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Spectrum Trading in Nigeria – the Next Revolution and Democratization of
the Nigeria Telecommunications Industry
Introduction and Current Stance of the NCC on Spectrum Trading
In traditional administrative approach to spectrum management, spectrum trading is a taboo.
Spectrum is assigned to a specific organization for a specific period, uses and geographical location.
Spectrum can only ‘change hands’ by merger or acquisitions. Two separate legal entities may not be
able to trade/lease their licenses. The secondary market is that spectrum market where a licensed
operators (sellers) puts out their spectrums for sale. In Nigeria, secondary trading is not allowed.
Even in the case of merger and acquisition, NCC must be involved to ensure the spectrum resources
change hands in accordance with on-going guiding principles.
In clear terms, according to Norton Rose Fulbright, ‘Spectrum trading is the ability to trade the rights
and obligations in radio spectrum, which is used for a variety of communications needs, including
mobile telecoms, broadcasting, the emergency services and coastal station radio’ᵞ. This
democratisation of spectrum use and transfer will go a long way in enhancing and facilitating the
implementation of National Broadband Plan. NCC Frequency Management Policy (May, 2013), does
not approval of spectrum trading.
According ictregulationtoolkit.org, ‘Spectrum trading, viewed by many as the key step to be taken in
the reform of spectrum management regulatory practice, is capable of unlocking the potential of
new technologies and eliminating artificial scarcities of spectrum which find expression in inflated
prices for spectrum-using services’ᵑ.
Spectrum Trading in Mature Telecom Industries (US, UK and India)
The telecommunications industries of India, UK and US are very mature and hence, they are fit as
perfect case studies and learning examples. A brief overview of their perspectives to spectrum
trading is presented as follows.
In the UK, Ofcom (the UK communications regulator) said ‘The UK authorities will not want to see
spectrum transfer as a means of greater market consolidation (and, hence, less competition)
through transfers to the largest incumbents. For each proposed transfer, Ofcom will carry out a
competition assessment (similar to the kind of assessment undertaken by competition authorities
under merger control procedures)’ᵖ. According to nortonrosefulbright.com, “In guidance published
in June 2011, Ofcom said that where a transfer has already received merger control clearance,
Ofcom would expect to follow the merger review findings in its competition assessment”ᵗ. The major
concern of Ofcom is to protect all players especially the small players and new entrant such that the
big incumbent does not mop up all the spectrum via the secondary market.
According to FCC, ‘In addition to obtaining spectrum licences directly from the government, either
through auction or application, wireless operators in the US can also obtain spectrum licences in the
secondary market--that is, from an existing licensee. In general, licences can be obtained via: (1)
direct transfer where the licence is assigned from one party to another; (2) indirect transfer where
ownership of the entity holding the licensee, generally a corporation, limited liability company or
limited partnership, is transferred from one party to another; or (3) the lease of the spectrum. In
addition, licences can generally also be transferred or leased in whole, or in part, by geographically
partitioning and/or spectrum disaggregation’ᵓ.
The FCC adopts the geographical partitioning and disaggregation methodology in management of
commercial spectrum. According to FCC ‘In geographic partitioning, a licensee assigns a portion of its
licensed area to another party, which then becomes the licensee for the partitioned area. In
spectrum disaggregation, a licensee assigns discrete portions or “blocks” of its licensed spectrum in a
licensed area to another party, which then becomes the licensee for the disaggregated spectrum’ᵝ.
This brought in a great deal of flexibility and high competition in spectrum use.
India came up with policies on Spectrum trading in October 2015. India TRAI (Telecoms Regulatory
Authority of India) stipulated that spectrum outright sales is allowed in the secondary market but,
spectrum leasing is forbidden. The TRAI stipulated specific bands that spectrum trading is allowed;
spectrum trading is not allowed in all commercially licensed spectrum. The validity of the spectrum is
unaltered even after ownership is transferred. A non-refundable transfer fee of 1% of the
transaction amount or initial cost of procuring the spectrum (whichever is higher) is paid to the
government as administrative charges – this fee is paid by the buyer ᵠ.
