The Cashless Lagos initiative currently led by the Central Bank of Nigeria (CBN) is set to go live on the 1st of January, 2012. The next couple of weeks will also see the CBN sensitizing stakeholders in Lagos on this new initiative for a cashless economy and the safe and secure options for making electronic payments. An electronic payment in its simplest sense is the making of payment(s) via an electronic terminal or platform and forms an integral part of the e-commerce ecosystem. The importance of e-commerce seems to be hinged on the prediction of JP Morgan senior analyst Imran Khan that global ecommerce revenue is expected to grow nearly 19 per cent in 2011 to the tune of $680 billion.
Electronic payment systems can be grouped into four broad categories: online electronic cash system, electronic cheque system, smart cards based electronic payment system and online credit card payment system (which is the main emphasis of this article). Each payment scheme has its advantages and disadvantages for the customers and merchants. These payment systems have a number of unique requirements: e.g. security, acceptability, convenience, cost, anonymity, control, and traceability. Online credit card payment system seeks to extend the functionality of existing credit cards for use as an online payment tools. According to Laudon and Traver 2002, this payment system has been widely accepted by consumers and merchants throughout the world, and by far the most popular methods of payments especially in the retail markets. This form of payment system has several advantages, which were never available through the traditional channels of payment. Some of the most important are: privacy, integrity, compatibility, good transaction efficiency, acceptability, convenience, mobility, low financial risk and anonymity.
But this payment system has raised several problems before the consumers and merchants. Irrespective of the convenience offered by this form of payment, it is still fraught with a lot of security challenges. Recent experience has shown that cyber criminals have evolved in response to the current trend for making payments online by engaging in phishing attacks such as website spoofing. Web site spoofing occurs where the cybercriminal masquerades as a known entity by setting up a phony website very similar to the website operated by the entity and attempts to obtain valuable information such as the credit card details from the online consumer. In response to this threat, trusted entities in the website community established the Extended Validation (EV) Certificate. An EV certificate is a type of public key certificate issued to a website operator according to a specific set of identity verification criteria. These criteria require extensive verification of the requesting entity's identity by the issuing “trusted third-party” certification authority before the certificate is issued. A website secured with the EV certificate is important in two ways; it identifies the legal entity that operates the web site by providing a reasonable assurance to the online consumer that the web site the consumer is accessing is controlled by a specific legal entity identified in the EV Certificate by name, address of place of business, jurisdiction of incorporation or registration and registration number or other disambiguating information and prevents a a-man-in-middle attack by facilitating the exchange of encryption keys in order to enable the scrambling of debit/credit card details when exchanged between the online consumer and the web site, however the primary purpose seems to be in establishing the legitimacy of a business claiming to operate a web site.
A recent development in website assurance is the use Trustmarks. Trustmarks are electronic labels or visual labels indicating that an e-merchant has demonstrated its conformity to standards regarding e.g. security, privacy and fair business practices. E-merchants hope that, by displaying the trustmark on their websites, online consumers will trust their certificate practice and be more likely to divulge their personal data and transact with them. Against this background, it is worthwhile to mention that the guidelines on electronic banking introduced by the CBN in 2003 is silent on the obligations of financial service providers to ensure that websites used for e-banking are protected with EV certificates or even any forms of secure socket layer (SSL) encryption technologies. The closest this guidelines comes to mentioning this obligation is by requiring that banks Ensure that adequate information is provided on their websites to allow potential customers to make an informed conclusion about the bank's identity and regulatory status of the bank prior to entering into e-banking transactions and that ISPs should exercise due diligence to ensure that only websites of financial institutions duly licensed by the CBN are hosted on their servers. ISPs that host unlicensed financial institutions would therefore be held liable for all acts committed through the hosted websites. However the circumstances under which the information provided by the banks on their websites is deemed to be adequate and that due diligence has properly been exhibited by ISPs has unfortunately not been made any clearer under the Guidelines. In my view, such operators of websites capable of processing online transactions owe it as a duty of care to their numerous online consumers to ensure that as a minimum their websites are “trusted” and that transactions processed on it are secure. On this score, the need arises for our federal legislators to pass the cybercrime bill which was unfortunately killed in the last legislative session. Recently the demand for a Cybercrime Framework has been renewed by the charismatic IT evangelist Gbenga Sesan through an e-petition on the www.change.org website. A cybercrime regime will go a long way in complementing the efforts of website operators in assuring their websites and will also work decisively to intervene where phishing attacks and other forms of cyber nuisance are committed in cyberspace.
