Economic Impact Of C-Band Spectrum In Nigeria

Project and Seminar Material for Economics

Abstract

Nigeria ranks a lowly 137 in the ICT Development Index (IDI) for 2016 and the imbalance in access to ICT infrastructure is very pronounced in Africa. Existing infrastructure in the African hinterlands is grossly inadequate, thus there is a need to develop national, regional and sub-regional carriers of digital links with cross- border inter-connectivity. This report sought to assess the economic impact of c-band spectrum in Nigeria. The specific objectives of the study were to determine the benefits from reallocation to c-band spectrum; to estimate the costs of reallocation to c-band spectrum; and to determine the economic impact of reallocation to c-band spectrum. The study recognises that Nigeria captures a reasonable amount of the Africa’s diversity in terms of how C-band is currently used by satellite industry and how it would be used by IMT (primarily for mobile broadband in urban areas). While countries like Egypt and South Africa are representative of countries with desert climates where C-band spectrum would be valuable for IMT in densely populated urban areas, since there would be intense use of spectrum and of countries in southern Africa which tend to have higher 3G penetration rates and less densely populated urban areas respectively, Nigeria is representative of tropical countries with densely populated urban areas but with varying levels of 3G penetration. This requires more action targeted towards optimization of the satellite usage and capacity.

Chapter One

1.1 Introduction

Nigeria’s poor level of development is shown by its ranking of 152 in the UN’s Human Development Index (HDI) rankings for 2016, which is very much within the ‘low human development’ band (UNDP, 2017). With effective governance, the resource curse thesis suggests that Nigeria would have performed better without oil thereby enabling it to attain a higher HDI ranking in all its constituent elements, that is, Gross National Income per capita, life expectancy at birth, and mean and expected years of schooling.

Information and communication technology (ICT) is a crucial determinant of economic development that underpins the modern economy in myriad ways. It is of vital importance to developing countries with large expanses of countryside and rough terrain with scattered villages and hamlets. Communication satellites are particularly efficacious in providing speedy and economic means to service the communication needs of the vast array of isolated communities and, by so doing, uplifting their well-being and living standards1. Reliance on the conventional terrestrial infrastructure of copper, fibre, and microwave is not only difficult in remote areas but inordinately costly hence communication satellites are a superior option. Very small aperture satellite terminals (VSAT) have proved to be reliable and flexible incurring low development and operating costs (SUPARCO, p. 1).

Universal access to ICTs are conducive to social and economic development by providing better educational opportunities, health services, stimulate private sector activity thereby greater employment opportunities. Importantly, whereas the more developed urban centres attain technologies as they arise on the market, the remote areas invariably do not. In summary, communication satellites can facilitate the reduction of this ‘digital divide’, that is, the disparity between urban and rural communities and assist in the creation of a more cohesive society and reduce migratory pressures from the countryside to towns and cities.

Nigeria ranks a lowly 137 in the ICT Development Index (IDI) for 20162. Internet user penetration in Africa as of March 2017 stood at 48.8% (InternetWorldStats.com, 2017) but the imbalance in access to ICT infrastructure is very pronounced in Africa. Existing infrastructure in the African hinterlands is grossly inadequate, thus there is a need to develop national, regional and sub-regional carriers of digital links with cross- border inter-connectivity. Although the continent has adequate capacity from submarine fibre optic cables along the shores of the African coast, it lacks an adequate infrastructure within African countries including cross- border connectivity (Lawal, Ahmed-Rufai &Chatwin, 2014).

Areas with good ICT facilities and applications have empowered individuals and businesses, especially SMEs, local and community groups and given women increasing participation in economic and human development activities including job creation. Various e-business applications and projects of government, public sector, banks and corporate bodies have stretched the capacity, capability and performance of existing ICT infrastructures; with some setbacks in efficiency of user experience, speed of transactions and operations.

Consumer demand for data has been increasing in the last decade, and continues to increase. World data traffic has doubled between 2012 and 2013.9 For the Middle East and Africa in particular, Cisco projects that mobile data traffic will grow 14-fold from 2013 to 2018, representing a compound annual growth rate of 70%.10 Mobile data traffic is expected to account for 39% of Middle Eastern and African fixed and mobile data traffic by 2018. Furthermore, 90% of mobile data traffic in Africa and the Middle East is projected to be ‘smart’ traffic by 2018.

While demand continues to increase, on the supply-side, ITU estimates that Region 1 (which includes Europe, the Middle East and Africa) will face a spectrum shortfall of between 779-979 MHz in their “High scenario”.11
Mobile operators will need to find ways to expand capacity to cater for this demand. While more efficient use of the current spectrum can deliver some of the capacity necessary, the rest will likely need to be delivered through reallocation of spectrum to mobile use. C-band spectrum (3.4-4.2GHz) appears to be well suited to provide additional capacity in urban areas and could help alleviate this expected spectrum scarcity.

