and new entrants” who hold “less than 7.5% market share” and have operated “less than three years in the market” to operate profitably. Put another way: the NCC thinks that, by charging lower prices for data, large telcos, like MTN, could kill off smaller internet service providers who’d be unable to compete profitably. Reports suggest the new regulation is due to lobbying by smaller operators.

More expensive mobile internet access costs will particularly stifle internet usage growth given Nigeria’s low fixed line broadband internet penetration. The move is being widely criticized by players in Nigeria’s fast-growing tech sector. Iyin ‘E’ Aboyeji, who made his name as a co-founder of Andela, one of the country’s high-profile young tech companies, called the decision the “biggest threat” to the Nigerian government’s own stated ambitions for the local tech sector. Aboyeji who now runs a payments startup called Flutterwave, addressed president Buhari directly in a series of tweets.

The decision also comes at a time when Nigeria’s mobile internet usage has been steadily regressing.

While the NCC’s decision to make telcos hike data prices is surprising, there was a chance the price of internet access was going to increase. As Quartz has reported, in a bid to increase government revenue, Nigerian lawmakers have discussed a bill to levy a 9% communications tax on various services including internet data. But with service providers unlikely to bear the extra expense, the costs was likely to be passed down to end users.

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