Benefits of Spectrum Trading
The benefits of spectrum trading is highlighted as below;
1. Ease of Doing Business and Opportunity for Immediate Investment
Spectrum trading provides opportunity for immediate deployment of telecoms
infrastructure since new entrant only have to go to the secondary market to buy instead of
waiting for the regulatory to auction. This simplifies acquisition of spectrum and enhances
speedy investment, in no time, investment begin to have returns.
2. Encourages Competition and Strategic Partnership
Spectrum trading allows for competition by allowing new entrant, unlike the traditional
method where new entrants have to wait till the auctioning year before the can procure
needed spectrum. At the same time, spectrum trading facilitate strategic partnership since
operators can partner in leasing/trading spectrums even in the same industry.
3. Enhances Optimization of Spectrum Use and Increases Efficiency of Spectrum Use
Spectrum licensees now value their resource better. They, on their own, can re-farm and
optimize spectrum resource and put it out for-sale without regulatory enforcing spectrum
efficiency. Spectrum licensees now know they can make money from their unused or poorly
used spectrum. This drastically minimises waste and increases revenue for spectrum
licensees.
4. Facilitates Rural Telephony and Broadband Penetration
Big player that have disaggregated national licenses can now lease or sell to smaller players
who might be willing to deploy in rural areas.
5. Encourages High Bidding Participation in Spectrum Auction
The purchasers have no fears of buying too much at the spectrum auction since they can re-
sell excess in the secondary market.
The Future We Desire in the Nigerian Telecoms Industry
From the fore-going, it is obvious that democratisation and liberalisation of spectrum trading in the
secondary markets comes with deluge of benefits for all the players in the industry. The operators
can make more revenue from trading the spectrum; new entrants have spectrum to buy in the
secondary market; the regulator makes extra revenue on every spectrum transactions and
subscribers enjoy the competition as prices are driven down.
The following is hereby recommended;
 Spectrum trading could be allowed for commercial licenses with the Nigeria telecoms space
 NCC could charge certain minimal percentage as a motivation and administrative charge,
India being a case study.
 A well drafted regulatory guidelines to regulate the trading within the Nigerian context
should be drafted.
 Taking a cue from FCC, geographical partitioning and disaggregation of spectrum could be
adopted in spectrum licensing so that spectrum can be sold in the smallest possible form in
any geographical location, eg 5MHz of an operator could be sold in say Edo states alone.
No African country has embarked on liberalising spectrum sales; NCC being a foremost leader in the
industry, will be a pioneering achiever in Africa in the democratisation of secondary sales of
spectrum. This has the capability of revolutionising not only the telecommunications industry in
Nigeria but Africa as a whole.
References
ᵞ Spectrum trading - the UK takes bold steps to liberalise communications markets. (n.d.). Retrieved
August 17, 2016, from
http://www.nortonrosefulbright.com/knowledge/publications/68841/spectrum-trading-the-uk-
takes-bold-steps-to-liberalise-communications-markets
ᵑ ICT Regulation Toolkit. (n.d.). Retrieved August 17, 2016, from
http://www.ictregulationtoolkit.org/en/toolkit/notes/PracticeNote/3076
ᵖ,ᵗ Spectrum trading - the UK takes bold steps to liberalise communications markets. (n.d.). Retrieved
August 17, 2016, from
http://www.nortonrosefulbright.com/knowledge/publications/68841/spectrum-trading-the-uk-
takes-bold-steps-to-liberalise-communications-markets
ᵓ, ᵝ Spectrum Trading in the EU and the US - Shifting Ends and Means. Retrieved August 17, 2016
from http://www.squirepattonboggs.com/~/media/files/insights/publications/2011/10/spectrum-
trading-in-the-eu-and-the-us--shifting-__/files/tel12_squire-
sanders_ver4/fileattachment/tel12_squire-sanders_ver4.pdf
ᵠ Guidelines for Trading of Access Spectrum by Access Service Providers. Published 12th
