Telecoms competition is still infrastructure-based, not service delivery yet says

By Opeke, Monday, February 11, 2008

Ms Funke Opeke could be likened to a telecommunications amazon. Leafing through her very rich resume speaks volumes about how she has traversed the sector. From when she left the then University of Ife (now Obafemi Awolowo University) with an honours degree (B.Sc) in Electronics and Electrical Engineering (1981) to when she enrolled at Columbia University, New York, USA for an M.Sc (Electrical Engineering (1984) and later becoming a member of the Institute of Electrical Engineering (USA) and Society of Engineers Nigeria, the soft spoken Funke leaves no one in doubt that she knew what she was up to.
Now a leading telecommunications expert, she began at America's largest mobile telecoms firm, Verizon Communications, New York and rose to the position of executive director in charge of the Wholesale division before returning to Nigeria in 2005 after nearly 25 years. She joined MTN as Chief Technical Officer on her return and left in 2006 to advise Transcorp on its proposal to buy majority stakes in NITEL. She became Chief Operating Officer and Executive Director in Post-privatised NITEL in 2006 and left again in 2007, since then, she has nursed the desire to link Africa to the rest of the world seamlessly. That is the Main Street Technologies (MST) packages, which she founded as CEO. She spoke on this and several issues with The Guardian's SONNY ARAGBA-AKPORE. Excerpts:

CAN you please do a critical overview of the Nigerian telecoms sector, the way it was before you travelled to America and how it has been the last few years, and compare it to the global scene?

Thank you. Studying the Nigerian telecoms sector in the past decade and perhaps for especially in the last six or seven years indicates it has really been transformed with the deregulation and the entry of GSM operators. And basically what that has done is to provide access to many more people that were, previously cut off.
I lived outside the country for 25 years and calling home was pretty difficult. And even to call from Nigeria was even more difficult. People used to queue up at NITEL, sometimes, it took a whole day before they actually got the call successfully out. And if you needed to call Nigeria, you will call all the numbers you knew because you never really, knew which one was going to be up working at such a time. And numbers were few and no one was sure of getting any. Waiting period for one was an average of 10 years. It was as bad. That was where we were prior to 2001. After setting up the GSM provider segment services and most people that needed to be reached had a line or someone in the immediate vicinity had a GSM. And so communications became a lot easier both within and outside, which I think that is so much where we are. Today certain things changed. The level of investment changed and there has been more investment inflows these past seven years.
We have actually deployed more investments and I think there is some degree of focus in terms of managing the investment to actually deliver results and services which the private sector has brought to the table as evident. And obviously one must give credit to the Nigerian Communications Commission (NCC). It has created the framework that has allowed investments to take place and services to roll out to actually make that happen. So a lot has happened. There is still so much to be done however. It is a very good start with regards to making services available to most parts of the country today. I don't think that anyone will be more than an hour away to be able to get on the network somewhere or the other to reach out across the world. That is a very good development. Well, services are still very poor in terms of quality, the costs are high, because service provision is still very much infrastructure-based, we don't have a lot of infrastructure. Either power or backbone or even the reach of the existing networks. Almost all the competition is based on infrastructure.
A competitor survives only because that competitor has a cell site there or somewhere. These include generators, security and a backbone network that can connect its cell sites there to the major switch. So such a competitor can provide services that nobody can. Well in other markets that have developed much further, you expect the competition to be based less on infrastructure it is usually based on actual services to the customers and more of the infrastructure costs to be shared between operators so that a lot of value is placed on services and not because one can deploy a base station and so can provide services and so can make a lot of revenue and the other cannot. So, there is a lot of what we have to do in the next revolution to move from infrastructure-based services to service-based competition. And we can really focus on what services are required, what services are the most valued to consumers, to retail-consumers, business consumers that really use telecommunication and information technology to really drive the economy. So that is the difference between what you see in more advanced countries and where we are today in Nigeria.

You started by saying so much investment has flown into the sector now than what we had before you left for the U.S. Now look at the regulatory framework, "Do you think the regulator and the Nigerian government are up to the task of regulating the sector for optimal results?