Wednesday, September 28, 2011
Monday, August 1, 2011
Adenuga moves to take over NITEL for US $450 Million: Competition issues at stake in the Communications Market
Over the weekend, it was reported by the Thisday newspaper that Dr. Adenuga, the Chairman and owner of Globacom Limited, Nigeria’s second national carrier has made a proposal to the Federal Government of Nigeria to acquire controlling interest in Nigerian Telecommunications Limited (NITEL) for USD 450 Million, through a Special Purpose Vehicle. This particular acquisition is likely to throw up myriads of competition/anti-trust issues that will require the intervention of Nigerian Communications Commission (NCC).
Section 90 of the Nigerian Communications Act, 2003 (NCA) empowers NCC “to determine, pronounce upon, administer, monitor and enforce compliance of all persons with competition laws and regulations, whether of a general or specific nature, as it relates to the Nigerian communications market”. The basis for NCC’s intervention is to prevent communications’ licensees from engaging in anti-competitive practice having the effect of “substantially lessening of competition” (SLC) in any aspect of the communications market (Section 91 (1), NCA). Section 26 of the Competition Practice Regulations 2007 (CPR) made under the NCA also empowers the NCC to review all mergers, acquisitions and takeovers in the Communications market. Transactions coming within the ambit of NCC’s review procedures are; transactions that involve the acquisition of more than 10% of the shares of a Licensee; or any other transaction that results in a change, in control of the Licensee; or any transaction that results in the direct or indirect transfer or acquisition of any individual licence, previously granted by the [NCC] pursuant to the Act (Section 27 CPR a-c). In other words for the review powers of the NCC under section 27 CPR to be activated first there must be the existence of a transaction that falls within the definition of the above listed transaction and secondly, the question of whether or not the transaction will lead to a SLC situation. The NCC is not required to attempt the second question if it is of the opinion that the transaction does not meet the specification of Section 27 CPR. However neither the NCA nor the CPR provides further guidance that will aid in answering these questions.
As already stated, a transaction must meet any of the three criteria above to constitute a transaction requiring the NCC to apply its review procedures. In the particular instance, Adenuga’s intention to acquire NITEL is the most obvious example of the application of Section 27 CPR and meets the jurisdictional threshold of both subsections a and b.
The second question is the application of the SLC test. The term “substantial lessening of competition” is not defined in the NCA but NCC published copious guidelines in the CPR which clarifies the meaning of SLC and determines whether particular conduct will constitute a SLC situation.
Where competition exists, Communications’ licensees contend with each other to grow their subscriber base, NCC is required to consider the instant transaction in terms of the effect it will have on the competition. In a fully competitive market, no one single operator will have market power and hence will not be able to influence market conditions, but must however respond to this competition by offering better prices or quality of service or quantities to attract customers.
An acquisition giving rise to a SLC situation would have a significant effect on the competition in the long run and therefore put more burdens on operators to improve upon their competitive edge. Such transaction would obviously impact negatively on consumer welfare. Irrespective of the commercial rationale for the transaction from the perspective of each of the parties, it still remains a possibility for the acquisition to give rise to a SLC situation through coordinated effects, especially as both GLO and NITEL (if acquired by Dr. Adenuga) may recognize their mutual interdependency and decide that they can reach a more profitable outcome if they coordinate their effort to limit the competition between them, this is even more probable as both companies are the only two companies holding a National Carrier License in Nigeria. Such coordination may be explicit or tacit and may take the form dividing market or by allocating contracts among themselves in a bidding competition. In practice this coordination is detrimental to consumers by eg. limiting production or stifling innovations. In such a case, NCC is required to consider the impact of this acquisition on the likelihood and effectiveness of the coordination.
NITEL also occupies a Dominant position in the communications market since it has control of essential network facilities or similar infrastructure built for and paid for by the Federal Government which gives it numerous competitive advantages over other operators. Access to these essential facilities is required by competing Licensees and that cannot, for commercial or technical reasons, be duplicated by competing Licensees. The holding of a dominant position is not prohibited but it is the abuse of a dominant position that is capable of a SLC situation. A conduct may be in breach of the NCA, the CPR and a communications license condition. For instance discriminating in the provision of interconnection or other communications services or facilities to competing Licensees... under Section 8 (b) of the CPR for example, NITEL may provide interconnection to GLO within a week but delay this interconnection to other operators for months. This conduct would be clearly breaching the communications license condition prohibiting undue discrimination and may also be an abuse of a dominant position contrary to Part V prohibition of the CPR. It is also important to note that agreements relating to any acquisition may still be anti-competitive especially if it is capable of resulting to any of the state of affairs enumerated under Section 13 of the CPR.
