Posted by By Tayo Ajakaye on
Telecom Operators in the country have opposed plans by industry regulator, the Nigerian Com-munications Commission (NCC) to licence manufacturers of recharge cards.
You can't appoint contractors for us
Recharge Card
Telecom Operators in the country have opposed plans by industry regulator, the Nigerian Com-munications Commission (NCC) to licence manufacturers of recharge cards.
The NCC had, following the directive early this year by the federal government that from December 31, 2004, importation of recharge cards would be disallowed in the country, gone ahead to licence some companies to engage in the local production of the cards.
But in a letter to the Executive Vice Chairman of the Commission, Engr. Ernest Ndukwe, the operators, under the aegis of Association of Telecommunications Com-panies of Nigeria (ALTON), opposed the NCC's action.
The group, in the letter jointly signed by its Chairman, Chief Adebayo Akande and Executive Secretary, Engr. V.K. Fashola frowned at the NCC's move to licence recharge cards producers. It cited the Telecom Act of 2003 in its argument and said the Commission's action was ultra vires.
"It is our understanding that under the Nigerian Communications Act 2003, the NCC only has authority to licence operators to provide communications services and operate communications facilities. From the definition under the Communications Act, the NCC's authority does not extend to licensing or authorization for recharge card production. In confirmation of this position, recharge card production is not included in the NCC's licensing framework."
What's more, the telecom operators continued, ALTON does not even think the Commission, or any government agency for that matter, has the requisite expertise to evaluate the competence of companies providing the service. "In view of the novelty of this form of security printing in Nigeria, ALTON is of the view that no requisite expertise exists in either the NCC or indeed any other Agency to evaluate the competence of companies providing this service or act in any regulatory capacity," ALTON stated.
Rather than engage in an activity for which its competence is doubtful, ALTON said it is "of the view that the NCC should be more concerned in articulating and pushing relevant fiscal/financial incentives to the proposed local recharge card production plants to attract investment into this venture."
The operators declared that in view of the specialized nature of recharge cards production, they would not compromise on issues of quality control standards in the selection of local card producers. The operators explained: "This is based on the fact that any compromise in quality control will have a direct negative impact on the profitability of ALTON members since most of the Nigerian subscriber base utilize recharge cards."
Although it assured NCC of its preparedness to operate in a manner that would ensure compliance with the Presidential directives, ALTON nonetheless pointed out that "in consonance with the existing laws and in furtherance of business objectives, ALTON members shall exercise their rights in selecting only local recharge card producers which meet technical standards and other criteria as determined in line with members' internal management rules."
In a position paper made available to THISDAY, the operators reviewed the situation in 15 countries in Africa including Algeria and Morocco; in Asia, including Indonesia and the Philippines; South America including Chile and Mexico and Europe including Greece and Bulgaria. They argued that no such licencing of recharge card manufacturers hold in any of these countries.
The operators further argued that the Central Bank in its several years of regulating the banking industry, has not insisted on licencing who prints cheque books for any bank although cheque books represent an exchange of value for the banks just as the recharge cards represent value exchange for the telecom firms.