I believe so because markets have various stages of development. And I want to focus on the results - there is a lot of noise about the quality of service, it might be so. But when you look at what they have been able to achieve in terms of building a framework, that has provided alternatives, a framework that allows investors to build their networks that have facilitated competition, that has facilitated intervention with respect to rates, for example, with the connection of networks. You will recall that even after the GSM network lines came we were aware of the challenges the operators were facing with respect to interconnection so when we look at the way things are today, clearly and I have been elsewhere, we can say definitely they have done something. One analogy I like to make here, is that when you are in the desert and you have no water, the focus first is to get a lot of water the quality may not matter immediately but you have water and you appreciate having that water. After that you can begin to bother about quality. Quality does not matter in a crisis situation, what you wanted was water and so you got water. And now the focus is what is the state of the water, the quality of the water and are we providing the water in a way that is sustainable or are we going to use all our ground water supply so that next year it is going to be more expensive, and difficult for us to get and keep the water.
We should appreciate the little success they had in the past in creating the environment today, but as the industry matures they will continue to revolve the processes, the regulations and the practice to meet the requirement of the industry, and regulate appropriately. Obviously you have the regulator out in the very advanced market trying to do what they are trying to achieve for the purpose of deregulation.
It is very different from what you have here. In less developed markets. So I know that based on the capabilities they demonstrated to get results in the past there is some revolution in these things going on. And you can see from the pronouncement of the regulator the kind of things they are trying to do today they are not just focused on options, they are focused on working with the National Assembly to create tighter regulations and which they can enforce provisions against the operators as they relate to monitoring of the performance of the operators based on a range of sanctions. So I believe they are changing the style of regulations to meet the requirement of the industry, to attain the state of maturity.

Something bothers me when people talk about the regulator. They actually expect the regulator to act like a policeman, who will go to the operators who is providing poor quality of service to arrest and detain such. Is that the right position?

That is part of it. But that is not all of it. The regulator in the actual sense is supposed to be not quite the judiciary but making recommendations in terms of regulations as well as enforcing these regulations. And the regulators are to achieve certain strategic objectives that show that the country has great respect for telecommunications. So if you go to the U.S. today, the issues that the regulators focus about are the free flow of Internet information and content on various networks providers on certain kinds of content. It is the value people attach to it.
It is about new wireless spectrum to provide new data services, a new kind of service to the market it is really not just that it is really about franchises for telephone companies and ensuring that the consumers can get the type of services that they want at the most effective prices. So the difference still is that you cannot just focus on the policing aspect without looking at the broader strategic aspects. Because if you have a very good policeman but we don't have the services that we require, it is not that good enough. So, it is a broader role that we have to target for better perspective.

What then do you consider to be the major drawback for the regulator? May be the laws are not strong enough?

Drawback. In Nigeria today, the laws could be made stronger in terms of the policing aspect of what they have to do and clearer. But then I think we are in a position no one anticipated today with the rate of penetration and the success we have in deploying mass equipment across the country. Clearly, things have grown, things have grown very fast and there was not much emphasis on tightening of laws. We are just trying to encourage the growth and now that we have the growth, we need to put more of those controls in place.
Strategically, you look at the issue of global warming and environmental hazards today as the world is properly industrialised, we realised that we need tighter regulations otherwise we will be hindering the market success. The regulations need to be tighter for there to be effects. And also they need to evolve, looking at those regulations, perhaps those services that better encourage participation in certain areas, not all the areas of telecommunications that are saturated. They need to do something to move up those areas. They should be thinking of facilities for Internet now and more backbones thus facilitating GSM and dial tone connectivity. So they should move away from the areas where participation is rich and competitive and look up to areas that act as complements.
And I must argue that they initiate things like structured licensing on a national basis, for example that will encourage people to deploy infrastructure to lower the cost because each retail operator and vendor do not have to deploy infrastructure to lower the cost because each retail operator and vendors do not have to deploy their infrastructure. As these come out, obviously they could put tighter sanctions to tighten controls. If you want to deploy your own and you do not initiate your own infrastructure to match the available and competitive, at reasonable price, then you can start evolving to actually have a penalty or higher costs to them for duplicating and driving up cost in the environment. So, I think that it is an evolution and I believe that the regulator is showing signs of things to come.
It doesn't have to be over night because people need time and room to adjust. These will come. It took them many years to get there in the U.S.

How can we achieve this in the short term?

Based on the facts, that we have been able to generate the results we see so far, I have no basis to believe that they cannot evolve to where they brought the industry, by putting the kind of regulations that will continue to ensure the health and wellbeing of the industry, So, let's face the fact, the results we are worried about now are the result of the incredible success they had that we are facing these challenges. Afterall, previously we had analogue mobile phones and people could not get services. But now that the services are so prevalent and the volume is very high we are now facing these challenges. We are not saying that we are doing it right but I think we need to give them some time. They also need to be clear about what they are doing and I think there have been some recent pronouncements about the time it's really going to take to get to a point where the industry will really pick up to enable for a better handling of these issues. And then we will be able to move forward. But let's start with the NCC. I don't know (laughter).