Evidence of such detrimental effect will play a key role in determining whether or not a SLC condition actually exists. NCC’s review to determine whether or not there exists a SLC situation is premised on the identification of the relevant market and the competitive effect of the acquisition. Finally, NCC as the sector regulator tasked with promotion of fair competition and protection against the misuse of market power or other anti-competitive practices, pursuant to Part 1of Chapter VI of the NCA would be required in the circumstance to apply mitigating measures such as denying approval for the acquisition/transaction, to recommend that component units of NITEL be acquired, to restructure the transaction, or give conditional approval where regulatory oversight would be used to check mate anti-competitive practices to prevent a SLC situation.
Section 90 of the Nigerian Communications Act, 2003 (NCA) empowers NCC “to determine, pronounce upon, administer, monitor and enforce compliance of all persons with competition laws and regulations, whether of a general or specific nature, as it relates to the Nigerian communications market”. The basis for NCC’s intervention is to prevent communications’ licensees from engaging in anti-competitive practice having the effect of “substantially lessening of competition” (SLC) in any aspect of the communications market (Section 91 (1), NCA). Section 26 of the Competition Practice Regulations 2007 (CPR) made under the NCA also empowers the NCC to review all mergers, acquisitions and takeovers in the Communications market. Transactions coming within the ambit of NCC’s review procedures are; transactions that involve the acquisition of more than 10% of the shares of a Licensee; or any other transaction that results in a change, in control of the Licensee; or any transaction that results in the direct or indirect transfer or acquisition of any individual licence, previously granted by the [NCC] pursuant to the Act (Section 27 CPR a-c). In other words for the review powers of the NCC under section 27 CPR to be activated first there must be the existence of a transaction that falls within the definition of the above listed transaction and secondly, the question of whether or not the transaction will lead to a SLC situation. The NCC is not required to attempt the second question if it is of the opinion that the transaction does not meet the specification of Section 27 CPR. However neither the NCA nor the CPR provides further guidance that will aid in answering these questions.
As already stated, a transaction must meet any of the three criteria above to constitute a transaction requiring the NCC to apply its review procedures. In the particular instance, Adenuga’s intention to acquire NITEL is the most obvious example of the application of Section 27 CPR and meets the jurisdictional threshold of both subsections a and b.
The second question is the application of the SLC test. The term “substantial lessening of competition” is not defined in the NCA but NCC published copious guidelines in the CPR which clarifies the meaning of SLC and determines whether particular conduct will constitute a SLC situation.
Where competition exists, Communications’ licensees contend with each other to grow their subscriber base, NCC is required to consider the instant transaction in terms of the effect it will have on the competition. In a fully competitive market, no one single operator will have market power and hence will not be able to influence market conditions, but must however respond to this competition by offering better prices or quality of service or quantities to attract customers.
An acquisition giving rise to a SLC situation would have a significant effect on the competition in the long run and therefore put more burdens on operators to improve upon their competitive edge. Such transaction would obviously impact negatively on consumer welfare. Irrespective of the commercial rationale for the transaction from the perspective of each of the parties, it still remains a possibility for the acquisition to give rise to a SLC situation through coordinated effects, especially as both GLO and NITEL (if acquired by Dr. Adenuga) may recognize their mutual interdependency and decide that they can reach a more profitable outcome if they coordinate their effort to limit the competition between them, this is even more probable as both companies are the only two companies holding a National Carrier License in Nigeria. Such coordination may be explicit or tacit and may take the form dividing market or by allocating contracts among themselves in a bidding competition. In practice this coordination is detrimental to consumers by eg. limiting production or stifling innovations. In such a case, NCC is required to consider the impact of this acquisition on the likelihood and effectiveness of the coordination.
NITEL also occupies a Dominant position in the communications market since it has control of essential network facilities or similar infrastructure built for and paid for by the Federal Government which gives it numerous competitive advantages over other operators. Access to these essential facilities is required by competing Licensees and that cannot, for commercial or technical reasons, be duplicated by competing Licensees. The holding of a dominant position is not prohibited but it is the abuse of a dominant position that is capable of a SLC situation. A conduct may be in breach of the NCA, the CPR and a communications license condition. For instance discriminating in the provision of interconnection or other communications services or facilities to competing Licensees... under Section 8 (b) of the CPR for example, NITEL may provide interconnection to GLO within a week but delay this interconnection to other operators for months. This conduct would be clearly breaching the communications license condition prohibiting undue discrimination and may also be an abuse of a dominant position contrary to Part V prohibition of the CPR. It is also important to note that agreements relating to any acquisition may still be anti-competitive especially if it is capable of resulting to any of the state of affairs enumerated under Section 13 of the CPR.
