Allowing Market Forces to Reduce Data Rates In Nigeria using the UK as a Case Study

Allowing Market Forces to Reduce Data Rates In Nigeria using the UK as a Case Study

Recently, the Minister for Communications and Digital Economy, Dr Isa Ali Pantami, directed telecommunication companies (otherwise known as telcos) to reduce the price of data plans, improve the quality of service and check illegal deductions of data.

I think the Minister’s action is very commendable but I would have thought it best to allow market forces, through the introduction of new competitive players like MVNOs to assist in achieving the first objective of reducing the price of data plans in Nigeria

Currently, Nigeria has 4 Mobile Network Operators (MNOs) responsible for the provision of communication services. Presently, there is no Mobile Virtual Network Operator (MVNO) existing or operating within the country.

MVNOs differ from MNOs, in the sense that, they do not need a license for spectrum to operate. They either do not need to acquire communication networks or assets. MVNOs purchase communication services (voice or data) from MNOs and then resell to consumers. They could hire customer support, marketing etc. and even operate with their sim. You can think of MNOs as manufacturers, while MVNOs act as wholesalers (middlemen) – simply reselling communication services to consumers.

In most parts of the world, where MVNOs operate, they tend to offer cheaper communication services to consumers, perhaps because their investment in communication networks is light. They also offer consumers the flexibility to choose from different operators.

Using the UK as a case study, Lyca mobile or Lebara, is well known for its cheaper communication services to consumers with lower purchasing power, even though the quality of service may be poor in certain regions. Also, the introduction of Lyca Mobile also means that MNOs like O2 are forced to reduce their services in a bid to attract more customers to their networks and reducing the churn rate.

Additionally, with the advent of 5G, network slicing would allow MNOs to be able to sell slices (dedicated parts of their networks) to enterprises or MVNOs, based on quality of experience, latency, reliability, speed, etc. This means that the Nigeria communication market ought to start preparing for this transition, where MNOs, in the future, could serve simply as manufacturers of communication services while other players market the services directly to consumers. This could equally benefit the MNOs who may be able to reap a quick return on their investments, through a direct focus on manufacturing only.

I therefore would like to conclude that we could achieve lower communication services within the country by incentivising new players (within the industry) to consider acting as MVNOs, which would lead to a fair competition within the market and no doubt, lead to the reduction of communication services offered to consumers.

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3 thoughts on “Allowing Market Forces to Reduce Data Rates In Nigeria using the UK as a Case Study

  1. My question is how will these MNVO’s be able to offer cheap data plans better than the MNO’s if the service they provide is gotten from the bigger players?

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  2. That’s very true. Think of it as a relationship between a manufacturer and a wholesaler; the manufacturer sells to the wholesaler in bulk at discounted prices; the MVNOs also have the flexibility of shopping around various MNOs to find a good deal. When MVNOs purchase these bulk communication services, they do not incur expenses related to capex or opeex, simply marketing, customer support etc.

    Besides, the introduction of more players would only mean that consumers have a wide range of alternatives (MNOs and MVNOs).

    With the advent of 5G, slicing would definitely mean that MNOs are looking to sell slices of their networks to enterprises, at special rates, to quickly make quick gains on their huge investment. These slices could equally be sold to MVNOs, at discounted prices.

    In the future, this business model would become the norm within the communication Industry and would only serve to reduce communication services, with the active participation of other players like MVNOs.

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  3. That’s a good question. Think of think as a manufacturerer – wholesaler relationship where the manufacturer sells to the wholesaler in large quantities at discounted prices. The MVNOs also do not incur expenses related to capex or opex, simply marketing or advertising costs.

    With the introduction of MVNOs, consumers also have various alternatives (MNOs and MVNOs).

    Now with the advent of 5G, MNOs will be selling large portions of their networks as slices to enterprises, at special prices, to quickly reap their investment on 5G networks. This could equally be sold to MVNOs. This would be come the defacto business model for future cellular generational system. The adcent of more players would only lead to a fair competition which would benefit consumers.

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