In baseball, double play is a defensive play where two players are put out. It turns out that the leading ecommerce companies like Amazon and Alibaba have such strategies in their businesses. Amazon runs an ecommerce operation, which largely loses money, but makes money via cloud computing services. In the world of Amazon, if it can destroy many brick and mortar retailers and force them to go online, it will have cloud services to sell to them.
For Alibaba, its double play comes from its asset-light marketplace and the Ant Financial which processes payments across its ecosystems. Besides the commission for selling on Alibaba, Alibaba takes another cut for handling the payment. When you examine these companies, one thing is obvious: no one makes good money by running just an ecommerce operation; you need a double play to supplement it.
The cloud service sector in Nigeria has been growing as companies begin to move their services and operations to the cloud. Besides the largely cost-competitiveness, cloud simplifies operations, with data consolidated more effectively. But the problem is that Nigerian cloud service providers are not getting these businesses: most Nigerian startups and companies, excluding banks, are […]
Facebook runs the Free Basics which is an initiative through which it offers free Internet services to some selected websites including most Facebook products. In other words, when you visit the websites, your meter will not be running on your mobile devices. According to the company, it is a way to make Internet affordable. In Nigeria, that initiative partners with Airtel, a major telecommunication operator.
It is very hard to ascertain how that service has worked in Nigeria. By that I mean if people are making decisions to buy Airtel SIM cards for the ultimate access to the Free Basics. In Lagos and across Nigeria, I did not have that feeling. MTN has remained the largest network, with Glo coming far behind. Airtel is #3 and remains so even after striking the partnership with Facebook on Free Basics.
Besides Airtel, other telcos across Africa now support Free Basics. Facebook pays the mobile operators since the customers do not have to pay for the data. That means that Facebook is the paying customer. Facebook through its balloons and other tools provide the broadband services which the telcos “retail” free for the end-consumers to use to access the chosen websites. If Facebook does not pay the small fee for the operations, the telcos ideally will not bother.
Also, there is the possibility that some telcos can use that as a consumer acquisition strategy, getting customers to use their SIM cards, knowing well they will stick with them when they need to enter the open Internet, which has to be paid for.
The Problem with Airtel and Facebook Partnership
A major problem with Free Basics is that the chosen websites are largely not for productivity. While Wikipedia is a good website, the fact remains that if you are restricted on the site, even the site you have access is diminished. There is always a feeling that the other site is better.
Imagine a scenario where a student is chatting with a friend on Facebook via Free Basics, and the friend tells him that the professor has posted a homework available in the university portal. The student wants to access the school portal but Free Basics does not support that site. The option for the student is to buy credit to have access to the real open Internet. When that is done, the student can see the assignment. This experience will surely diminish the Free Basics before the student.
The implication is that the best way to run Free Basics is to partner with companies that understand how to offer Internet free, even if it means watching adverts, to do so. People watch the adverts to have access to the web. So, when they are on Free Basics, they access the available sites, but when they want to access the open web, they watch adverts to do so. The Facebook-Tizeti partnership should be anchored on that framework. But that is not what we are getting.
The Facebook-Tizeti partnership
Tizeti, which manages Wifi.com.ng and Flobyt, a free WI-FI service, would have been a natural partner. It can offer end-to-end experience on totally free service for Free Basics website and the open Internet for users. That means, what Facebook supports get delivered and the other websites can be accessed by watching adverts. That was possible in the old Tizeti; not anymore.
Tizeti Network Limited is a fast growing Wireless Internet service provider in Lagos, Nigeria, delivering high-speed unlimited wi-fi Internet access to residential and business customers. Founded in 2012, the Company has established wi-fi networks all over Lagos. The Company was the first ISP to deliver unlimited internet using wide area wi-fi in Nigeria and is now offering its services all over Lagos and the South.
Yes, after Tizeti raised money from global investors, it pivoted from its old business model of offering free WI-FI services. Now, you need to pay to have access to its WI-FI services. Nonetheless, on this Express WI-FI, you can still access the Free Basics part free on its network. From Facebook and Tizeti press release:
Tizeti … announced a partnership to expand Express Wi-Fi by Facebook in Nigeria, …, this initiative supports Facebook’s andTizeti’s shared goal of connecting more people to the internet in a cost-efficient way.
