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Nigeria’s dead internet service providers rise to 568

A combination of factors ranging from harsh operating business environments, unintended consequences of regulatory intervention and many others have culminated in the high mortality rate of internet service providers (ISPs) in the country.

According to industry sources, no fewer than 568 ISPs who were members of the Association of Telecoms Companies of Nigeria (ATCON) have closed shops, a development that is inimical to the digitization agenda of the Federal Government. Internet connectivity is pivotal for the digital economy and for mass digitalisation of the country while the role of ISPs is central also for uptake of internet of things (IoT).

An ISP is an organisation that provides services for accessing, using, or participating in the Internet. They can be organised in various forms, such as commercial, community-owned, non-profit, or otherwise privately owned. According to the level of services they render, they could further be categorized into Ter1, Tier 2 and Tier 3.

Tier 1 ISPs sell access to their networks to Tier 2 ISPs. Tier 2 ISPs then sell Internet access to organizations and home users. However, sometimes Tier 1 ISPs may sell Internet access directly to organizations and individuals. Additionally, a second intermediary ISP, referred to as a Tier 3 ISP, may purchase network bandwidth from a Tier 2 ISP before selling that bandwidth to end users. Effectively, Tier 3 ISPs fall into the category of small, medium enterprises (SMEs) which is said to be the economic engine of the modern economy.

The January 2024 internet stat released by the Nigerian Communications Commission (NNC) showed that Mobile (GSM) had 161,504,390 connections. It was 163,353,643 in December; while fixed wired had 21,437. ISP (Wired/Wireless) accounted 213,876; VoIP: 238,180 which was 249,816 in December; bringing total to         161,977,883 signifying a decline because it was 163,838,439 the previous month. The report showed that broadband subscriptions stood at 92,195,937 while penetration fell from 43.71 per cent in December 2023 to 42.53 per cent in January 2024.

According to the National Bureau of Statistics (NBS) last year report, SMEs contribute about 48 per cent to Nigeria's GDP, making them a critical driver of economic growth and development. SMEs are involved in various sectors of the economy, including technology, agriculture, manufacturing, services, and retail, among others.

The Emerging Technologies Research Unit of the Research and Development Department, NCC has acknowledged the high mortality rate of ISPs. It said over the years, many ISPs had been licensed but findings show that not all are still in business. ISPs in the Nigerian telecommunications industry have been struggling to stay afloat due to challenges confronting their market to remain in business, expand operations and post profit after every financial year.

In its report entitled: An Exploratory Study on the Challenges and Survivability of ISP Licensees in the Nigerian Telecom Sector, it said the licence renewal rate of ISPs in Nigeria continues to drop, even as others take up the licence.

A detailed assessment of the challenges facing ISPs in Nigeria were found to include competition with MNOs offering ISP services, harsh business environment and inadequate national Broadband Infrastructure.

Additional, multiple taxation by different levels of government, and unfavourable conditions for the industry in terms of disparity between advertised Internet speeds and actual speed obtainable on the networks, inadequate provision of redundancy by ISPs to handle network down time and lack of compensation for downtime and poor quality of service.

CEO of Information Connectivity Solutions Limited, Yemi Oshodi, speaking at a forum last year, identified cost and pushed for more open access initiative, innovation around energy supply including mini-grids to rural communities.

 As the number of the operators kept rising year after year however, so also did the number of unsuccessful operators who were compelled to shut down operations due to inability to cope in the challenging market.

NCC noted that pioneer Nigerian ISPs faced intense competition when mobile network operators, with their large subscriber base, started offering Internet services, crashing the price of data, and inadvertently making the business unprofitable for small operators. As a result, there has been a huge churn in the industry due to the inability of the ISPs to renew their licences.

Experts noted however that the successful operators were those who have carved a niche for themselves in the market or act as resellers for the MNOs.

Major operators in the ISP space have identified numerous huddles they have had to cope with and in fact, a good number of them have bowed to these challenges to exit the market. Some of these challenges are general to the telecoms sector while some are specific to consumer dissatisfaction with ISPs such as competition with MNOs offering ISP services; harsh business environment; inadequate national broadband infrastructure and multiple-taxation. Others are vandalism of infrastructure; disparity between advertised Internet speeds and actual speed obtainable on the networks; inadequate provision of redundancy by ISPs to handle network down time and lack of compensation for downtime; poor service quality; inexplicable depletion of data services; auto renewal of service among others.

The above challenges have led to the low rate of renewal of licenses by the ISPs which is affecting the Internet service segment of the country’s telecommunications sector.