Telecom operators are gearing up for a cost recovery phase as inflation continues to put pressure on the economy. Consumers, already feeling the pinch, expect to see their bills rise, as TOYE FALEYE reports.
NCC and the Review of Interconnection Rates
The Nigerian Communications Commission (NCC) has kicked off a review of interconnection rates—the fees that telecom operators pay each other to connect calls and SMS across different networks.
These rates have remained unchanged since 2018 and are now out of sync with Nigeria’s current inflation, soaring energy costs, and the depreciation of the naira.
The regulator believes that a new cost-reflective framework is essential to keep investments flowing into telecom infrastructure.
What the Rates Mean for Nigerians
For everyday subscribers, this review translates to higher call and SMS tariffs just when household budgets are already stretched thin.
Many people may turn to over-the-top (OTT) platforms like WhatsApp and Telegram for communication, but those in rural areas with limited internet access will feel the impact the most.
While the shift towards data-driven communication is likely to speed up, the issue of affordability remains a significant hurdle.
Government in Tricky Position
The government finds itself in a tricky position. The telecom sector contributes over 8% to Nigeria’s GDP, making it crucial to maintain investment.
However, if prices rise too steeply, it could worsen digital exclusion and undermine trust in regulatory bodies. The NCC’s reputation hinges on establishing rates that are fair, transparent, and reflective of actual costs, without pushing millions of Nigerians out of the market.
Implications for Telecom Providers
Telecom operators are looking at this review as an opportunity to recoup costs associated with rising diesel prices, imported equipment, and the rollout of 5G technology.
However, if the rates are set too high, smaller players might find it hard to survive, leading to a more concentrated market. This could allow larger operators to take the lead, ultimately reducing competition and limiting choices for consumers.
How It’s Done Abroad
In the UK, regulators like Ofcom have adopted a long-run incremental cost model to determine mobile termination rates.
They’ve been gradually lowering these rates to make calls more affordable while still allowing operators to cover their costs.
Over in India, the Telecom Regulatory Authority (TRAI) has made headlines by slashing interconnection charges to nearly zero, believing that fostering competition and keeping prices low for consumers is more important than protecting operator profits.
Meanwhile, in South Africa, the Independent Communications Authority (ICASA) has taken a more measured approach, implementing a phased reduction strategy that cuts rates over several years to strike a balance between encouraging investment and maintaining affordability.
These global examples illustrate that regulators often lean on cost-based models and gradual reductions to safeguard consumers while promoting industry growth.
Nigeria’s NCC is on a similar track, but the timing is crucial: this review is happening in a struggling economy, where even small increases could hit consumers much harder than in more stable markets.
Coping in a Parlous Economy
Nigerians are likely to adapt by leaning more on bundled packages, loyalty discounts, and internet-based messaging services.
Small and medium-sized enterprises (SMEs) might need to rethink their communication strategies to keep costs in check.
Telecom providers will face pressure to innovate, and the government must ensure that the push for industry sustainability doesn’t come at the expense of digital inclusion.
A Crucial Test
Nigeria’s review of interconnection rates isn’t just a technical tweak; it’s a crucial test of regulatory balance in a delicate economy.
The results will influence call and SMS costs, the competitiveness of telecom operators, and the overall direction of Nigeria’s digital landscape.