Evidence of such detrimental effect will play a key role in determining whether or not a SLC condition actually exists. NCC’s review to determine whether or not there exists a SLC situation is premised on the identification of the relevant market and the competitive effect of the acquisition. Finally, NCC as the sector regulator tasked with promotion of fair competition and protection against the misuse of market power or other anti-competitive practices, pursuant to Part 1of Chapter VI of the NCA would be required in the circumstance to apply mitigating measures such as denying approval for the acquisition/transaction, to recommend that component units of NITEL be acquired, to restructure the transaction, or give conditional approval where regulatory oversight would be used to check mate anti-competitive practices to prevent a SLC situation.
Monday, July 25, 2011
An Innovative way of Improving Quality of Service in Mobile Telecommunications Service with the Nigerian Sovereign Wealth Investment Fund
With a teledensity of 64.70 per cent and a total connected lines (GSM and CDMA) of 115,140,681 (and still counting), network congestion has continually been the bane of poor quality of service (QoS) levels in mobile telecommunications services in Nigeria, Africa’s largest telecommunications market. This article seeks to propose an innovative way of applying the Infrastructure Fund created by the Nigerian Sovereign Wealth Authority Act to fund projects expanding mobile network capacity by building additional base stations. This investment decision would not only be consistent with the statutory objective of assisting the development of critical infrastructure in Nigeria that will attract and support foreign investment, economic diversification and growth, but would have the resultant effect of improving the QoS levels currently experienced in mobile telecommunications service in Nigeria.
On the 10th of May, 2011, the Senate passed the Nigerian Sovereign Wealth Investment Authority Bill into Law, this was subsequently followed by passage of the same Bill by the House of Representatives on the 19th of May, 2011. The Bill now an Act establishes the Nigerian Investment Authority which is statutorily charged inter alia with the mandate to enhance the development of Nigerian Infrastructure by establishing the Nigerian Infrastructure Fund. The Nigerian Infrastructure Fund is part of the Nigerian Sovereign Wealth Investment Fund and is primarily set up to support through investment predicated financial returns the development of basic, essential and efficient critical infrastructure in Nigeria (such as mobile telecommunications networks) in order to stimulate the growth and diversification of the Nigerian economy and create jobs for Nigerians.
This article proposes that part of the Infrastructure Fund should be applied to funding projects expanding mobile networks by building additional base stations only in geographic areas where QoS parameters such as network coverage, service accessibility and service retainability are perceived by mobile telecommunications users to be low. The proposed structure would involve the grant of long term (say 25 years) soft loan to cover at least 70 per cent of the cost building these base stations to the project company or the Special Purpose Vehicle (SPV) set up by Mobile Telecommunications Service Providers in Nigeria. This SPV would be specifically incorporated to build-own-operate (BOO) the additional base stations throughout its lifecycle. In line with this arrangement, the project company would also be required to enter into a long term Infrastructure Service Agreement with the existing mobile telecommunications service providers (both GSM & CDMA service providers). This contractual arrangement is similar to an Offtake contract or Power Purchase Agreement (used for a project producing electricity) which assures; on one hand, the GSM & CDMA service providers (the purchasers) that these mobile networks will always be available and on the other hand, that the SPV will have a ready market to lease out the base stations on a long term basis at a preagreed price.
As this is a type of public sector funding, arguments against this approach would contend that it lacks the discipline inherent in private sector financing. Typical due diligence undertaken where a private sector lender is involved usually entails the careful evaluation of all the risks involved in the project and their proper allocation to parties other than the SPV. This practice is derived from the principle that risks should be allocated to the party best able to manage it; however the argument supporting this investment approach contends that the Infrastructure Fund would provide a form of low-cost public sector finance for mobile network expansion that retains the benefit of private sector management and control (since the SPV is constituted by both the GSM and CDMA service providers), this is beside the fact that long term investment like this would also improve upon the return for the Sovereign Wealth Investment Authority (as the major investor), taking advantage of the fact that debt is actually cheaper than equity. The major point argued is that why not have the project benefit from the best of both worlds by having the public sector provide the project with debt, in partnership with equity stakes to be held by the private sector investors in the SPV.
