Dying By Installment

*Sad Story of How Nigerian ISPs Are Closing Shops

Their story is so pathetic that it has continued to engage the minds of those who see the Internet as playing an important role in bridging the digital divide separating Nigeria from the developed world. On daily basis, their number continue to decimate unabated. They die by instalment, each waiting for its turn to answer this unfortunate call-death. What are the causes of this death by instalment? ROMMY IMAH attempts an answer.......

They are like the casualties in J. P. Clark’s celebrated poem, “The Casualties”. However, in their own case, they are wounded and traumatised and so, wait death by instalment. They rise today with great promises like the morning flower but not long they are beaten by the vagaries of an unfriendly business environment, they wait their death by instalment. And they eventually die.

On paper, Nigeria boasts of over 100 licensed ISPs, but only a third of these are active. Yet, none of them could be said to hold a substantial share of the market. Virtually every Nigerian ISP until a few years ago obtained their upstream bandwidth from outside of the shores of the country. Even with the arrival of the country’s communication satellite and the SAT-3 submarine cable system connecting Africa to India, majority of Nigeria’s ISPs have maintained relationships with their Foreign Service providers, to whom they mostly connect through VSAT.

In 2007, a research firm reported that in seven years of steep rise in mobile telephony in Nigeria, the number of Internet Service Providers (ISPs) in the country was ironically on the decline. The report noted that within a short space of three years of commencing business in Nigeria, over 60 ISPs were forced to close shop. Three years after this finding, the situation can be said to be worsening.

Giving reasons for this sad development in 2007, the researchers observed that there existed a huge gap between demand and supply of bandwidth brought about by consumers’ inability to buy the Internet infrastructure. The report suggested that this was a spill-over effect of non-accessibility to public power supply, which is a common phenomenon in Nigeria. Today, the challenge has gone beyond erratic power supply.

In an interview with Daily Independent, a Lagos based national daily, chief executive officer of the Nigerian Internet eXchange Point, Muhammed Rudman lamented the disaster that awaits the ISPs should government continue to abandon them.

According to him, “Government needs to provide incentives for the service providers as you are aware they are dying very fast in the country because of infrastructure challenge like power. They need to generate their power before they can provide services to their clients.” 

Nigeria with an estimated 150million people has only about 11million people representing 7.3 per cent, having access to the Internet. Yet, access to voice telephony has astronomically risen to over 78million according to Nigeria’s industry regulator, the NCC’s statistics. But that is the irony of telecommunications development in Nigeria where Internet penetration stunts, while voice telephony is enjoying such an exponential growth.

It is not therefore, an uncommon knowledge today that doing business in Nigeria especially Internet related business, is most challenging owing to so many factors ranging from human to economic and then to social. Business in Nigeria is not for the lily-livered; it is for the bold and the toughest of men.

Nigeria has a massive shortage of electricity supply and service providers rely heavily on diesel-powered generators for their business. This, operators argue, adds an extra layer of costs for which consumers have to carry the burden.

Jide Awe, versatile IT practitioner once observed thus: “Already the Internet and ISP business in Nigeria is suffering. Ours is the only field in Nigeria where despite the escalation in fuel prices, almost nonexistent power supply and other operational factors, the public expects lower prices for our services. The results and outcome of forcing the ISPs in Nigeria is not even good to be imagined not to think of becoming a reality.”
Unarguably, the poor state of power supply in Nigeria has monumentally affected Cyber café business in Nigeria such that many of them have wound up few months after commencement of business. This on the other hand, has a spill-over effect on the existence or otherwise of Internet Service Providers (ISPs). Many ISPs that rely solely on the patronage of Cyber cafes have all gone under. And many are still going under.

Even as telecommunications experts hold the view that Internet penetration in Nigeria is still on the low side and that there is still a lot to be done in pushing Internet further to the reach of majority of Nigerians, several factors are collaborating with poor power supply to deny Nigerians access to the super-highway.

Power therefore, may not in the real sense of it, be the only albatross of Internet Service Providers in Nigeria as there are alternative sources of power generation outside of public power supply that could still keep their business running.

