Telcos Canvasses Cost Reflective Pricing Model
Contrary to reports that telecom operators, telcos, in the country have called for hike in tariff, they have explained that the call was rather for a cost reflective pricing model to give them autonomy to adjust prices in tandem with operational costs.
Chairman of the umbrella body of the telcos, Association of Licensed Telecom Operators in Nigeria, ALTON, Engr Gbenga Adebayo said the reports were misinterpretations of the joint statement it issued alongside sister association, Association of Telecom Companies of Nigeria, ATCON, last Wednesday.
Adebayo was worried that misinterpretation of its cost reflective pricing call to mean tariff hike could pit subscribers against the telcos considering the deteriorating financial economy of many Nigerians at the moment.
He said that while tariff hike gives a short-term gain, cost reflective tariff is a strategic model that can sustain the gains of the sector over time.
He said: “Reports that the telcos are calling for tariff hike are misinterpretation of the joint statement ALTON and ATCON issued on Wednesday. For us the issue is not basically to increase tariff but the autonomy to adjust pricing to reflect operational cost at every given time. If you can observe, Multichoice, PHCN and such operators in other sectors adjust their prices based on current realities; not that they are not regulated but their pricing model allows them that autonomy.
‘But the pricing system in our sector is such that we cannot navigate even within the tariff band. So, our call is that the NCC should periodically commission cost-based study to determine what tariff we should charge. The study should evaluate our operational cost and align it with subscribers’ affordability. A pricing model that will remain static for eleven years when operational cost has changed many times due to several factors is skewed.
“Like I said, even if the government increases tariff to, say 200 percent today, it may still not favour operators if the other factors are not taken care of. Our call is for the sustainability of the sector.”
However, the NCC does not seem to agree that the current pricing regime does not align with current realities. Director, Public Affairs of the commission, Reuben Muoka, said: “Though I am not in a position to answer the request of ALTON, it is a management decision which also requires a lot of studies and consultations, you may wish to know that the current model is an outcome of cost-based price determination.”
On Wednesday, ALTON and ATCON had jointly called on the government to address telecoms industry challenges to ensure sustainability of the sector’s gains.
The joint statement hammered on four prime areas, namely; addressing Infrastructure deficits; protection of assets and network Infrastructure; Cost-Reflective Tariff of Services and Regulatory independence which the telcos believe if addressed will not only stabilize the sector and larger economy but also attract huge foreign direct investment into the country.
On Infrastructure deficits, the telcos complain they still lack access to essential telecommunication services due to a myriad of challenges, including multiple taxation and regulations and prohibitive Right of Way (RoW) charges, inadequate electric power supply and vandalism of telecommunications infrastructure.
They also advocated for legislation that designates telecommunications infrastructure as Critical National Infrastructure, as a way of protecting assets and network infrastructure in the country considering the escalating security threats facing telecommunications infrastructure in Nigeria.
Their cost-reflective pricing model call, requests the government to facilitate a constructive dialogue with industry stakeholders to address pricing challenges and establish a framework that balances consumers’ affordability with operators’ financial viability.
The telcos also claimed that telecommunications infrastructure development requires substantial investments in network expansion, maintenance, and technology upgrades, yet despite the adverse economic headwinds, the industry remains the only one yet to review its general service pricing framework upward in the last eleven years, primarily due to regulatory constraints.
They argued that for a fully liberalized and deregulated sector, the current price control mechanism, which is not aligned with economic realities, threatens the industry’s sustainability and can erode investors’ confidence.
The joint statement also demanded government to sustain the culture of independence in the regulatory landscape to safeguard against undue influence and unwholesome incursion into the Nigerian Communications Commission, NCC’s domain. They believe regulatory independence will inspire trust in the telecommunications sector and encourage investment.
Meanwhile, several stakeholders and telecom industry analysts have supported the telcos’ call for a flexible pricing model, saying it will open doors of more opportunities for the sector.
A Senior Lecturer and former HOD, Computer and Information Sciences Department, Trinity University, Dr. Falade Muritala Adesola said: “Pricing autonomy is a linchpin for industry sustainability. The ability to set cost-reflective tariffs is indispensable for ensuring adequate returns on investment and fostering long-term viability. Telecom operators require a more transparent and collaborative approach to tariff adjustments, emphasizing the importance of a pricing framework aligned with operational realities. The current pricing window, sanctioned by regulators, is a foundation, but the industry needs greater flexibility to navigate cost fluctuations while ensuring service quality and accessibility remain uncompromised.
“The clamour for cost-reflective tariffs is not merely about short-term gains but a strategic imperative to sustain the sector’s growth trajectory. The transition from 2G to 5G and with 6G on the way symbolizes the industry’s evolution, made possible by substantial investments that fuel innovation and expand service capabilities. However, without conducive regulatory frameworks that incentivize investment, the industry risks stagnation, jeopardizing future advancements and undermining service availability.
“The telecommunications industry in Nigeria is currently at a crossroads where infrastructural challenges, pricing dynamics, and regulatory frameworks intersect, offering a unique opportunity for swift and collective action. A thriving and resilient telecommunications ecosystem has the potential to empower individuals, drive economic growth and enrich lives across the nation of Nigeria. Whilst the industry regulator has delivered commendably, prevailing realities demand a new approach to ensure continued viability of the sector.”