A fast and affordable public wi-fi hotspot service, Express Wi-Fi in Nigeria is focused in areas where people gather and work, including markets, cafes and public outdoor spaces. Using affordable internet through Tizeti’s wi-fi technology, anyone with a wi-fi capable device and the ability to receive a one-time SMS will be able to use Express Wi-Fi without switching SIM cards or having a data plan. People can connect through Express Wi-Fi on most Android and iOS phones, tablets, and laptops.
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Our Express Wi-fi plans are affordable and range from N50 for 100MB to N2,000 for 10GB.
In addition, anyone connected to an Express Wi-Fi hotspot can access Facebook Flex and Free Basics, which offers people access to impactful local services, including health resources, education and business tools and more.
From the press release, you can get the Facebook Free Basics via this partnership. But if you need the open web, you have to pay. The cost of 10GB of data is N2,000 which is really cheap; 9Mobile would reduce your pocket by N7,000. Yet, it did not solve the pain point even though it has lowered the cost of broadband. A free win would have been if Facebook has pushed Tizeti to adopt its original free WI-FI service, supporting it with funding to make up any revenue from advertisements. That is when we will know great things will happen.
All Together
Free Internet has emerged as a stunt which entrepreneurs use to get free media. Once they start operations, they begin to charge customers. Most of them that promised free Internet are now charging customers. Of course, it is not an easy business model to run free WI-FI because it costs money to build the infrastructure. The Free Basics remains limited, because offering one part of Internet free and other parts paid will always create poor experiences for most people.
A company that can use advertising to support the cost of the open web will be a natural partner to this initiative. They can cap the maximum data usage for the open web while Free Basics remains unlimited to the chosen websites. That way, people will know that even though I do not have money, I can be in Free Basics contents, and if something triggers me to go to the open web, I can watch ads and access the contents while making sure that I do not exceed my available data allocation. Not doing that weakens Facebook vision and India was right to have banned it outright: it is a distortion of the mind.
That inability to find a way to get people to the open web remains the weakest link of this initiative. I will never encourage a family member to use such a service because it rewires the brain on the possibilities of the web. Facebook can fix this with its money. Yet, I respect that the firm has to execute its business model on its own terms.
A professor from Nigerian Electricity Regulatory Commission (NERC) gave a speech in Owerri last week. In that talk, he broke down all the problems with the Nigerian electricity sector. He explained the near-impossible seamless interface between the distribution companies (Discos) and the generating companies (Gencos) despite the presence of the NBET (Nigerian Bulk Electricity Trading Plc) and the Transmission Company of Nigeria (TCN).
The Discos are not motivated to carry all the available electricity sent to them because the tariff to sell them to the consumers is below market price. According to the professor, the Discos devised a way to manage that problem by stalling the implementation of the smart meter, giving them the opening to do estimated billing. Through that, Discos could rip-off customers, making money, even when not delivering any electricity. The Discos are not fully privatized: government retains about 49% in each of the Discos.
The Gencos are not happy because since electricity through the Nigerian grid cannot be stored, and Discos cannot accept all that Gencos are capable of generating, Gencos are not energized to operate at their maximum capacities. So, Gencos cut capacity, idling plants and losing on economies of scale. Most of the assets by Gencos are fully privatized.
The TCN, wholly owned by the Nigerian government but on contracted management, has its own problem. Its transmission system cannot carry more than 8,000 MW of electricity which means that even if Gencos generate above that amount, Discos will never get them.
NBET was designed to help to smooth these relationships, removing the friction which may exist between Gencos and Discos so that even if Discos cannot accept the electricity, Gencos will not lose money badly. Most times, it is irrelevant if the end customers have electricity. NBET is in intermediary role to make sure that an equilibrium point is maintained and the markets function well.
Nigeria needs to modernize its power systems (source: fosuji)
As the don spoke, I saw a clear ceiling in the whole problem: Nigerian problem is centralization of our energy policy. This is what I think we can do:
Dismantle the whole nexus of national grid. Nigeria will never have enough money to beef up TCN to provide the transmission capacity we need to have 50,000 MW we need in this country. With that knowledge and TCN capacity stunted below 8,000 MW, a simple decision can be made. Do away with national grid and allow private sector to come in and run this business.
