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Why CDMA operators couldn’t survive harsh telecom industry 


Ikechukwu Nnamani, President, Medallion Communications, an experienced player in the telecom industry and operator of interconnect clearinghouse is one of the TOP 20 CEOS in the ICT industry nominated by ICT Watch Network in collaboration with the industry stakeholders and in this exclusive interview he shared his thoughts with TAYO ADEWUSI and disclosed key issues that frustrated all the erstwhile buoyant operators of the Code Division Multiple Access [CDMA] out of the industry. Excerpt.


The telecoms revolution started in 2001 and government licensed many firms to operate the GSM, CDMA technology and your company decided to go into the digital space. Tell me why you chose this way?

That is a very important question for us. At the heart of any multi-operator telecoms market, its success and the ability to reach desired goals either by the regulator or the subscribers is efficient interconnectivity. If you don’t have efficient interconnectivity, then, all you end up it with is one big monopoly where the dominant service provider is the only one that truly does business, every other thing becomes putting a close user group of PHBS with a particular operator that cannot be connected to others.


So, interconnectivity plays a critical role. As such, the moment Nigeria decided to deregulate properly from the previous national monopoly and create opportunities for new classes of licensed operators, interconnectivity is a critical issue that needed to be addressed. We wanted seamless interconnection and that is the goal to ensure that no matter how small an operator is, its subscribers can reach everybody and everybody can reach them, nationally, locally and internationally, and all these can only happen through seamless interconnection across all networks irrespective of the technology the service provider is being used whether it is fixed network or mobile network, whether it is TBN or IP.


That should not be a matter of concern to the subscribers. The subscribers should be able to have seamless interconnection and talk to other subscribers on the networks. So, we have realized that this was a critical point and the regulator in its wisdom also saw that without having independent companies that manage interconnectivity, you are going to have anti-competitive practices by dominant operators that feel that they are making enough revenue from within their subscribers base and don’t want other players to come in because, interconnect by default, has to do with anti-competition.


Other players always want to use interconnect as a means to frustrate smaller competitors out of the market. So, having an interconnect operator in the middle helps to eliminate all that ambiguity and helps to create a transparent environment and that is why a good and efficient interconnect service provider must not be seen to be affiliated to any other operator because it takes away your independence, it takes away your transparency and that is the real value you bring into the ecosystem.


That was one of the reasons at Medallion we felt this was a critical part and as an infrastructure service, we know that we can never go wrong with having the right infrastructure in place. Those were the things that motivated us to look at this class of license.


I know that one thing that comes to mind in interconnectivity is clearing-house and debt settlement. Is that all you do?

You see, traditionally, you have what is called financial clearing houses for the telecoms industry. What the financial clearing house does is simply process invoices and due settlement. A big carrier that feels it got so many interconnect partners can outsource the invoicing, billing and settlement part of its operations to a financial clearing house. The problem is that the financial clearing house will have to depend on the records that the operator that has outsourced its services provides in order to work. You don’t have a way to generate the independent call record that you can use to verify if there is any dispute. So, in the case of Nigeria, the scope of the operation of interconnect clearing house goes beyond financial settlement.


It also has to do with having a physical network, a switch, where calls are actually routed and switched. And the advantage of this is that not only do you generate independent record of the calls which becomes a viable data, especially in these areas, you have a record from the originator, you have the record from the terminator and you have an independent record at the interconnect clearing house.


This is what ideally should be accurate enough to be used for this settlement and reconciliation. So, you play that role but, of course, because we’ve got a switch and transmission facility, you can interconnect new players that come into the market and make sure that within a very short time, they can reach other existing service providers and they also can also be reached by every other existing operators.


You are playing that role of enabling seamless interconnection and switching and routing of call independent of the protocol, independent of the class of service being offered to the last mile and, simultaneously, you are doing the traditional role of a financial clearing house which is to process invoices and reconciliation among other things. But now, what you are doing is primary reading, recording it and generating data on your own switch which should be more accurate than whatever operators are giving you because, for all intent and purpose, there may be disagreement, and that is one of the challenges you get when two or more operators are directly connected. That comes under peer-to-peer interconnect.


If there is a dispute or disagreement, you have nowhere to go because it is like your word against the other party. You cannot invite subscribers to interfere and remake the calls so you can now accurately record it. But through a clearing house, you have that independent record, which a clearing house has generated.