Improving the QoS of mobile telecommunications services by investing in the construction of additional base stations is likely to have an effect on deciding potential locations of foreign direct investments as the nature of an economy’s overall infrastructure plays a key role in its ability to respond to changes in demand and prices or to take advantage of other resources. In terms of economic growth, additional investment in telecommunications infrastructure would see an improvement of the GNP and the production of higher value added services and products driven by the secondary or tertiary telecommunications industries. As the economy grows and telecommunications services improves, there is likely to be a correlating increase in investments by foreign companies (such as Alcatel-Lucent, Nokia, Siemens, Ericcson) dealing in modern communications technologies.
No doubt it goes without saying that telecommunications services drive the development of new businesses, as evidenced by the enormous growth throughout the world in recent years of cellular and internet-based business models. In return, the growth of these business activities would drive demand for telecommunications services, thus forming a virtuous circle. Increasingly as businesses, especially private businesses develop in Nigeria, the need to address and develop the market for advanced telecommunications services will also arise. One consequence is a strong support to the development and transition of the economy as a whole which is given impetus by the rationale for investing with the Nigerian Sovereign Wealth Fund.
On the 10th of May, 2011, the Senate passed the Nigerian Sovereign Wealth Investment Authority Bill into Law, this was subsequently followed by passage of the same Bill by the House of Representatives on the 19th of May, 2011. The Bill now an Act establishes the Nigerian Investment Authority which is statutorily charged inter alia with the mandate to enhance the development of Nigerian Infrastructure by establishing the Nigerian Infrastructure Fund. The Nigerian Infrastructure Fund is part of the Nigerian Sovereign Wealth Investment Fund and is primarily set up to support through investment predicated financial returns the development of basic, essential and efficient critical infrastructure in Nigeria (such as mobile telecommunications networks) in order to stimulate the growth and diversification of the Nigerian economy and create jobs for Nigerians.
This article proposes that part of the Infrastructure Fund should be applied to funding projects expanding mobile networks by building additional base stations only in geographic areas where QoS parameters such as network coverage, service accessibility and service retainability are perceived by mobile telecommunications users to be low. The proposed structure would involve the grant of long term (say 25 years) soft loan to cover at least 70 per cent of the cost building these base stations to the project company or the Special Purpose Vehicle (SPV) set up by Mobile Telecommunications Service Providers in Nigeria. This SPV would be specifically incorporated to build-own-operate (BOO) the additional base stations throughout its lifecycle. In line with this arrangement, the project company would also be required to enter into a long term Infrastructure Service Agreement with the existing mobile telecommunications service providers (both GSM & CDMA service providers). This contractual arrangement is similar to an Offtake contract or Power Purchase Agreement (used for a project producing electricity) which assures; on one hand, the GSM & CDMA service providers (the purchasers) that these mobile networks will always be available and on the other hand, that the SPV will have a ready market to lease out the base stations on a long term basis at a preagreed price.
As this is a type of public sector funding, arguments against this approach would contend that it lacks the discipline inherent in private sector financing. Typical due diligence undertaken where a private sector lender is involved usually entails the careful evaluation of all the risks involved in the project and their proper allocation to parties other than the SPV. This practice is derived from the principle that risks should be allocated to the party best able to manage it; however the argument supporting this investment approach contends that the Infrastructure Fund would provide a form of low-cost public sector finance for mobile network expansion that retains the benefit of private sector management and control (since the SPV is constituted by both the GSM and CDMA service providers), this is beside the fact that long term investment like this would also improve upon the return for the Sovereign Wealth Investment Authority (as the major investor), taking advantage of the fact that debt is actually cheaper than equity. The major point argued is that why not have the project benefit from the best of both worlds by having the public sector provide the project with debt, in partnership with equity stakes to be held by the private sector investors in the SPV.
Improving the QoS of mobile telecommunications services by investing in the construction of additional base stations is likely to have an effect on deciding potential locations of foreign direct investments as the nature of an economy’s overall infrastructure plays a key role in its ability to respond to changes in demand and prices or to take advantage of other resources. In terms of economic growth, additional investment in telecommunications infrastructure would see an improvement of the GNP and the production of higher value added services and products driven by the secondary or tertiary telecommunications industries. As the economy grows and telecommunications services improves, there is likely to be a correlating increase in investments by foreign companies (such as Alcatel-Lucent, Nokia, Siemens, Ericcson) dealing in modern communications technologies.
No doubt it goes without saying that telecommunications services drive the development of new businesses, as evidenced by the enormous growth throughout the world in recent years of cellular and internet-based business models. In return, the growth of these business activities would drive demand for telecommunications services, thus forming a virtuous circle. Increasingly as businesses, especially private businesses develop in Nigeria, the need to address and develop the market for advanced telecommunications services will also arise. One consequence is a strong support to the development and transition of the economy as a whole which is given impetus by the rationale for investing with the Nigerian Sovereign Wealth Fund.