of October,
2015. Government of India Ministry of Communications and IT, Department of Telecommunications.
Retrieved August 17, 2016, from www.auspi.in/policies/2015_10_13-Trading-WPC.pdf

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Spectrum Trading in Nigeria

  • 1. Spectrum Trading in Nigeria – the Next Revolution and Democratization of the Nigeria Telecommunications Industry Introduction and Current Stance of the NCC on Spectrum Trading In traditional administrative approach to spectrum management, spectrum trading is a taboo. Spectrum is assigned to a specific organization for a specific period, uses and geographical location. Spectrum can only ‘change hands’ by merger or acquisitions. Two separate legal entities may not be able to trade/lease their licenses. The secondary market is that spectrum market where a licensed operators (sellers) puts out their spectrums for sale. In Nigeria, secondary trading is not allowed. Even in the case of merger and acquisition, NCC must be involved to ensure the spectrum resources change hands in accordance with on-going guiding principles. In clear terms, according to Norton Rose Fulbright, ‘Spectrum trading is the ability to trade the rights and obligations in radio spectrum, which is used for a variety of communications needs, including mobile telecoms, broadcasting, the emergency services and coastal station radio’ᵞ. This democratisation of spectrum use and transfer will go a long way in enhancing and facilitating the implementation of National Broadband Plan. NCC Frequency Management Policy (May, 2013), does not approval of spectrum trading. According ictregulationtoolkit.org, ‘Spectrum trading, viewed by many as the key step to be taken in the reform of spectrum management regulatory practice, is capable of unlocking the potential of new technologies and eliminating artificial scarcities of spectrum which find expression in inflated prices for spectrum-using services’ᵑ. Spectrum Trading in Mature Telecom Industries (US, UK and India) The telecommunications industries of India, UK and US are very mature and hence, they are fit as perfect case studies and learning examples. A brief overview of their perspectives to spectrum trading is presented as follows. In the UK, Ofcom (the UK communications regulator) said ‘The UK authorities will not want to see spectrum transfer as a means of greater market consolidation (and, hence, less competition) through transfers to the largest incumbents. For each proposed transfer, Ofcom will carry out a competition assessment (similar to the kind of assessment undertaken by competition authorities under merger control procedures)’ᵖ. According to nortonrosefulbright.com, “In guidance published in June 2011, Ofcom said that where a transfer has already received merger control clearance, Ofcom would expect to follow the merger review findings in its competition assessment”ᵗ. The major concern of Ofcom is to protect all players especially the small players and new entrant such that the big incumbent does not mop up all the spectrum via the secondary market. According to FCC, ‘In addition to obtaining spectrum licences directly from the government, either through auction or application, wireless operators in the US can also obtain spectrum licences in the secondary market--that is, from an existing licensee. In general, licences can be obtained via: (1) direct transfer where the licence is assigned from one party to another; (2) indirect transfer where ownership of the entity holding the licensee, generally a corporation, limited liability company or limited partnership, is transferred from one party to another; or (3) the lease of the spectrum. In
  • 2. addition, licences can generally also be transferred or leased in whole, or in part, by geographically partitioning and/or spectrum disaggregation’ᵓ. The FCC adopts the geographical partitioning and disaggregation methodology in management of commercial spectrum. According to FCC ‘In geographic partitioning, a licensee assigns a portion of its licensed area to another party, which then becomes the licensee for the partitioned area. In spectrum disaggregation, a licensee assigns discrete portions or “blocks” of its licensed spectrum in a licensed area to another party, which then becomes the licensee for the disaggregated spectrum’ᵝ. This brought in a great deal of flexibility and high competition in spectrum use. India came up with policies on Spectrum trading in October 2015. India TRAI (Telecoms Regulatory Authority of India) stipulated that spectrum outright sales is allowed in the secondary market but, spectrum leasing is forbidden. The TRAI stipulated specific bands that spectrum trading is allowed; spectrum trading is not