Initially, the telecom operators resisted the involvement of the interconnect house. What motivated them to embrace Medallion Clearing House?

There was, to some extent, much resistance from the major operators and that is most unfortunate because the direct result of that is that the value the clearing houses would have provided was not being felt. However, because of that resistance and frustration and inability to operate efficiently, we noticed the anti-competition area, which we are going to pave a level playing field for everyone to operate. And that is not our favour.


The big operators, through their resistance, were saying they didn’t want new players in the market. They didn’t want smaller players to survive, as such; let’s frustrate the process, let the status quo remain, let’s the few of us share the available traffic and continue to grow while others continue to struggle and die off, which unfortunately, led to the disappearance of smaller players today in the industry including the CDMA operators. Now, what has happened over time is as technology evolves, we started seeing operators realizing that it’s in their best interest if they outsource some of these non-core services.


A typical operator’s call service should be customer acquisition and making sure that you retain your customers, spend more of your time developing new services you can give to your customers, bring new people on board and retain them. Can you imagine an operator today that has a set of staff on its payroll and all they do is every morning, they go to the gas station to buy diesel to power their generating sets. No operator is doing that again; they outsource that service to diesel suppliers and site management companies because they know that it’s not their core service.


It is cheaper for them to do that but there is a cost component they may not immediately see, which may be detrimental on a long term. That is why they do that. The same thing we are beginning to see in the area of cell site management. If you have noticed over the last years, literarily, all the operators have outsourced the management of their cell site to third party companies. We are seeing that also taking place in the area of interconnectivity. One or two major areas need to be sorted out and then you will appreciate the role of the clearing houses.


Today, they are putting more tie-it-down to the cost because the way the costing model is being operated in Nigeria today it is cheaper when an operator calls another operator directly than when it calls through a clearing house. And for the operators, they are not seeing interconnect house as their least calls route; and in telecom, the best route they want to take in passing any traffic is look for your least call route.


So, that has been one of the bottlenecks which we are hoping will be addressed very soon as we are engaging the regulators and the operators because there are work being done towards that. Once we can solve that problem, we would have eliminated some of the challenges facing the industry.


How exactly was it possible for the CDMA, wireless service providers and VAS despite measures taken by the NCC to prevent this?

We can’t now address everything. We have just addressed one of the factors here which is interconnection, but there are other causes responsible for the failure of the smaller operators to survive in the market. There are definitely other challenges such as inability to raise capital, adoption of the wrong business model, and the wrong investment in infrastructure technology. These could have played a role to kill the CDMA operators. That is accepted and you cannot rule out those possibilities.


But coming to the challenge on the interconnect side, the truth is, before now, interconnect was extremely difficult. There were a lot of anticompetitive practices that are frustrating and we still have cases of massive anti-competition going on where a new operator comes in and has secured debt finance to rollout. It has a business projection that within the first six months, they would be able to get subscribers and do business and their business plan and model is right. The subscriber is there to take the service they want to offer by the major operators will inflict hardship on them with interconnect.


Sometimes when a clearinghouse makes a request, they will frustrate the process. They will come up with excuses. We are still experiencing that, as we speak, and I know that not less than five operators that have not been able to launch their service because major Mobile Number Operators (MNOs) are still frustrating them on the interconnect side. Sometimes, if you want to push it through a clearinghouse, they will go back and frustrate it and they will tell the small operator to come and connect directly to them.


Once you do that, your business is dead because they know that there are some advantages you have as a small operator, which is the transparency and independency you get if you don’t go direct. But once they convince you to go direct within a short time, your business dies off because you would not be able to deal with those challenges that they will place before you without having an independent body or transparent means to justify that injustice being done to you.


We see this daily. The last set of licenses the Nigeria Communications Commission [NCC] issued to the special numbering plan, talk to any of them, they will tell you about the frustration they suffer in the hands of the dominant operators. It’s been extremely frustrating for any one of them to take up their service and in this midst of this, we are doing the best we can to see how we can resolve some of those challenges.


If this is happening in 2018, when the market supposedly should have matured, you can imagine what happened five or 10 years ago. This is a big problem for most of carriers. It is what it is, and we cannot run away from the fact that interconnect has been a major way of frustrating new and emerging service providers and that explains why many of this operators are no more in business.


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