Sunday, May 29, 2011
NaijaCyberHacktivism, Cyber threats and the failure of the National Assembly to Strengthen the Arm of the Nigerian Law
On the 1st of March, 2011 the Federal House of Representatives led by outgoing speaker Hon. Dimeji Bankole killed An Act To Provide For The Establishment Of The Cyber Security And Information Protection Agency Charged With The Responsibility To Secure Computer Systems And Networks And Liaise With The Relevant Law Enforcement Agency For The Enforcement Of Cyber Crimes Laws, And For Related Matters (HB 154), the reason been that the provisions of the Bill overlapped with the provisions of some existing legislations such as the Economic and Financial Crimes Commission (Amendment) Act 2007. HB 154 was supposed to provide the legal framework for the establishment of an independent Cybercrime Agency and would have legislated on various Cybercrimes and Cyber-Security offences. These offences are either committed against the integrity, availability and confidentiality of computer systems and telecommunications networks or using such networks to commit offences. In particular HB 154 sought to apply to; offences against the confidentiality, integrity and availability of computer data and systems (hacking, unlawful interception, denial-of-service attacks, system interference, etc); computer related offences (fraudulent electronic mail, spamming, impersonation, copyright infringement); content related offences (child pornography); data retention; lawful & unlawful Interception; designation of critical information systems; and admissibility of electronic evidence.
Fast-forward to May 25th, 2011 where the cyber activist group going by the name Naija Cyber Hacktivist group brought down the website of Niger-Delta Development Commission’s (NDDC) website in protest of the federal government’s planned expenditure of almost 1 billion Naira on the presidential inauguration of Dr. Goodluck Ebele Jonathan. This protest which took the form of a denial-of-service attack has once again brought to the fore the inability of our extant legal framework to combat cyber threats or security threats against computer or telecommunications networks. This denial-of-service attack is a type of system interference which seeks to make computer resources unavailable by saturating it with external communications request to prevent it from responding to legitimate traffic, translated to simple English, it generally means that this cyber attack will prevent an internet site or service from functioning efficiently or at all, temporarily or indefinitely.
It becomes important to mention that Section 13 of the already dead HB 154 criminalizes this type of conduct with a term of imprisonment not less than seven (7) years or by imposing a fine of 2 million naira; in particular it provided that:
Any person who without authority or in excess of authority intentionally denies or interferes with access to any computer or network so as prevent any—
a) part of the computer from functioning; or
b) denying or partially denying any legitimate user of any service of such computer or network;
commits an offence and shall be liable on conviction to a fine of not less than N2,000,000 or imprisonment for a term of not less than 7 years or to both such fine and imprisonment.
The particular aim of this section was to bring within its ambit the intentional prevention of the lawful use of a computer system including telecommunications facilities by using or influencing computer data. We must also note that the protected interest here is the right of the network operator or us, the system users being able to have them function optimally (me continues to think how this provision or similar provisions embedded in HB 154 overlapped with any provision of the EFCC Act 2007). This prevention definitely refers to actions that will interfere with the proper functioning of the computer or network system and will usually take the form of imputing, transmitting, damaging, deleting, altering or suppressing computer data. No doubt the 24 hour unavailability of NDDC’s website and the current threat is serious enough to warrant the intervention of HB 154’s section 13.
However while not attempting to call any bluff here, we must note that we have been promised another dose of cyber attacks against the networks of all financial institutions, e-payment platforms, telcos and government if the federal government goes ahead with its planned expenditure for the presidential inauguration, we can only do but wait and see how the long arm of the Nigerian law intends to catch up with this category of cyber robin hood and his band of merry men when this promise is fulfilled.
On a last note, I end with a quote from Johnson and Post in Law and Borders-The Rise of Law in Cyberspace’, Stanford Law Review, 48, (1996): 1367, 1375 that:
the rise of an electronic medium that disregards geographical boundaries throws the law into disarray by creating entirely new phenomena that need to become the subject of clear legal rules that cannot be governed, satisfactorily, by any current territorially based sovereign
Fast-forward to May 25th, 2011 where the cyber activist group going by the name Naija Cyber Hacktivist group brought down the website of Niger-Delta Development Commission’s (NDDC) website in protest of the federal government’s planned expenditure of almost 1 billion Naira on the presidential inauguration of Dr. Goodluck Ebele Jonathan. This protest which took the form of a denial-of-service attack has once again brought to the fore the inability of our extant legal framework to combat cyber threats or security threats against computer or telecommunications networks. This denial-of-service attack is a type of system interference which seeks to make computer resources unavailable by saturating it with external communications request to prevent it from responding to legitimate traffic, translated to simple English, it generally means that this cyber attack will prevent an internet site or service from functioning efficiently or at all, temporarily or indefinitely.