Evidences abound that the Nigerian Internet Service Provider is confronted with so many other challenges that remaining in business is likened to the biblical passage through the eye of the needle. In fact, the major challenge faced by traditional Internet service providers in Nigeria is that spearheaded by traditional voice telephony providers. The real danger is in the emerging technology convergence and the effects of the universal licensing regime already in operation in the country.

Technological convergence as a phenomenon refers to a group of technologies developed for one use being utilized in many different contexts. Until now, these technologies were working independent of each other but are now able to share resources and interact with each other thereby creating new efficiencies.

Amazon.com may have alerted about this impending doom a couple of years ago when it noted that a trend was underway in which voice and data communications were merging arguing that the irresistible logic is that digitized voice is just another kind of data, after all. It added that the economies of convergence can be considerable: “there would be no need to build and support separate voice and data infrastructure when you can just have one.”
Perhaps, it is this combination of infrastructure that presents the problem that telecommunication convergence aims to solve; data people who until now, were not worried about voice in the past, have to worry about it now. Similarly, people who used to specialize exclusively in switched voice circuits are already adapting to the new environment.

Besides, the inclusion of data service in their service offerings by Private Telephone Operators (PTOs) and lately, the GSM operators have without doubt, enormously affected the business fortunes of Internet Service Providers in Nigeria. Virtually every fixed wireless operator in Nigeria today has data service in its service portfolio. In fact, observers insisted a few years ago that by including data in their service offerings, the PTOs had commenced a gradual extinction of the ISPs from Internet business.

Code Division Multiple Access (CDMA) operators now offer Internet services via 1x and EV-DO through dial-up connection, which is mainly patronized by individuals at homes and offices. Even in some small business enterprises like the cyber-cafes, dial-up serves as their gateway to the super-highway.
From Starcomms to ZoomMobile to Multilinks-Telkom and indeed to the GSM operators, there has been a renewed interest in playing in the ‘lucrative’ Internet market with varieties of offerings. There is the Internet card, the USB cable and the Pocket PC, all aimed at offering Internet services.

The current fate of the ISP cannot be entirely divorced from the competition in the telecoms industry which has become so tense that everybody is battling to have a good chunk of the market hence the diversification in service offerings by operators. Currently, Internet service offering is no longer the exclusive of the ISPs as virtually every player in the telecoms industry now offers Internet service.

Yet, what could unarguably pass as having dealt the greatest blow on Internet Service Providers analysts insist is the emergence of the Smartphone also known in some circles as the mobile PC. This reflects globally in the steady rise in cell phone usage as the most convenient Internet access tool against the traditional PC. Besides, it is cost-effective accessing the Internet using the cell phone.

With what is today known as technological singularity or technological convergence, services hitherto performed by various devices are now packed in single device. Today’s mobile phone cannot only be used to make voice calls but can be used to access the Internet, listen to radio and watch TV broadcasts, take still photographs, watch movies as well as play music.
It has been proven that with the current convergence drive in information technology, the mobile phone stands a better position to serve the consumer with ease than the PC especially the upwardly mobile. And this is why the entry of traditional voice telephony providers has further depreciated the market control of the Internet business of traditional Internet Service Providers.

About four years ago, major GSM services providers in Nigeria began the deployment of Blackberry Smartphones which come in the form of a mobile phone, a computer, a camera as well as an Internet connector. In fact, virtually every telecom voice provider in Nigeria in response to the opportunities allowed by the Unified Licensing regime promotes one Smartphone or the other in the marketplace.
The emergence of the Smartphone is perhaps, the greatest threat faced by the Internet Service Provider in Nigeria. Since the Internet is yet to assume a mass market status, mobile executives and some middle class citizens now rely on the Smartphone for all their Internet-driven transactions. And this is where the competition comes in.
TradeInvestNigeria.com, an African Business website reported some time ago that “traditional Internet service providers are facing increasing competition from Internet services offered by mobile operators,” adding that “the introduction of 3G services has enabled many Nigerians to access the Internet through mobile devices.”

In recent times, personal digital assistants (PDAs) and Smartphones such as the Blackberry, iPhone etc, have been seen as having significantly increased in the functionality and capabilities they offer users. Some people even argue that they now offer an extensive range of features that can be used to address enterprise requirements.