allowed in all commercially licensed spectrum. The validity of the spectrum is unaltered even after ownership is transferred. A non-refundable transfer fee of 1% of the transaction amount or initial cost of procuring the spectrum (whichever is higher) is paid to the government as administrative charges – this fee is paid by the buyer ᵠ. Benefits of Spectrum Trading The benefits of spectrum trading is highlighted as below; 1. Ease of Doing Business and Opportunity for Immediate Investment Spectrum trading provides opportunity for immediate deployment of telecoms infrastructure since new entrant only have to go to the secondary market to buy instead of waiting for the regulatory to auction. This simplifies acquisition of spectrum and enhances speedy investment, in no time, investment begin to have returns. 2. Encourages Competition and Strategic Partnership Spectrum trading allows for competition by allowing new entrant, unlike the traditional method where new entrants have to wait till the auctioning year before the can procure needed spectrum. At the same time, spectrum trading facilitate strategic partnership since operators can partner in leasing/trading spectrums even in the same industry. 3. Enhances Optimization of Spectrum Use and Increases Efficiency of Spectrum Use Spectrum licensees now value their resource better. They, on their own, can re-farm and optimize spectrum resource and put it out for-sale without regulatory enforcing spectrum efficiency. Spectrum licensees now know they can make money from their unused or poorly used spectrum. This drastically minimises waste and increases revenue for spectrum licensees. 4. Facilitates Rural Telephony and Broadband Penetration Big player that have disaggregated national licenses can now lease or sell to smaller players who might be willing to deploy in rural areas. 5. Encourages High Bidding Participation in Spectrum Auction The purchasers have no fears of buying too much at the spectrum auction since they can re- sell excess in the secondary market.
  • 3. The Future We Desire in the Nigerian Telecoms Industry From the fore-going, it is obvious that democratisation and liberalisation of spectrum trading in the secondary markets comes with deluge of benefits for all the players in the industry. The operators can make more revenue from trading the spectrum; new entrants have spectrum to buy in the secondary market; the regulator makes extra revenue on every spectrum transactions and subscribers enjoy the competition as prices are driven down. The following is hereby recommended;  Spectrum trading could be allowed for commercial licenses with the Nigeria telecoms space  NCC could charge certain minimal percentage as a motivation and administrative charge, India being a case study.  A well drafted regulatory guidelines to regulate the trading within the Nigerian context should be drafted.  Taking a cue from FCC, geographical partitioning and disaggregation of spectrum could be adopted in spectrum licensing so that spectrum can be sold in the smallest possible form in any geographical location, eg 5MHz of an operator could be sold in say Edo states alone. No African country has embarked on liberalising spectrum sales; NCC being a foremost leader in the industry, will be a pioneering achiever in Africa in the democratisation of secondary sales of spectrum. This has the capability of revolutionising not only the telecommunications industry in Nigeria but Africa as a whole. References ᵞ Spectrum trading - the UK takes bold steps to liberalise communications markets. (n.d.). Retrieved August 17, 2016, from http://www.nortonrosefulbright.com/knowledge/publications/68841/spectrum-trading-the-uk- takes-bold-steps-to-liberalise-communications-markets ᵑ ICT Regulation Toolkit. (n.d.). Retrieved August 17, 2016, from http://www.ictregulationtoolkit.org/en/toolkit/notes/PracticeNote/3076 ᵖ,ᵗ Spectrum trading - the UK takes bold steps to liberalise communications markets. (n.d.). Retrieved August 17, 2016, from http://www.nortonrosefulbright.com/knowledge/publications/68841/spectrum-trading-the-uk- takes-bold-steps-to-liberalise-communications-markets ᵓ, ᵝ Spectrum Trading in the EU and the US - Shifting Ends and Means. Retrieved August 17, 2016 from http://www.squirepattonboggs.com/~/media/files/insights/publications/2011/10/spectrum- trading-in-the-eu-and-the-us--shifting-__/files/tel12_squire- sanders_ver4/fileattachment/tel12_squire-sanders_ver4.pdf ᵠ Guidelines for Trading of Access Spectrum by Access Service Providers. Published 12th of October, 2015. Government of India Ministry of Communications and IT, Department of Telecommunications. Retrieved August 17, 2016, from www.auspi.in/policies/2015_10_13-Trading-WPC.pdf