US embassy cable - 03ABUJA284

UNCLAS SECTION 01 OF 03 ABUJA 000284 
 
SIPDIS 
 
 
FCC FOR BOATENG, 
 
 
E.O. 12958: N/A 
TAGS: EAID, ECPS, ECON, PGOV, NI 
SUBJECT: NIGERIA: TELECOMMUNICATIONS EXPANSION A SUCCESS 
STORY; USG CAN TAKE SOME CREDIT 
 
 1.  Summary: While there is still a long way to go to 
bridge the telecommunications divide between Nigeria and 
the developed world -- or even between Nigeria and the rest 
of Africa -- the Nigerian Communications Commission (NCC) 
has made a promising start.  Quiet support from 
USAID/Nigeria, the Leland Initiative and the Federal 
Communications Commission has helped the NCC create a pro- 
competition and more transparent regulatory environment, 
raise more than USD 1 billion for the government budget, 
triple teledensity, develop a strategy for reaching rural 
agricultural communities and better harmonize a regional 
telecommunications policy harmonization across ECOWAS 
member-states.  This Global Development Alliance centered 
on the leadership role of the USAID-supported Nigerian 
Communications Commission (NCC).  The USG can claim some of 
the credit for making telecommunications the fastest 
growing business sector in Nigeria, and after petroleum, 
the sector with the greatest foreign investment.  End 
Summary. 
 
 
Poor Communications Plague Nigerian Economy and Development 
--------------------------------------------- -------------- 
 
 
2.  Low-cost reliable telecommunications services are 
accelerating sustainable development around the world.  The 
weakness of the telecom sector has been a major obstacle in 
the way of economic and social development in Nigeria. 
When U.S. development assistance programs returned to 
Nigeria in 1999, installed telephone lines for the 
country's 120 million people numbered 700,000 of which only 
450,000 lines were estimated to work. The 
telecommunications sector suffered from gross mismanagement 
by the state-owned monopoly carrier, NITEL; service 
delivery was poor and corruption endemic.  NITEL 
had invested in expensive capital  projects 
which failed to expand network capabilities, 
increased operating costs, and proved incapable of 
collecting its bills.  The Abubakar transitional government 
of 1998-99 decreed NITEL would be subject to competition in 
the telecom sector and the Obasanjo government (1999 to 
date) accelerated telecom liberalization.  The NCC, though 
hampered by a lack of regulatory authority over NITEL, has 
emerged as an effective regulatory body by regulating the 
new competition.  It has won the confidence of the local 
and international business community and has begun to 
protect consumer interests. 
 
 
NCC Goes from Potemkin Agency to Promote Telecom Growth 
--------------------------------------------- ---------- 
 
 
3. The United States, through USAID, has played an advisory 
role with the NCC and other telecom entities as Nigeria 
works toward effective regulation of the telecommunications 
sector.  Thanks to that assistance, the NCC has established 
clear objectives: a) increased teledensity  (telephones per 
person); b) increased geographic spread of Nigeria's public 
and private telephone network; and c) enhanced 
telecommunications access in Nigeria's agricultural 
communities. 
 
 
4. The Government of Nigeria (GON) established the Nigerian 
Communications Commission (NCC) as the telecommunications 
regulatory authority in 1992.  This was one of the reforms 
that then Head of State Ibrahim Babangida instituted as 
part of his putative transition to democracy.  While the 
establishment of the NCC should have signaled the 
liberalization of the communications industry, it in fact 
made almost no impact.  The NCC was understaffed, without 
any authority over NITEL, dominated by a Ministry of 
Communications rife with corruption.  Much of the NCC's 
authority in licensing and control of the broadcast 
spectrum was contested by the Nigerian Broadcasting 
Commission (NBC).  Furthermore, the promised award of 
broadcast and frequency licenses to private sector 
companies was delayed throughout the Abacha period (1993- 
1998). 
 
