Business

Broadband plan: Addressing device barrier

Nigeria is currently pushing to achieve 90 per cent broadband penetration by the year 2025. While the issue of infrastructure is being addressed through various initiatives, reports suggest that the country may not achieve its goal without addressing the high cost of mobile devices. SAMSON AKINTARO

That Nigeria is targeting 90 per cent broadband penetration in the next five years is no longer news. Indeed, while the Federal Government has been the driver of the National Broadband Plan (NBP 2020-2025), state governments are beginning to key into the project through recent policy statements on Right of Ways (RoW), which would enable faster rollout of broadband infrastructure across the country. However, while efforts are going on to build the needed infrastructure, the high cost of mobile devices and lack of local manufacturing capacity may be a major stumbling block on the country’s road to achieving the broadband target. This much was acknowledged by the National Broadband Plan Committee, which pointed out that the high cost of smartphones may deny many Nigerians access to broadband. The global group advocating for cheaper internet, Alliance for Affordable Internet (A4AI), which Nigeria also belongs, also emphasised this in its latest report, noting that the high cost of phones is said to be denying many people the right to digital services while impacting economies negatively.

Committee’s recommendation

According to the committee set up by the Minister of Communications and Digital Economy, Dr. Isa Pantami, which came up with the NBP 2020-2025, to realise the goal of the broadband target, government must put in place incentives that would attract local assembly of smartphones to drive down cost. The committee led by the Chief Executive Officer of MainOne, Ms. Funke Opeke, had noted that the high cost of smartphones was identified as one of the factors hindering Nigerians from accessing broadband service. The team, therefore, recommended that government put in place incentives such as tax holiday and duty waivers to encourage Original Equipment Manufacturers (OEMs) to set up an assembly plant in the country. In its report, the committee noted that entry-level smartphones in the country currently sell for about N18,000, while it suggested that the price may remain the same by 2023, it expected that by that year, the country must have had one local smartphone assembly plan. Through government incentives, the country is expected to have had three smartphone assembly plants by 2025, while the price of smartphones is expected to have come down to N9,000.

Local plants expected

The committee also advised government to begin development of implementation framework standards with potential OEMs this year, while licensing of OEMs based on “agreed framework and incentivised local manufacturing with a focus on budget 3G/4G smartphones” is expected to commence in 2021. This process is expected to birth a local assembly plant in the country by 2023. “Some of the factors identified as barriers to the low usage rate and adoption of broadband services include the high cost of services and access devices, low digital literacy, lack of local and relevant content, and poor perception of broadband value, amongst others. Effective utilisation of broadband services requires the use of capable devices such as smartphones, tablets and PCs, among others. The cost of these devices is typically higher than what a large segment of the population can afford. “In view of the above, it is important for government to take steps to fast-track the adoption of broadband services and access devices by incentivising local assembly of smartphones with pioneer status and other waivers of duties, taxes and levies – with a target of getting smartphones to Nigerians at below $25 by the year 2025. Adequate digital literacy programmes should be embarked upon to enlighten every Nigerian on the relevance of broadband to their lives and day to day activities,” the committee said in the report.

A4AI advice

According to the Alliance for Affordable Internet (A4AI), Nigeria and other countries hoping to build a digital economy would have to reduce taxes and duties on mobile phones. The Group, in its latest report titled: “From Luxury to Lifeline,” noted that COVID-19 crisis had underlined that the internet and the devices that allow people to access it are no longer luxuries. “These devices are lifelines and governments should be setting policy accordingly to ensure as many people as possible can buy them,” it stated. While noting that countries use importation duties, excise taxes, or other sector-specific taxes to skim revenue off the top of the mobile sector, it said the taxes range from two per cent to 35 per cent of additional costs on devices and are being justified by the idea that the ICT sector is a luxury. “Such taxes have been the target of previous successful policy campaigns to reduce taxation on mobile devices. COVID-19 shows that internet access is not a luxury but a lifeline and a basic right. Internet-enabling hardware must not all be treated as luxury consumer goods” the group stated in the report. “Now being used for everything from remote learning and working to contact tracing and telehealth, internet connectivity has never been more important. Access is critical not only for individuals’ wellbeing but for the health of a country’s economy. With the economic disruption of COVID-19, digital growth will be even more important for national economic performance,” the group added.

Affordability still a problem

A4AI observed that while the price of mobile devices has fallen steadily over recent years, nearly 2.5 billion people live in countries where the cost of the cheapest available smartphone is a quarter or more of the average monthly income. The group said that policymakers could make quick progress on device affordability by reducing taxes that apply to low-cost devices. “This directly brings down costs for consumers and, if applied to low-cost devices only, can encourage manufacturers and retailers to offer lower-priced products to qualify for the tax exemption, decreasing prices across handset markets,” it said. For this to be effective, the group advised governments to design and monitor policies carefully to make sure that changes in the tax regime translate into lower prices for consumers. “While targeted tax reductions mean lower tax revenue short-term, the increase in digital activity as more people use the internet is likely to drive higher long-term economic growth,” it added. “Eliminating these taxes might cause a short-term dip in tax revenue, but with the potential for greater productivity and digital activity in the medium- to long-term. The Kenyan government saw this when it eliminated VAT on mobile handsets, resulting in sales increasing by over 200 per cent in the following years. This, in turn, helped spark greater market competition in mobile broadband with cheaper tariffs for Kenyans and more digital activity across the country,” the group said.

Barrier to digitisation

Speaking specifically to countries like Nigeria, which is currently pursuing a digital economy agenda, A4AI said: “Countries looking to accelerate their digital economies must account for device prices and the barrier to access that they represent to billions of people across the globe. Without interventions, many will source their devices through second-hand, grey, and black markets with lower degrees of trust and sometimes poorer quality devices.”

Last line

Currently in Nigeria, many are still unable to afford 4G smartphones, thus limiting the number of 4G users despite operators’ efforts to spread the service. There is, therefore, no doubt that government needs to take decisive actions in bringing down the cost of phones in the country if it is to achieve its broadband target.

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