Home Infotech Low demand of broadband responsible for unutilized capacity — Oladepo

Low demand of broadband responsible for unutilized capacity — Oladepo

A new wave of the reasons behind the wear and snell spead deployment of broadband internet across Nigeria has been adduced by Kazeem Olawale Oladepo, general counsel to an indigenous broadband group, MainOne Cable Company.
Answering question on why upon the landing of several submarine cables from abroad, not much has been recorded in penetration of services, he said “the best way to appraise this is to take a demand and supply side approach to understanding the constraint with internet penetration and pervasiveness”.  
According to him, “Demand factors are things that drive more uptake or usage. Whilst the operators have a role to play through price reduction to encourage uptake, this side of the push is more reliant on policy and to a large extent positive externalities of what government policies and economic index suggests”.
“The cost of access devices for instance is one; availability of relevant and attractive content is another, amongst others. If you have to procure your drivers’ license through an online portal for instance, or you can do several of your government or your child’s educational support resources on-line, then more people will use internet services and the operators can see volume.
“These demand side factors are not well stimulated yet, although there are efforts at the policy level that are currently being addressed by the federal government through the National Broadband plan.
“On the supply side, we are dealing with the provision of the services to consumers. The submarine infrastructure is a component and we have adequate capacity on that to provide services.
“The terrestrial infrastructure continues to be a challenge, as earlier highlighted. There is a policy side to it in terms of cost and more favourable operating environment, with issues of ‘Right of Oladepo added that the issues are still there and continue to delay roll-out. The NCC Infraco model is also expected to improve optimization in this area as it should relieve the operators of certain cost of service delivery through subsidies for shared infrastructure and guarantee a degree of orderliness in the deployment of infrastructure.
Making a comparism between internet services in Nigeria and those of developed markets, the MianOne staff “For an operator to get connected at these exchanges it needs to go through a gateway. The submarine cable infrastructure is a gateway, just as the satellite is also a gateway that was pervasively used prior to the advent of the submarine infrastructure, albeit at very expensive prices and less efficient service level”.
“The submarine cable is an infrastructure that takes you from Lagos to the exchange in London where everybody else is peering internet traffic.
There is a significantly huge cost to getting that infrastructure set up between Nigeria and London.
“The build cost alone for MainOne is $240M of monies raised at very high cost of capital which is peculiar to the Nigerian operating environment.
He said “This does not include the additional cost of building distribution networks terrestrially that were not there in Nigeria due to the absence of common carrier, open access, networks,  available in advanced countries with cheaper internet prices.
According to him, “These are some of the key considerations, from a cost perspective, that we need to keep in view when we talk about comparative cost of wholesale bandwidth in Nigeria versus the United Kingdom or other developed markets”.
On internet demand and pricing, he argued that “We need to be mindful of the level of internet usage and attendant volume of bandwidth consumption that the operators in Nigeria are currently seeing on their network”.
“Without doubt, volumes do drive reduction in prices as we have observed even with the trend in Nigeria, where wholesale prices have fallen from over 1,500USD per Mbps to about 200USD per Mbps.
He said “Today in Nigeria, we see latent demand rise slowly but steadily. Currently, I doubt if there is any operator in Nigeria  exhausting up to 10% of the capacity they have on their submarine cable, meaning that the investment is at least 90% underutilized, a constraint, of course, on their ability to generate revenue to recover not only its  cost; but also earn margin on the investment.
“When compared with developed markets such as the United Kingdom, and operators that are largely Tier I operators (AT&T, TATA, Interoute, PCCW, etc.), their wholesale prices in Europe are far lower as these operators do not have the constraints that are peculiar to our market.
“The transmission cost of moving traffic from location to location is almost nothing, since you do not need to move the capacity 7,000 kilometers away from the tele-house. They have huge volume and are largely Tier One operators who do not even have to pay one another to share traffic.
He said “If we have the volume of internet traffic out of Nigeria that you will see for instance in UK and we can peer, the cost of upstream provisioning that we pay to other operators for Internet Transit in Europe will be eliminated, but this will not remove the cost of transmission between Nigerian and London and the operational cost associated with providing the services. Those costs remain a significant cost differentiator between cost of wholesale Internet Transit services in the United Kingdom and Nigeria.


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