 
5.  In 1998, transitional Head of State Abdulsalami 
Abubakar issued a decree that revoked those legislative 
obstacles to telecommunications competition.  He also 
released the first (and to date largest) group of private 
television and radio broadcast licenses.  The newly elected 
Obasanjo government followed up on these earlier reforms 
and by early 2000, targeted improvements in 
telecommunications as a major "democracy dividend."  A 
critical decision made the NCC the preeminent agency for 
telecommunications and Obasanjo lured Engineer Ernest 
Ndukwe away from the private sector to become the NCC's 
Executive Vice Chairman and Chief Executive. 
 
 
NCC Objectives and Accomplishments 
--------------------------------------------- ------- 
 
 
6. The major objectives of the NCC are to: 
-     Create a regulatory environment for the supply of 
telecommunication services and facilities and the 
promotion of fair competition and efficient market 
conduct; 
- Facilitate entry into markets for telecommunication 
services and facilities of persons and organizations 
wishing to supply such services; 
- Protect licensees and the public from unfair conduct 
of service providers with regard to service quality 
and payment of tariffs; 
- Promote the development of the telecommunication 
sector of the Nigerian economy; and, 
- Establish technical standards and promote the 
development of Nigerian telecommunication 
capabilities, industries, and skills. 
 
 
7. NCC achievements to date are: 
- The GSM cellular auction in January 2001, described 
by observers as the best-run in Africa, raised USD 
855 million for the government budget and licensed 
3 national digital cellular operators; 
- Fixed wireless local loop licenses were auctioned 
for all 36 states and the Federal Capital Territory 
(Abuja), raising $11.3 million; 
- A second national operator (Globacom, Limited) was 
licensed in August 2002, raising $200 million; 
- Competition was increased by licensing 29 private 
networks; 
- Twenty-seven licenses for the provision and 
operation of community telecommunications were 
issued; 
- Two licenses for the provision and operation of 
national long distance communication were issued; 
- One license for global mobile personal 
communications by satellite was issued; 
- Establishment of the consumer affairs bureau which 
increased protection of consumer interests. 
 
 
 
 
Telecommunication Reform as a Democracy Dividend 
--------------------------------------------- ---- 
 
 
8. Changes in the telecom sector have been dramatic.  NCC 
actions have made possible increased cellular coverage from 
25,000 lines to over 1.2 million within the first year, 
with a corresponding increase in mobile teledensity from 
0.04 telephone lines per hundred persons to 1.7 lines per 
hundred persons.  This is a more than forty-fold increase 
in the number of lines.  NCC actions have also generated 
more than US $70 million a month in revenue for the 
cellular companies.  Another sign of the NCC's growing 
success is the GON decision to transfer management of 
commercial frequencies from the Ministry of Communications 
to NCC. 
 
 
9. Nonetheless, the NCC has had its failures.  Unable to 
regulate NITEL (except in GSM cellular communications for 
which NITEL had to apply to the NCC to get a license), the 
NCC has not resolved interconnection problems of cost and 
inoperability.  This has compelled many users, particularly 
business people to have with them at all times a NITEL land 
line, an Econet or MTN GSM phone, and a fixed wireless 
phone as back-up to the unreliable NITEL land line. NITEL 
has limited interconnection for ECONET and MTN to 10,000 
lines--though some complain that the number is really 
lower--and has the highest interconnection costs in the 
world. (These are reported as high as 65 Naira per minute 
though a final rate is yet to be agreed between NITEL and 
GSM providers.)  It is also generally believed that NITEL 
favors its own GSM service for connection to landlines, and 
in fact uses this as a major selling point.  The expense of 
GSM tariffs has meant most Nigerians cannot afford them, 
and many who buy the line and handset must sparingly use 
the pay-as-you-go service.  GSM service is still limited to 
major urban centers although as prices come down, the 
service is becoming increasingly affordable to lower-income 
users. 
 