It further pointed out that licencing of recharge cards manufacturers will naturally introduce additional costs to them (manufacturers) since they would have to pay some form of levies to the regulator. The levies so paid, once or periodically, would be passed on to the customers, in this case the telecom operators. Again, licencing may lead to the creation of what the telecom operators called "an oligopoly and potential clogs in market supply." This is because operators would be subjected to the production capabilities and competencies of the few licenced manufacturers with the potential attendant effect that if there is a breakdown in the process, chaos creeps in. "The recent level of uproar that met the short term shortage in MTN recharge cards alone provides an indication of the likely public response to a general shortage in all telecoms cards!" the telecoms operators warned. Such an action by the regulator, they argued, would be an unnecessary regulatory intrusion into the operator's supply decision-making process especially in an extremely competitive sector where an operator needs as much flexibility as possible. The telecoms operators declared: "Scratch card vouchers are not only a billing tool; they are a tool of differentiation and brand loyalty. The telecoms industry is at the intersection of high-technology and consumer marketing; the best technology is of limited use if not transmitted or communicated adequately to the end user, and marketing is disrupted if they operator has limited flexibility on its choice of technology and/or supplier." It advised that to achieve government's objective of local manufacturing of recharge cards, some incentives needed to be put in place to attract adequate investment and expertise in the scratch card sub-sector. This is because for many international manufacturers, local production will carry a higher cost than exporting into Nigeria. Yet they will only transfer expertise to Nigeria if government offers incentives to them in areas such as granting such manufacturers tax relief through pioneer status; tax relief if a large proportion of local raw materials are used in the production process; tax relief if there is a massive labour involvement and tax relief for investment in disadvantaged areas. Some of the arguments of the telecoms operators against the appointment of contractors by NCC include:
Regulatory intervention in the operator's value chain will hamper Nigeria's ability to benefit from the latest technologies, including the latest tools to facilitate payment for mobile services and combat fraud: scratch cards are only a part of a complex and sophisticated billing value-chain; any restrictions in Nigeria on the development of one element of the value chain will limit the rapid deployment in the country of the latest billing technologies, such as roaming vouchers, etc.
Well managed, the billing supply chain process will see operators create the conditions that allow their customers to use vouchers as currency for other goods and services and reduce dependence on cash for transactions; in the event of excessive government intervention, card manufacturers will be reluctant to transfer the latest technologies available.
NCC intervention is inconsistent with a key objective of universal access: A disruption of the supply chain with an NCC-imposed list of suppliers in a context of active focus network build-out can result in an operator inability to adequately serve their subscribers, in the event that security is compromised or production capacity is lower than demand. The bottom line of the operators would be directly affected, through lower revenue or reduced margins, in turn negatively impacting operator ability to expand their networks as necessary.
The licensing of card manufacturers by the NCC would be an unnecessary regulatory intrusion into the operator's supply decision-making process, in an extremely competitive sector where operators need as much flexibility as possible. Scratch card vouchers are not only a billing tool; they are a tool of differentiation and brand loyalty.
The telecoms industry is at the intersection of high-technology and consumer marketing; the best technology is of limited use if not transmitted or communicated adequately to the end user, and marketing is disrupted if they operator has limited flexibility on its choice of technology and/or supplier.
Regulatory intrusion into the operator's decision-making would send a negative message to the investment community, at the time when operators need all the necessary goodwill to raise adequate funding: the message would be that of unexpected regulatory intervention in areas that global best practice generally regard as part of the operator's purview.
There are no guidelines in place for a licensing of scratch card suppliers: If the NCC is going to take on the function of licensing scratch card manufacturers, it has to do so within the framework of and in accordance with an established set of rules agreed upon by all industry stakeholders, in line with guidelines pertaining to the security of the production premises, etc. The licensed card manufacturers would then need to have their activities supervised and managed to ensure that they are operating within guidelines. To the best of our knowledge, such guidelines do not exist. This service is not envisaged in the existing licensing structure.
Having the NCC license scratch card manufacturers is not in line with the spirit nor the letter of the telecommunications law: It is indeed doubfful whether such tasks fall within the purview of the NCC's mission as part of the telecommunications Law, or even follow the spirit of the law, as it pertains to NCC functions. At the least, the decision substantially extends the scope of the NCC's functions.
Having the NCC license scratch card manufacturers would create a precedent that could extend to other areas of the supply chain and unduly stretch the resources of the NCC: a government or NCC control of operators' supply decisions could extend to suppliers of infrastructure and software, areas that are just as critical as billing, an evolution that would be highly detrimental to operator's ability to manage operating costs and ultimately, to the growth of the Nigerian market.
There is currently, within the NCC, limited expertise to adequately license deserving manufacturers: the authorization of a scratch card manufacturer responds to a set of criteria related to security, printing expertise, environmental degradation, etc. The NCC has not been involved in the regulation of any such telecom product and does not possess any expertise in this area. NCC officials who were attending a retreat of the Commission's staff at the weekend could not be reached for comments. ALTON is an association of operators in the telecommunication sector. They include telecom operators, equipment vendors and support services providers. They are also part of the larger telecom body, the Association of Telecommunications Companies of Nigeria (ATCON).