We have had the opportunity of having a regulator. The regulator started deregulating the industry sometime in 1992 but the dominant operator remained NITEL. Unfortunately NITEL could not provide the required services that Nigerians wanted. Now the question is do you think privatisation and commercialisation will be the answer to comatose entities like NITEL?

Absolutely. Having had some experience in privatisation of NITEL since I returned to the country in 2005 I am even more convinced that privatisation is the way to go. Telecommunications technically requires a high level of investment. It is knowledge-based business. There are specific business practices it's very operationally intensive to run a telecommunications company. With government running an enterprise that is not focus on profit, that is not focus on the sustainability of those operations for profit, for returns, accountability to the shareholders, it is unclear how effectively they can manage that enterprise. I am sure that is why it is the private model in most parts of the world that has worked effectively for telecommunications. There is management, there is ownership, there is accountability for every investments to generate a return. The management is measured and held accountable for that. And when they have to get these results, they have to sustain the operations. If they don't sustain the operations, they cannot get those results. Likewise the responsibility of the ownership of the company to make investment so that they can remain competitive and continue to generate those results. SO I think private-run telecommunications companies by nature of that they are profit-making ventures force the accountability on the different players and participants towards getting the right results and that is why I think private telecommunications companies are more effective than government's that have different standing criteria, different priorities and so trying to focus on telecommunications companies can be turned to something else. When a company is being run for profit they have to ensure ongoing sustainability of the business. And the level of profit may change overtime but there will still be a basis for operating and getting the results.

In other words are you saying that profit is the underlying factor for telecommunications operations generally?

I think profit and accountability. There has to be a motivation. What I will say is that government is not for profit venture and unless the government will not control the institution. Based on what I have seen in most parts of the world and by my experience at Verizon International Communications, we ensure that accountability is beneficial to the customer who is paying to get service, you take their money and they don't give you more money if you don't deliver good services, so you don't make good profit. So you are expected to do that and if you have competition, which means that if you do not provide the level of service, and you go into competition without money, your business is going to be stranded. Then that is a sense, the company ceases to deliver to the requirements of the customers whereby demand and supply, determine the cost of operations and high capital. You have to ensure the return on that capital that is invested. I think that is the proven model that works around the world working with the strategic objectives, obviously when you go to an advanced economy, people don't create. Graham Bell didn't create the telephone just for profit, great technology pioneers and the evolution of services is not just driven by a profit objective. So if it is solely driven by profit objective it doesn't work well and these are some of the challenges we have also in the emerging market like ours because people tend to see telecommunication just as a profit-making venture. There has to be a commitment to adding value.
The framework which you do that and deliver it to consumer most effectively is a credible consumer market but when the sole objective is just to earn a profit, that is when it goes awry, that is when the service starts getting flustered but when you look at creating a sustainable environment to add value to telecommunications and information technology, so when you put that in a competitive framework because that drives efficiency that forces you to lower costs because you are going to have competition, your competitors may have lower costs and better services to customers and you lose your customers. That forces you to improve your processes, look at your cost structure, your delivery that is appropriate to consumers and give them value. I think around the globe that is the framework that is proving most effective for delivery the services to the market. But when profit becomes the model and value-orientation, then the regulator comes in. That is what obtains for this industry around the world. The strategic objectives of national communications for security, for better connections or economic growth, for the economy gets thrown up and then you start having challenges. Most economies focus on the increasing growth and penetration, increasing internet access, increasing mobility of information to the population because they realise that all of these things enhance the continue economic development of their countries.

Is there really any competition in the Nigerian telecom environment?

In a way there is competition. However, like I said earlier on, it's more of infrastructure-based competition and not service and value-based competition so it is more of I can put in more infrastructure, then I can render the service that nobody else can offer.

In that case, what determines price, the market or the operators?