This thinking is related to a research finding by Point Topic and YouGov sometime ago, which showed that while current usage of the mobile phone to access the Internet is dominated by work-related applications, new users are much more interested in entertainment and keeping in touch with their friends. That is why social network platforms like Facebook, My Space, and Twitter etc are ever busy owing to the fact that even while mobile, telephone users can still access such platforms with their Smartphones.
In fact, the quest for this mobile technology is on the increase due to the consumer’s desire for convenience and practical solutions especially in the case of Nigeria, now that there is growing interest in mobile banking. Bank transaction details are now instantly sent to consumers while sitting in commercial buses, homes and offices and even walking on the street in so far they are armed with their cell phones.

It has been variously argued that the use of cell phones helps Internet users bypass cable infrastructure gaps as well as the country’s pervasive power outages to access the super highway, clearly making the cell phone the key to massive Internet adoption. TradeInvestNigeria.com went further then to quote Kanni Adegbile, an assistant project manager with Skannet, an IT solutions provider based in Ibadan, Western Nigeria as saying, “The Internet landscape in Nigeria is fast changing. Ten years ago, we did not have the different types of access to the Internet that we have today. A public cyber cafe used to be the only access individuals had to the Internet.
“Now there are Internet service providers (ISPs) in various shades and sizes, delivering direct access to individuals and businesses on a variety of platforms. CDMA-based providers are upgrading their networks to the more advanced EVDO technology. GSM operators who were initially reluctant to tap into this area are now aggressively marketing Internet services as part of their offerings. Internet access is fast becoming a commodity item in Nigeria.”

Charles Anudu, managing director of Swift Networks told this writer about two years ago that one of the problems confronting the telecoms sector especially the Internet Service Providers sub-sector emanates from the very obvious scenario of an industry that has been up against so many impediments.
According to him, “For a lot of the ISPs that do not have their own access infrastructure, it has been a very big struggle because if you are for instance just looking at people who relied at the dial-up infrastructure of the Fixed line operators, you will begin to ask what has been the penetration of the copper or the Fixed wireless line if all of them sum up to below 1million lines country-wide.

“And of course, you take into consideration that some of the PTOs started competing with them which made it much more difficult for some of them to survive. But those of them who have access infrastructure; those who have the 3.5GHz spectrum, those with wired infrastructure and those who were able to put some DSL or copper infrastructure, all survived. But again, remember there were a lot of quacks in the ISP industry, and gradually, market forces are taking care of them.”

One other factor responsible for the dearth of Nigerian ISPs experts contend has to do with the existence of bad ISPs owing to the investor’s lack of knowledge of the management of Internet service provision. They say that some of the people that venture into the business do so because they see it as a money spinner. And with the mindset to come and make quick money, such ISPs hardly last in the business.

It is a common occurrence in Nigeria that whenever it is raining, Internet access speed at some instances runs at snail speed and some instances, the server goes down. This is why most Internet users go for services provided by mobile operators. High-speed Internet service requires fibre optic cables. Yet, most ISPs in Nigeria do not rely on fibre optic to deliver service. In fact, it has been argued in some quarters that what the service providers call broadband service is only but shared bandwidth.
It is further argued that only a few of them provide dedicated bandwidth service. With shared bandwidth, services are often faster in the early mornings and odd hours but slower at peak periods. This has resulted to Internet users going for wireless, plug and play solutions that are faster and more reliable. As a result, many users are going for voice telephony operators providing Internet services, using their wireless platform

Further checks by this magazine shows that many of the ISPs are also involved in what is known as ‘Bandwidth Oversell’, which is a situation where the service provider sells a limited bandwidth capacity to too many users at the same time, thereby causing the network to become over-crowded. Bandwidth oversell is responsible for service fluctuations, slow download speed and other poor quality issues in Internet provisioning. The consequence of this is lack of confidence on the part of consumers and subsequent loss of market by service providers.

Even as the situation is to say the least worsening, there are a few that have continued to play in the market though majorly sustained by patronage from the banking industry. However, there are growing fears that the fortunes of the country’s ISPs would continue to dwindle as long as telecom consumers are consistently exposed to new technologies that make Internet access a lot easier and convenient.

If this should be the case, traditional Internet Service Providers stand the obvious risk of completely losing grip of their market to mobile operators. And that would lead to the mobile operators singing requiem for the ISPs. Or, they could see J. P. Clark’s ‘The Casualties’ as a companion for consolation.