More capacity from Gencos is not the answer: Our problem is not more capacity. Even if Gencos produce 50,000MW, only 8,000 MW can reach the Discos through TCN pipelines. My suggestion will be for the Gencos to have the capacity to sell their power directly to customers, without going through Discos. They can find a way to do that through their partners and investors
Discos should lose exclusivity on meters: Government should make it possible for any company that can generate at least 50MW to have the capacity to sell meters and install same for customers under defined supervision for quality and fairness. Our fuel stations use meters and government regulates them, making sure they are fair as they dispense the petrol; we can do same on smart meters for electricity.
Absolute and total decentralization: From generation to distribution through transmission, allow competition. Simply, decentralize the whole aspects but with requirement that no LGA can have more than two Gencos (above 50MW capacity) and two Discos and where those institutions operate they must share meters and transmission lines. If we do that, we will solve the problem of the national grid. That will also take out the problems the Gencos are experiencing of not operating on full capacity. This will also push Discos to innovate and function better through competition.
Government should allow reflective tariff: As naira loses value, it makes sense to allow electricity to be optimally priced. Nigerian government should allow that to happen.
I understand that the Gencos who are used to producing massive power to transmit regionally and nationally will not be happy with decentralization. The fact remains that they can fund such infrastructures to reach new markets, if they decide.
Generally, if we decentralize and deal with the issues of national grid and meter, we will get closer to having constant power. The structure we have today will not work, because even in ten years, I don’t see where Nigerian government will find money to improve the capacity of the transmission lines. In a system, a weak link renders everything useless: the transmission system is the permanent weakest link here. Because TCN is still Nigeria’s issue, Gencos and Discos cannot reach real equilibrium based on market forces. We need a real market dynamics to have electricity in Nigeria: decentralization will get us closer to that.
There is a very deep conversation which is going on LinkedIn since I wrote that the Nigerian government can indeed regulate cryptocurrencies like Bitcoin. As I noted, my preference is for the government to create our own cryptocurrency, NairaCoin, and tie its value to the Naira. I have a reason for that.
In commercial contracts which need to be insured, most times, you need to put monetary figures on them. If you have a contract that is created on blockchain and quantified in Bitcoin, in Nigeria, for the supplies of items and your partner refuses to do its part, after you have paid, you have to go to court to seek help. I do think most Nigerian courts may note that the Nigerian law does not recognize Bitcoin to assess the true value of that contract. In short, your partner can even countersue that the contract is voidable. Technically, you will have two issues to deal with:
You have to prove to the court that blockchain contracts are legally enforceable in Nigeria. I know of a time when emails were not admissible in courts. And banks would not accept emailed instructions or mandates. The Law fixed that and we now take them for granted. Nothing has been done in the area of blockchain and the default is that such contracts are potentially voidable
The Bitcoin is not a legal tender in Nigeria. The implication is that the monetary value is not permissible in Nigerian court. You will need to convince the court to offer value to that contract which largely was written outside the law. This is different from US dollar based contract. Nigeria is part of United Nations, and we recognize all global currencies. That means if you have a contract in South African rand, our court will enforce it. But today, I have no idea if any Central Bank has adopted Bitcoin and made it its legal tender.
Always remember that you can do anything you want in business. But what matters is when there is problem. I tell people to always operate in areas where there is clear certainty of the law unless they want to speculate and that speculation must be clear and evident.
This does not mean that we cannot advance blockchain-based technology. My point is that you are going to be surprised if things go bad. In short, for any Nigerian insurance company to insure your blockchain-based contract and the associated business it drives, you will expect them to be in the same financial system you are operating. If you are in Bitcoin and they are in Naira, I do not see how that insurance policy can be sold. Also, there is a possibility that the regulator, NAICOM, does not recognize Bitcoin. The insurers will not insure you, period. Sure, you can do business without insurance, but that may not be a good idea.
There was a time in U.S. when school kids recorded their “friends” intimate moments via webcam. Yet, district attorneys could not bring charges against the kids, because there was no law in the statue to prosecute those kids. Of course, the law has been upgraded to deal with such.
Yet, you can put your blockchain-contract in Naira, but since this is digitized architecture, my suggestion is to simply create a Nigerian cryptocurrency backed by the Central Bank of Nigeria so that Nigeria has its cryptocurrency (NairaCoin) which is tied to the Naira. That will make blockchain contracts more efficient. The NairaCoin will maintain exchange rates with Bitcoin and others, just as paper Naira has with U.S. Dollars and Euro, while making sure that the paper Naira and NairaCoin are always correlated.
*image: Nigeria’s Minister of Justice and AG, Abubakar Malami
