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Addressing concerns around 5G spectrum

As Nigeria prepares to launch 5G, several issues have cropped up regarding the spectrum price and tenure. These issues, if not addressed, may mar the process, even as operators said they may be discouraged from participating in the auction if the cost is not reduced. SAMSON AKINTARO reports

A few weeks from now, Nigeria will be auctioning 5G spectrum to interested telecom operators in another landmark event that will make the country one of the earliest adopters of 5G technology in the world. But the success of the December 13, 2021, auction is still uncertain given the issues that came up at the stakeholders’ engagement forum organised by the Nigerian Communications Commission (NCC), last week. At the forum, which was centered on the Information Memorandum (IM) for the 3.5GHz spectrum auction for 5G deployment, telecoms operators, including the global body, GSM Association (GSMA), disagreed with NCC over the reserved price of N75 billion per slot of the spectrum. While NCC is considering 10 years period for the duration of the spectrum, the operators want the Commission to extend it to 20 years to enable winners of the spectrum have enough rollout time to utilise the spectrum in offering telecoms services to subscribers.

The IM

The Director, Spectrum Administration at NCC, Oluwatoyin Asaju, who presented the draft IM for the 3.5GHz spectrum auction at the stakeholders’ consultative forum, said: “The IM provides guidance and process that the Commission has decided to adopt for the licensing of the 3.5 GHz band, including details of the spectrum to be made available, the pre-qualification process and the auction process.” According to him, the 3.5GHz spectrum will come in five lots of 100 MHz each, to be cleared at different periods, depending on the level of encumbrances on the slots. He, however, said for the purpose of the auction, only two lots of 100 MHz each would be offered in the first phase, while the remaining three lots would be auctioned some other time. For the auction process, Asaju explained that it would be Ascending Clock Auction (ACA), while the auction would be software-based. He said provisions had been made for the manual auction should the auction software fail during the auction process, adding that there would be a mock auction that would precede the main auction on December 13. “A reserve price of approximately N75 billion, equivalent to $197,400,000.00, will be used. An Initial Bid Deposit (IBD) equal to 10 per cent of the reserve price is adopted in line with the previous auction. “New entrants are allowed to participate in the auction in addition to existing licensees and only licensees with 100 per cent regulatory compliance will be allowed to participate in the auction. “The auction comes with a 10-year spectrum licence and a minimum requirement of a UASL Operational Licence. New entrants or licensees without a UASL will be required to additionally obtain a UASL Operational Licence,” Asaju said. For the rollout obligations, he said operators would, in the first two years starting from the effective date of the licence, roll out service in at least one state in each geo-political zone, including federal capital territory and an additional six states after five years.

Operators’ response

Reacting to the N75 billion reserve price, telecoms operators, which included MTN, Airtel, Huawei, Intelsat and GSMA, called on NCC to consider the current exchange rate in pegging the reserve price. They argued that if the reserve price remained high, it would discourage operators from participating in the auction process. Specifically, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), Gbenga Adebayo, expressed his concern over the reserved price. Speaking on behalf of the telecom operators, Adebayo said though the industry was committed to supporting NCC to achieve its goals, the operators are a bit concerned about the cost of 5G and the issue needs to be dealt with going forward. However, the NCC’s stance at the forum was that it would go ahead with its plans at the same cost. According to the Commission, the spectrum reserved price was arrived at following international best practices. But it noted that some other issues that require review would be looked into adequately.

Earlier concern

At another forum held in August, President of the Association of Telecommunications Companies of Nigeria (ATCON), Ikechukwu Nnamani, had noted that the high cost of the spectrum would make the service inaccessible to the masses and may hinder the rollout of the service. While acknowledging that 5G deployment is far more capital intensive than 4G and other lower technologies, he said Nigerian Senate had, during a recent public hearing on the technology, expressed concern that the operators might pass the cost to subscribers. “There is no doubt that the operators are going to spend a lot of money to deploy 5G and they will have to recoup their investments from the service. The only way the cost can be lowered for the subscriber is for the telecom regulator to make the 5G spectrum cost as low as possible,” he said. More worrisome for the operators is the plan by NCC to increase the cost of spectrum by 400 per cent. This is part of the provisions of the draft spectrum regulations recently released by the telecoms regulator.

Past experience

Industry stakeholders are worried that the issue of pricing of the 5G spectrum, if not addressed before the auction date, may lead to another botched process similar to that of the 2.6GHz auction. NCC had, in 2016, put forward for sale (through auction) the available 14 slots of 2.6Ghz spectrum at a reserve price of $16 million per slot. However, MTN was the only operator that showed interest and bided for six, leaving eight slots with the regulator. At a post-mortem event organised by the Commission to know why the telcos shunned the spectrum auction, the operators had faulted the auction process, arguing that it favoured only those with deep pockets. According to them, every auction exercise where the highest bidder wins has the characteristics of being lopsided and designed to favour only big operators that have the financial muscles, to the detriment of small operators who have lean pockets. They also said they were worried and uncomfortable with the high reserved price of $16 million per slot, owing to the poor economic state of the country. Specifically, the then Managing Director of Spectranet, Mr. David Venn, was of the view that though NCC had been transparent in all its auctions, the operators were not comfortable with the fact that the system favoured big operators at the expense of the small players. In addition, he observed that as at the time NCC was considering the auction exercise, the price of data had already crashed in the telecoms market, a situation that affected the revenue generation of operators to bid for the 2.6GHz spectrum, which, he said, had always attracted heavy capital investment.

Last line

While NCC had said it followed international best practices in arriving at the reserved price of the spectrum, which may become higher in the process of bidding, the peculiarities of the operating environment in Nigeria should also be put into consideration. The telecom regulator should resolve all issues before going into the auction to avoid a repeat of the 2.6GHz auction scenario.

 

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