2014 Industry Report

NIGERIAN COMMUNICATIONS COMMISSION
The Successful Auctioning of 2.3GHz Spectrum to encourage Nigerian Content

development and Implementation of the Open Access Model launch for
deployment of Pervasive and Affordable Broadband Services and Determination
of Dominance in Certain Market.
The Open Access Model
The Open Access Model is an initiative of the Nigerian Communications
Commission (NCC) to evolve a new broadband deployment environment, in
line with the National Broadband Plan. The objective of the plan is to bridge the
digital divide and deliver fast and reliable broadband services and to
complement the existing broadband ecosystem through the Open Access
Model to deliver wholesale wireless access.
The objective of the open access model is to stimulate a new national
broadband network that is not only more wide spread but also faster and more
secure than what is available today, thereby stimulating other sectors of the
economy and leading to higher economic spin offs for Nigeria. In addition, it will
offer efficient connectivity as well as ultra high speed broadband services that
are available, affordable and sustainable. The open access model will
potentially help to optimize the cost of broadband access across the country
and ensure operators have equal access to the infrastructure. The Model will
also deal with the issues of densely populated and haphazard towns, Right of
Way (ROW) and Infrastructure sharing issues. The Commission`s choice of the
Open Access Model is predicated on the basis that the new National
Broadband Network will have a pervasive Nationwide fibre penetration, Nondiscriminatory and Carrier Neutral Backbone and Metro-politan fibre, Optimized
Development Strategy and Co-operation of existing Operators.
The Commission has assured Industry stakeholders of the effectiveness and
workability of this model and allayed the fears of industry stake holders. The
model contains inherent safeguards such as Account separation that will ensure
the success of this mode. The EVC, Dr Juwah, in a recent media report,
explained that the account separation is a situation where operators on the
whole-sale end of the market will find it difficult to play on the retail end of the
market. He further stated that the new national broadband network may be
segregated into Passive infrastructure layer (responsible for rollout of fibre,
maintenance of ducts, handholes and manholes); Whole-sale layer (responsible
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for terminal equipment, optic fibre electronics, routers, switches, data centres)
and Retail service providers (RSP) (purchase of bandwidth connectivity from
whole sale operators to provide services to end-users. However, to achieve the
objective of the new national broadband network, the EVC stated that there
will be the establishment of Infrastructure Companies (Infraco) that are
geographically focused to support this initiative.
The Infrastructure Companies (Infracos)
The Commission has articulated the need to licence seven (7) Infrastructure
Companies (infracos) to support the new national broadband network in
Nigeria. The objective of the infracos is to deploy a broadband network
infrastructure that is faster and more secure than what is available today. The
Infracos shall be licensed one (1) per geopolitical zone of the country and one
(1) to cater for Lagos State alone. This is because Lagos State occupies a special
status due to the size of its market.
The activities of the Infracos shall be complimentary to the existing Integrated
Operators that offer end-to-end services and long distance operators offering
whole sale services. The Infracos shall specifically bridge market gaps in the
metropolitan and regional fibre segment as well as provide end-to-end
transmission services,to be available at point of access (PoAs), to access
seekers. Stricly, the Infacos shall deal with Wholesale wireless last mile operators
(eg Bitflux Ltd),Retail service Providers (RSP),Independent Operators/wholesale
operators who require to lease transmission services and other access seekers
such as Vertically integrated Operators
The NCC has also articulated a set of guiding principles to ensure the success of
this initiative. These set of guiding principles include Government financial
support, Infraco mandate, ownership structure, rollout targets, Interconnection
obligation, pricing, deployment strategy and risk management. These
commercial principles were deliberated upon by industry stakeholders in the
Commission`s usual engagement where the stakeholders expressed their
concerns on market monopoly and unfair competition. The EVC, Dr. Eugene
Juwah, allayed the fears of the Industry and stated that the licensing of Infacos
will complement efforts in broadband infrastructure rollout, and will not in any
way create unfair competition or market monopoly.
In line with the Commission`s timelines issued to the Industry the NCC has
commenced the licensing processes for the selection of Infracos for Lagos State
and the North Central region.
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The auction setting

The auction was held on February 19, 2014 at the prestigious Transcorp Hilton
Hotel, Abuja. The auction was witnessed by journalists, representatives of
Association Licensed Telecom Operators of Nigeria (ALTON), representatives of
the Ministry of Communications Technology as well as the participants. The
auction format adopted was the ascending clock option. The Director,
Spectrum Administration, at the NCC, Engr. Austin Nwaulune, reeled out the
rules guiding the process. He explained that at the end of the bid round, if the
bidders tied, they would start again until a preferred bid is received even if it
entails rolling a dice for a winner to emerge.
The bidders were kept in separate rooms to avoid interference and without any
communication gadgets such as phones, i-pads or personal computers to avoid
undue interference. The journalists and guest monitored the auction process
from another room. The reserve price for the 2.3 GHz spectrum was fixed at
Twenty Three million dollars (USD23, 000,000.00).
The Nigerian Communications Commission (NCC) concluded the sale of the
2.3GHz spectrum to an indigenous company Bitflux Limited at a bid price of
Twenty There Million Two Hundred and Fifty One Thousand US dollars (USD23,
251,000). The auction process and the auction, was adjudged to be free, fair,
transparent and in line with the guiding principles of the Nigerian
Communications Commission. The success of the auction is good news for the
Commission and the Nigerian Government because the auction underscored
the perception of NCC as Africa`s foremost telecom regulator and one of the
model regulators in the global market.
The successful completion and conclusion of
this auction is also the
Commission`s initiative to support Nigerian Content development in order to
encourage the delivery of broadband wireless access service at the wholesale
level, provide ISPs and other Retail Telecoms Service Providers with the requisite
bandwidth to service their subscribers. The NCC understands that providing the
enabling environment to support Nigerian Content makes good business sense
and yields sustained benefits both for the Country and the Operator because it
generates employment opportunities, opens a new vista of investments,
encourages infrastructure build out, and provides opportunities for learning and
development.
The auction outcome