What you are saying is who and what determine the prices of services. Somehow it is an open market, so the operator is determining the concept and what you have and which will see happening in this market is in an open market, it is otherwise the opportunity to come in if they can do better. So what we are seeing is that we continue to see new entrants into this market because there is a perceived opportunity to come in and do better.
It is a challenge but it says there is an opportunity. I believe that the market forces will support the lowering of prices over time. I need to caution now because being in telecommunications myself, one needs to recognise the challenges of our environment and this is where, I think that as the rest of our economy develops it will also help the regulator and do what they need to do. For example, power, transportation and our road network availability of complex skills, availability of infrastructural materials so that they do not need to import directly. There is also high pricing, high tariffs, there is also high cost of deploying infrastructure in Nigeria. So when we say the market is open to new entrants, it is open but those new entrants also have high cost of entry. So is it truly open? If we make the environment easy to operate in, if there were more infrastructure, everyone didn't have to buy a generator for every site. If everyone didn't have to incur some expenses on fixing the road to get to the site, if everyone did not have to hire armed security to get to the site or to keep the site to be able to do work on the site, if everyone did not have to wait for months to get materials and goods for network installations through the ports, then it would be easy because there will be an opportunity to lower prices and add value. The new entrants who think there is an opportunity to add value, come in and deal with the logistical challenges of operating in Nigeria and I think that is partly why things have not progressed as quickly. I presumed that the regulators, I heard sometimes they tried to articulate the challenges and come out as clearly, but I think these are some of the challenges mitigating attempts to foster competition to drive the sector. But I think we have enough participants to make that perfect but there is a challenge to get things done. The power situation will have to be improved, the road and security network need to be improved. When these technical areas come together, we will see the benefits of telecommunication services as well.

Now let's talk about the project you are involved in. The MainOne cable project? The MainOne cable project. What difference will it make to telecommunications in Africa? Not just Nigeria because you are going to take it through the coast down to Cape Town, across the coastlines of Africa? There is already and existing SAT-3 project. What difference will it make? This is very crucial and we have to get it correctly?

What MainOne will do is increase the capacity available beyond what SAT-3 can offer for international communications and Internet communications and also lower prices. Just as we talk about some of the other areas of services and need for competition and the ability of competition to drive market efficiency and lower prices, the same will happen in the sub-marine area. However, one of the misconceptions I think we have here in Africa is how much requirements do we have for submarine cable. In more advanced market for example what we call the North Atlantic corridor from Europe to the U.S, we have more than 20 if not 50 active sub-marine cables providing services across those two markets. And those are not the only cables into Europe and North America. You have also cables going from the West Coast into Asia, you have cables going through the Middle East to Asia. In fact, three of those cables had service interruptions in the past week and then you see why you cannot rely on one, two or three cables. You really need a lot of cables because the world has become increasingly interconnected place. You know the outsourcing industry and India was seriously affected and people making service calls to the U.S. could not get help online because they tried it to an extent to India. And that was disrupted until we migrated to that of cable services. So the fact that we have SAT-3 here is really a limitation. You can hardly have an access into the Internet when you look at the number of people and services, when you look at aggregate amount of international capacity we have compared to any other geography in the world. Africa has the least amount of capacity. And it also has the highest cost compared to other continents. We also have the highest proportion of international traffic on the average and that is because we don't have enough international capacity. So clearly there is a need for more capacity, Technology has been so envolved since that system was deployed. So there is a need for expansion in our capacity. And also the structure under which SAT-3 was deployed is not the most flexible open access kind of structure that you would have. In most parts of the world greater communications is opened today. SAT-3 was created by governments. It was a construction of government-owned telecommunications companies and those companies reserved the right in those countries to sell their capacity as they deemed fit. In most new sub-marine cable deployment around the world today, they are solely done under open access common carrier basis, which basically serves any operator or service provider that needs the basic national laws on deployment to purchase which telecommunication capacities can subscribe to the system and get international capacities. And so in other markets you are rather a service provider before you are able to tap into that international capacities of the sub-marine cables and deliver services to the subscribers. They don't have to own a cable.
So service providers in developed markets do not have to own a cable and they rarely solely own cable access to deliver services to the market. As you can see this is Africa, we have just SAT-3 cable and as you can see other continents have more than they need.
In Europe - Europe through the Middle East the global map shows there are many sub-marine cables than they really need. That is capacity.
And currently there is a shortage in terms of the enabling structure in deploying in new systems because there is so much new demand coming out of Asia this region for new cable systems that the suppliers do not have adequate capacity to meet the requirements in other parts of the world. So, clearly Africa is behind. This is one area that is globally acknowledged in the industry that Africa is significantly behind in terms of the supply of international capacity and truly our ability to leverage information technology, if you look at all the new technologies in information today there are all very content rich for information rich applications. So people send to you files, they send presentations and a lot of spreadsheets and documents and pictures, which require a lot of bandwidth. Also they require connectivity to this thing we call the global Internet, which is how most information is passed around the world today. So without this kind of sub-marine cable, which is now the preferred way of moving information around the globe, and totally even domestically in countries like the U.S. The major phone operators now are deploying fibre optic directly to the homes.
So there is a yawning gap to be filled because the backbone network of the global networks directly to the consumers for the delivery of brand band applications. So we have some opportunity to grow and to participate in the global market place and this is what truly takes us there and that is why we decided to call it MainOne.