It becomes important to mention that Section 13 of the already dead HB 154 criminalizes this type of conduct with a term of imprisonment not less than seven (7) years or by imposing a fine of 2 million naira; in particular it provided that:
Any person who without authority or in excess of authority intentionally denies or interferes with access to any computer or network so as prevent any—
a) part of the computer from functioning; or
b) denying or partially denying any legitimate user of any service of such computer or network;
commits an offence and shall be liable on conviction to a fine of not less than N2,000,000 or imprisonment for a term of not less than 7 years or to both such fine and imprisonment.
The particular aim of this section was to bring within its ambit the intentional prevention of the lawful use of a computer system including telecommunications facilities by using or influencing computer data. We must also note that the protected interest here is the right of the network operator or us, the system users being able to have them function optimally (me continues to think how this provision or similar provisions embedded in HB 154 overlapped with any provision of the EFCC Act 2007). This prevention definitely refers to actions that will interfere with the proper functioning of the computer or network system and will usually take the form of imputing, transmitting, damaging, deleting, altering or suppressing computer data. No doubt the 24 hour unavailability of NDDC’s website and the current threat is serious enough to warrant the intervention of HB 154’s section 13.
However while not attempting to call any bluff here, we must note that we have been promised another dose of cyber attacks against the networks of all financial institutions, e-payment platforms, telcos and government if the federal government goes ahead with its planned expenditure for the presidential inauguration, we can only do but wait and see how the long arm of the Nigerian law intends to catch up with this category of cyber robin hood and his band of merry men when this promise is fulfilled.
On a last note, I end with a quote from Johnson and Post in Law and Borders-The Rise of Law in Cyberspace’, Stanford Law Review, 48, (1996): 1367, 1375 that:
the rise of an electronic medium that disregards geographical boundaries throws the law into disarray by creating entirely new phenomena that need to become the subject of clear legal rules that cannot be governed, satisfactorily, by any current territorially based sovereign
Monday, December 6, 2010
INEC dragged to court over Direct Data Capture (DDC) machines: My Opinion.
It was reported in Vanguard of 26th November, that a Lagos-based firm, Technocrat Consult and IT Systems Limited (Technocrat IT), dragged the Independent National Electoral Commission (INEC) before a Federal High Court sitting in Lagos, challenging the legality of the award of contract for supply of the Direct Data Capture machines to three firms without its consent.
Technocrat IT is demanding N8billion as damages, claiming that it invented the technique, a portable telecommunication device used in biometric identification covered by patent right No RP: NG/P/2010/283. According to Technocrat IT, this invention is comprised of a portable and lightweight fingerprint apparatus (biometric capture agent application), which can scan and record fingerprint images in the field and wirelessly transmit the said images to a central unit (biometric database) for the purpose of providing immediate identity and background checks on the individuals being fingerprinted.
This piece analyzes the strength of Technocrat IT’s case before the court. A convenient place to start in this analysis would be the caveat contained in section 4(4) of the Patent Act which says that “Patents are granted at the risk of the patentee and without guarantee of their validity.” In essence, this means that the fact that you own a patent right does not guarantee the validity of that patent.
Some of the requirements for patenting an invention under the Patent Act are set out as: if the invention is new, results from an inventive activity and is capable of industrial application or it constitutes an improvement to an earlier invention.
Having construed Technocrat IT’s patent claim as explained and displayed on their website at www.technogratgroup.co.uk , it seems that their patent though capable of an inventive activity, has not met the standard of patentability of been new/novel, neither has it resulted from an inventive activity.
