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Cablegate: Nigeria: Telecommunications Expansion a Success

This record is a partial extract of the original cable. The full text of the original cable is not available.

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

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