 
USG Projects in Support of Nigerian Telecom Expansion 
--------------------------------------------- -------- 
 
 
10. USG assistance to the NCC has been led by USAID 
Nigeria working through the Leland Initiative and Telecom 
Leadership Program, providing support through a series of 
capacity-building and technical assistance programs dating 
from the arrival of Vice Chairman Ndukwe at the NCC.   Key 
partners in this process include the FCC, National 
Telecommunications Cooperative Association (NTCA), the 
National Association of Regulatory Utility Commissioners, 
the Public Service Commissions of the District of Columbia 
and Oregon and the Center to Bridge the Digital Divide at 
Washington State University.  The Trade and Development 
Agency (TDA) has also provided funds for a spectrum survey 
and analysis of secondary wired backbones and the Embassy's 
Public Affairs Section, using Education for Development and 
Democracy Initiative (EDDI) funds, has established an 
office (the Nigerian-American Information Initiative- NAII) 
to publicize bilateral cooperation. 
 
 
11.  USAID projects included policy workshops at Afrinet 
2000 and 2002 on licensing, interconnection, e-commerce and 
rural access; consultations between key FCC leadership and 
senior NCC staff; support for NCTA planning for community- 
based telecommunications licensing; training in the U.S. 
and Nigeria on pro-competition policy for NCC commissioners 
and senior staff; technical assistance in drafting a model 
code of regulations; and  staff training in consumer 
affairs, licensing, policy and planning, and spectrum 
pricing. 
 
 
12. USG assistance projects have produced concrete results. 
The NCC Consumer Bureau, modeled on that of the FCC, is 
functional and providing the regulatory body with for 
improving service.  As it becomes more effective, the 
Consumer Bureau should increase transparency and enhance 
consumer protection.  The NCC published and made publicly 
available it regulatory code, another significant step in 
increasing transparency and predictability for the 
investment climate.  The USG has involved the NCC from the 
beginning in plans for the West African Telecommunications 
Regulators Association (WATRA) which was formally chartered 
in November 2002. The NCC will host the first Annual 
General Meeting in Abuja in March, 2003. 
 
 
13. USAID plans to build on the leadership of the NCC, and 
will extend its engagement to additional public and private 
sector entities.  Major new initiatives include: 
a) Effective regulation: USAID will continue its technical 
assistance based on requests from the NCC to strengthen 
the NCC's capacity for effective regulation.  Priority 
areas are: strategic planning, market analysis, spectrum 
pricing, tariff principles and practices, regulatory 
accounting, and training for judges and legislators on 
legal issues related to Telecoms. 
b) African Telecoms Institute:  The NCC has acquired a 
building and initiated plans for a state of the art 
facility for training using traditional and on-line 
distance technologies.   USAID will assist the NCC to 
conduct a feasibility study and support to bring in non- 
traditional and private sector partners.  USAID will also 
bring the NCC and other Nigerian partners into 
nettel@africa (the Network for Capacity Building and 
Knowledge Exchange).  Nettel components include an 
extensive training program on ICT policy and regulation. 
Peer-to-peer exchange programs between Africa and the 
U.S. regulatory entities, and a research program to 
develop case studies that look at performance in the 
telecommunication sector are other elements of future 
assistance. 
c) Rural Access: Technical assistance will be provided 
through the NTCA to prepare community-based operators for 
licensing and identification of sources of capital, 
including oil companies, other industries and Nigerians 
living abroad. NCC plans that leverage existing Universal 
Service Funds to provide greater access to capital will 
also be supported. 
 
 
14.  Comment: The Global Development Alliance (GDA) put 
together for Nigerian telecommunications exemplifies the 
development model recently praised by Secretary of State 
Powell and USAID Administrator Natsios.  USG assistance to 
the telecommunications sector in Nigeria brings together 
new partners, new models and new resources to enhance the 
sector and its role in development.  As a result non-USG 
resources have exceeded the financial and human resources 
provided by USAID and other USG agencies.  Exciting new 
ways to bridge the digital telecommunication divide in 
Nigeria are now being implemented.   End comment. 
JETER