1.2 Statement of the Problem

Africa uses a significant proportion of C-band spectrum to provide various satellite-based services, including TV distribution.12 Terrestrial TV is distributed to broadcast towers using C-band. TV networks and mobile operators are likely to have earth stations operating in C-band, and these are used as hubs for TV contribution and distribution, and global connectivity.13 VSAT-based applications also make use of C-band, such as for commercial and public sector connectivity, and mobile backhaul.

As mentioned earlier, we only assume that a proportion of C-band currently allocated to satellite use would be shifted to mobile use. Reallocating this portion of C-band spectrum, specifically 400 MHz in the lower half of the C-band, to mobile would involve some costs to satellite operators. These would be one-off costs of reallocation. This would be compared with the cumulative value of economic benefits derived from C-band spectrum by mobile operators in African countries, with special reference to Nigeria. As part of the cost-benefit analysis, we therefore estimate the benefits from reallocation as the economic value of C-band spectrum to mobile. The costs are estimated as the costs of co-existence for satellite operators.

1.3 Research Objectives

The main objective of this study is to assess the economic impact of c-band spectrum in Nigeria. The specific objectives of the study are as follows;

To determine the benefits from reallocation to c-band spectrum
To estimate the costs of reallocation to c-band spectrum
To determine the economic impact of reallocation to c-band spectrum

1.4 Research Questions

The following questions were formulated to guide the study

What are the benefits from reallocation?
What are the costs associated with reallocation to c-band spectrum?
What is the economic impact of reallocation to c-band spectrum?

1.5 Significance of the Study

The costs of reallocating spectrum to mobile use would be one-off costs to satellite operators. This would be compared with the cumulative value of economic benefits derived from C-band spectrum by mobile operators in Nigeria. This study will provide data that will inform policy makers and stakeholders on the economic impact of adopting/reallocating to the c-band spectrum. Also, this study will contribute to the existing literature and serve as a reference for future studies.

Chapter Four

4.1 Summary

Consumer demand for data has increased in the last decade, and continues to increase. World data traffic doubled between 2012 and 2013.1 For the Middle East and Africa in particular, Cisco projects that mobile data traffic will grow 14- fold from 2013 to 2018, a compound annual growth rate of 70%.2 Mobile data traffic is expected to be 39% of Middle Eastern and African fixed and mobile data traffic by 2018, compared to 10% in 2013. Furthermore, 90% of mobile data traffic in Africa and the Middle East is projected to be traffic over smartphones by 2018. In sub-Saharan Africa, over half of all subscribers are expected to have 3G connections by 2020, compared to 15% in 2013, which would make it the second largest region for 3G connections by 2020.3

Mobile operators will need to expand capacity to cater to this demand. While more efficient use of the current spectrum can deliver some of the capacity, it is likely that the rest will need to be delivered by reallocating spectrum to mobile use.4 C-band spectrum (3.4-4.2GHz) appears to be well suited to provide additional capacity in urban areas, and could help alleviate this expected spectrum scarcity.

Africa uses a significant proportion of C-band spectrum to provide various satellite-based services, including TV distribution.5 Terrestrial TV is distributed to broadcast towers using C-band. TV networks and mobile operators are likely to have earth stations operating in C-band, and these are used as hubs for TV contribution and distribution, and global connectivity.6 VSAT-based applications also make use of C-band, such as for commercial and public sector connectivity, and mobile backhaul.

Reallocating C-band spectrum from its current use to mobile would involve some costs to satellite operators. We model these as one-off costs of reallocating a share of C-band spectrum from satellite to mobile usage. This cost is then compared to the cumulative value of economic benefits derived from C-band spectrum by mobile operators in the African countries.

4.2 Conclusion

The study recognises that there is a high degree of diversity in Africa, which is difficult to capture precisely using a small number of case studies. Nigeria captures a reasonable amount of the continent’s diversity in terms of how C-band is currently used by satellite industry and how it would be used by IMT (primarily for mobile broadband in urban areas). While countries like Egypt and South Africa are representative of countries with desert climates where C-band spectrum would be valuable for IMT in densely populated urban areas, since there would be intense use of spectrum and of countries in southern Africa which tend to have higher 3G penetration rates and less densely populated urban areas respectively, Nigeria is representative of tropical countries with densely populated urban areas but with varying levels of 3G penetration. This requires more action targeted towards optimization of the satellite usage and capacity.

Project Material Download