Now you have started, talking to people, you have some investors already. How is the government reacting?

So far the government has and the individuals in government have been supportive but we are asking the government for more support. Obviously, this is a project of strategic importance, to facilitate ICT development, they facilitate the development of the industry locally. One of the things we also see even from the security standpoint, most calls within Africa, in fact, some portion of calls within Nigeria route overseas not just outside Nigeria but outside the continent. So all of our content, I tell you all of our data content, computer content is actually more sensitive information, goes outside the continent to be connected with the target destination for that information within Nigeria or the rest of the continent. To build an infrastructure like this, you actually can be trained by creating distinct layer to move out that information within the country and within the continent in a more meaningful way, so we are asking the government for more support. One of the things we observe is that there is little experience in deploying this kind of systems here and the only one that had been done was by government agencies across the continent.
There are no clear policies or guidelines in terms of getting things done and there is no knowledge, what we are doing is working with different departments of government on how to get permits and licences. We are hoping for more support and making direct inputs to government for additional support and also because of the local content development and the fact that we will site our operations centres here, as I said we will provide the market for switching and we have actually got interest from technology partners such as CISCO systems, which wants to work with us in creating that intelligent layers so to speak here in Nigeria. We are looking for support in facilitating all of that because we recognise the value that it will bring to Nigeria. While there might be other systems or other initiatives because other entrepreneurs or capitalists around the world are striving to study GSM opportunities in Africa and so are studying to see the sub-marine cable opportunity in Africa and we like to tap into I t. I am not sure that the operational model is the same or the focus on value in Africa is the same as what we intend to bring. We are in Africa to add value, we are not just coming to put the infrastructure and generate the revenue, we want to create lasting values on the continent, we want Africans to drive the processes, we want to develop the local content and intelligence here that will be sustainable and provide the platform for future growth of ICT for generations to come.

Who is Funke Opeke?

I have been in telecommunications for several years, almost 25 years experience, worked outside Nigeria for several years. I had a successful career in the U.S. and started thinking more about giving back to Africa. What better opportunity to give back than to give back to Africa. So I came back to Nigeria in 2005 and since then it has been a challenge but I do hope we are getting there. So I took up the opportunity to truly add value in a sustainable way, values that make the real difference in terms of capability, and content development, people development and economic development. That was the inspiration for coming back to Africa. I have received a lot of training in business and telecommunications processes and the opportunity to bring back that to Africa in any way that actually adds value. I have met a lot of people, we can do things like the way I thought I could not do in America.
Here we are thinking of what to do to impact education, we can think of thousands of schools, hundreds of our universities that are no longer competitive internationally because of limited access to information. Researchers start participating in the global economy in a more meaningful way, we could actually create an outsourcing industry because people can actually reach out with high speed data and we can provide content and interesting things like Nollywood and all the creativity that is here that is still exported on a limited rate but with the expansion of the Internet and international communications capacity see how much we can do. I think these are some of the challenges that we also have because we also have things like the abuse of the Internet and with the amount of skills and intellect we have in this country, if we do have the platforms, there is no reason why we actually cannot develop a national framework and using those capabilities to better manage the integrity of the information that is going in and out of Nigeria. It will be useful for the security agencies, it will help our image as Nigerians and other ways of managing the abuse that goes with these things. But you need to have the skills and capabilities and the platform upon which to do that. So we think both in terms of making positive contributions and in terms of curtailing some of the challenges and abuses can result from availability of this kind of technology and then we can add the real value. That is what really gets me excited I think more than anything else. That is what Funke Opeke is really about, is using all the skill and knowledge that I acquired in all my years away from Nigeria to make a lasting contribution.

How do you cope between family life and your profession?

My family is very supportive. They caution me, they realise what really gets me excited and the opportunity to add value, and so they are supporting. This is strange but they have to support a lot, I have to be away from home, there is a lot of travels, there is a lot of midnight putting documents together, scheduling calls with potential suppliers and partners across different parts of the globe, working on negotiations and some other things. But you know we are excited by the possibilities of truly making a difference. That is what keeps me going and the success we are having in seeing this become reality. So we keep doing what we have to do.

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Events

WATRA SAT3 Workshop, Abuja, Nigeria
SEPTEMBER 11 - 12, 2007

 

AFRICA CONNECT Conference, Rwanda
OCTOBER 29 - 30, 2007

 

ICT Africa, Addis Ababa, Ethiopia
FEBRUARY 13 - 15, 2008