A total of nineteen (19) companies expressed interest in the spectrum. Only two
companies, Bitflux Limited and Globacom were pre-qualified after paying the
initial deposit of USD2.3 million (10% of the bid reserve price). Both companies
exhibited deep and rich Nigerian content. The Biddings lasted a total of thirty
minutes (30mins) of fifteen minutes (15mins) per round. At the end of the first
round both companies were unwilling to bid beyond the reserve price hence
round 1 was a tie at the bid reserve price of USD23, 000,000.00. At the
commencement of the second round, Bitflux Limited increased the reserve price
by 1.09% to arrive at a bid price of USD23, 251,000 while Globacom increased
the reserve price by 0.22% to arrive at USD23, 050,001. Bitflux Limited emerged
winner of the 2.3 GHz spectrum with the highest bid. The Executive Vice
Chairman (EVC) of the Commission, Dr. Eugene Juwah, congratulated Bitflux
Limited and stated that Bitflux have a 14day deadline from the date of the
auction to make full payment for the licence or lose it to Globacom. The EVC
also lauded the auction process and explained that the Commission has
maintained the virtues of Open Access Model from beginning to the end.
Socio Economic Impact of the Sale of 2.3 GHz Spectrum to Bitflux Limited.
Broadband is widely perceived as a development enabler. It transforms the
society and generally brings about economic well-being. This much was alluded
to in the Nigerian National Broadband Plan 2013-2018 that stated inter alia We
live in a global village where ICT has a direct impact on a Nations ability to
improve the economic wellbeing of her people and compete globally.
Broadband is an essential infrastructure of the 21st Century. It enables access to
business and job opportunities, improves healthcare, education and
government services, and facilitates social interactions.
World Bank report also noted that the effect of broadband in accelerating
economic growth was greater in less developed countries like those in subSaharan Africa than in more developed countries, and more than for fixed,
mobile or Internet penetration. With about nine tetra byte of undersea cable
capacity at the shores of Nigeria there is still not enough capacity inland to
support faster and high speed broadband. This is because there is inadequate
metropolitan fibre connection, haphazard infrastructure layout and a seeming
evaporation of the last mile. However, with the triple initiatives of the NCC sale
of the 2.3 GHz, the proposed licensing of Infracos and the implementation of
Open Access Model, shall obliterate and reverse this infrastructural deficit with
the following attendant impacts; Employment Generation, Positive increases on
the Country`s GDP, Highly knowledgeable society, Improved Access to and
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effective Public sector businesses, High Return on Investment support and

development of local content in Nigeria.
Assessment of Competition and Determination of Dominance in certain Market

Segments
The Commission assessed the Level of Competition in the industry and defined
the Telecommunications market according to segments of services provided in
order to identify and checkmate any form of agreements, arrangements and
practices among the Operators which might constitute anti-competitive
conduct.
Subsequently, the market was divided into Mobile voice, Fixed voice, Mobile
data, Fixed data, Upstream and Downstream market segments.
This led to the determination of dominance in these markets, where MTN was
designated a dominant Operator in the Mobile voice market segment. While
Glomobile and MTN were designated as joint dominant Operators in the
Wholesale leased lines and transmission capacity sub-segment of the Upstream
market segment.
In addition to the dominance determination, the Commission imposed the
following obligations on Dominant operators in order to foster fair competition
and market sustainability as listed below:
a) Accounting Separation: The Commission will immediately enforce and
implement Accounting Separation on the dominant operator

b) Collapse of On-net and Off-net Retail Tariffs: The differential between the on
net and off net retail tariffs will be immediately collapsed. The tariff for on-net
and off-net will be the same, and subject to periodic review.
c) Submission of Required Details: The Commission may require the dominant
operator to submit details on specific aspects of its operations from time to

time as the need arises.
The Dominant Operators in the Wholesale Leased Lines & Transmission Capacity
market are also required to adhere to the following obligations:
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a) Price Cap/Price Floor: The Commission will come up with a price cap for
wholesale services and price floor for retail services, and subject to periodic
review.
b) Accounting Separation: The Commission will immediately enforce and
implement Accounting Separation on the joint dominant operators.

c) Submission of Required Details: The Commission may require any of the joint
dominant operators to submit details on specific aspects of its operations

from time to time as the need arises.

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NIGERIAN COMMUNICATIONS COMMISSION

The Successful Auctioning of 2.3GHz Spectrum to encourage Nigerian Content

The auction setting

The auction outcome

effective Public sector businesses, High Return on Investment support and

Assessment of Competition and Determination of Dominance in certain Market

implement Accounting Separation on the dominant operator

operator to submit details on specific aspects of its operations from time to

implement Accounting Separation on the joint dominant operators.

dominant operators to submit details on specific aspects of its operations

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