ISPs: Smaller, not bigger, players are most likely to innovate customer service – Engr Abiodun Omoniyi, GMD of VDT Communications

In continuation of our TOP 20 CEO’s exclusive Interview series we bring to you the Group Managing Director of one of the big Internet Service Providers (ISPs), Engr Abiodun Omoniyi, he shares his thought about the state of the industry. Excerpt.    

Research has shown that Africa has the largest ICT market. Is that why NCC licensed many ISPs year-in-year-out? 

Well, it should not be farfetched because again when you look at the different service segments that the NCC has, there are MNOs among others, therefore, when you look at it you would discover that you have the middle players, small players and the big players at the top of the pyramid. The middle ones are a bit robust. The lower ones are the multitudes. When you look at this segmentation, it looks like that. I must say the ISP generally, may be because of the licensing fee. Then you would get a license for five years. When private investors come into a market like a wave, can we say it is an SME business? Of course, you have some SMEs. You have some that are not SMEs. We are not SMEs but we play in the market. There is another story about how VDT got into the ISP industry. We did not just apply ab initio of the business. We looked at all the things involved in the ISP business. Why pay N20 million for a license when we could pay N500,000 and get a 5-year license?”

Then we looked at the content of an ISP. What we wanted to do would have been N20 million or N30 million then. We started by paying something higher for a license, which includes capacity resale. We started by applying for the capacity resale license but it is not a well-crafted license. We started the business after about 5 years. We existed without documentation. At the expiry of 5 years, we applied for an ISP license. The majority of businesses want to provide service in one way or another. We have the big five. Many people who go into the ISP business do so because they do not have a clearly defined focus or vision. Some do have and it may have been because of the harsh environment. Our environment is quite challenging. That is what may be responsible for the constant licensing.

Among the top 10 ISPs in the country, why do we have about 400,000 subscribers? 

Funding plays a major role in this business. Therefore, you would find out that the regulation could be better even for the active ones. For the 10 ISPs having 400,000, it is embarrassing given that we have more than 100 million subscribers for the bigger ISPs. The regulator needs to do something about it. The regulator can do many things.  Left to business owners, the advantageous thing for them would be to be a monopoly.

What can the regulator do?

The regulator would need to understand the mitigating factors. What is obstructing the growth of these ISPs? Is it funding? The operating environment? Is it regulation itself? If it is regulation, that is within the ambit of the regulator. The regulation probably favours the bigger ones. I do not think it is the regulation. What I mean is that the regulation should be targeted at promoting the ISPs, the smaller ones. Can we have the smaller ISPs have at least 5% of the market share to heighten competition, for instance? Can we have a plan as we have the national broadband plans? There has to be a strategy. How do we get there? What do we do? If the smaller ISPs are uncovered, the bigger players can price them out of the market.

The smaller players play in the same market. They sell to the same subscribers. Otherwise, the tendency is for the bigger players to be monopolies. When you are a big fish, you would want to be the only fish in the pond. Of course, when you are the only fish in the pond you would become a target for another bigger predator. The regulator needs to play the role of an umpire and frown at any anti-competitive practice from the bigger players.

Can the regulator fund the smaller players?

Without funding, how do the smaller players break even? The regulator makes a profit. In other climes, the smaller players would have received some subsidies to boost their businesses. The U.S. government does it. Elon Musk received subsidies. Musk’s solar panel business is being subsidised. Space X is big. It was highly subsidized in the beginning so that it can grow into Starlink. Therefore, we cannot have innovation if the regulator concentrates on the top. The smaller players are most likely to bring about innovation to the customers than a single bigger player. Therefore, those are some of the things I believe the regulator can do, which are not being done right now. It starts by setting an agenda, “We want these people to have maybe 5% of the market.”