It is important to mention here that on the 25th of December, 1998, an International Application (with number PCT/US98/20089) was presented for filing under the Patent Cooperation Treaty (PCT) with the International Bureau (IB) of the World Intellectual Property Organization (WIPO), a similar application covering the same invention has also been filed before the United States Patent and Trademark Office. This application relates to a MOBILE BIOMETRIC IDENTIFICATION SYSTEM and the summary of the Invention states that:
“The present invention may be embodied in a distributed biometric identification system having highly mobile user workstations. More particularly, the invention may be embodied in a distributed, mobile biometric identification system and architecture for rapidly identifying individuals using fingerprint and photographic data. The disclosed architecture includes a centralized server, and a plurality of distributed, mobile client workstations that are remotely located from the centralized server. The mobile workstation includes a substantially portable two-way communications link (e. g., a land-based or satellite-based mobile radiotelephone) that may be used to place the mobile workstation in communication with the centralized server”
This earlier invention primarily practices the invention now claimed by Technocrat IT, I must also say that Technocrat IT’s invention/patent is not an improvement to this earlier invention), it is important to note that in determining the novelty of an invention or as to whether it results from an inventive activity, the Patent Act states that the invention itself must not form a part of or obviously follow (either as to the methods, or the product which it concerns, or as to the industrial results it produces) from the state of the art which the Patent Act defines under Section 1 (3) as:
concerning that art or field of knowledge which has been made available [not necessarily patented] to the public anywhere [in the world] and at anytime whatever…before the date of filing of the patent application…
The court in interpreting the above provision will exercise flexibility and will not be restricted to only evidence of the state of the art available in Nigeria neither would it be limited to evidence of a prior Patent grant obtained in Nigeria as the standard of been made available does not necessarily entail the prior grant of a Patent but rather that information concerning the patent or claimed invention has been previously disclosed to the public by way of a written or oral description, by use or in any other way.
In the English case of Windsurfing International Inc. v Tabur Marine (GB) Ltd. [1985] RPC 59, the plaintiff were the manufacturers of the first commercial windsurfer/sailboard and patented their design for sailboard with a Bermuda rig and a wishbone spar in the UK and elsewhere. The plaintiffs subsequently sued another company for patent infringement as a result of making and selling a similar sailboard in the UK. The validity of the patent was challenged by an the defendant on the fact that in 1958, at least 10 years before the grant of the patent a 12 year old boy called Peter Chilver had built an early version of a sailboard which was evidenced by film footage taken off the coast of Hayling Island. They alleged that this proved that the subject of the plaintiffs' patent had been anticipated
The Court upheld the defendant's claim that the boy's invention predated the plaintiff's application for a UK patent and the patent was rendered invalid notwithstanding that Chiver’s sailboard was of a slightly different design.
Conclusively, this evidence of an earlier invention which predates Technocrats IT’s Patent grant will not only destroy their case but nullify the earlier grant of the Patent under Section 9 (1) a of the Patent Act since it does not meet the standards of Patentability (Novelty/New and resulting from an Inventive Activity) as set out under Section 1 of the Act.
PS: On a lighter note, reading over the weekend about the injunction obtained against INEC on a similar ground of Copyright/Patent Infringement, I am beginning to be concerned as to when exactly I would be able to make my vote count.
Technocrat IT is demanding N8billion as damages, claiming that it invented the technique, a portable telecommunication device used in biometric identification covered by patent right No RP: NG/P/2010/283. According to Technocrat IT, this invention is comprised of a portable and lightweight fingerprint apparatus (biometric capture agent application), which can scan and record fingerprint images in the field and wirelessly transmit the said images to a central unit (biometric database) for the purpose of providing immediate identity and background checks on the individuals being fingerprinted.
This piece analyzes the strength of Technocrat IT’s case before the court. A convenient place to start in this analysis would be the caveat contained in section 4(4) of the Patent Act which says that “Patents are granted at the risk of the patentee and without guarantee of their validity.” In essence, this means that the fact that you own a patent right does not guarantee the validity of that patent.
Some of the requirements for patenting an invention under the Patent Act are set out as: if the invention is new, results from an inventive activity and is capable of industrial application or it constitutes an improvement to an earlier invention.
Having construed Technocrat IT’s patent claim as explained and displayed on their website at www.technogratgroup.co.uk , it seems that their patent though capable of an inventive activity, has not met the standard of patentability of been new/novel, neither has it resulted from an inventive activity.
It is important to mention here that on the 25th of December, 1998, an International Application (with number PCT/US98/20089) was presented for filing under the Patent Cooperation Treaty (PCT) with the International Bureau (IB) of the World Intellectual Property Organization (WIPO), a similar application covering the same invention has also been filed before the United States Patent and Trademark Office. This application relates to a MOBILE BIOMETRIC IDENTIFICATION SYSTEM and the summary of the Invention states that:
“The present invention may be embodied in a distributed biometric identification system having highly mobile user workstations. More particularly, the invention may be embodied in a distributed, mobile biometric identification system and architecture for rapidly identifying individuals using fingerprint and photographic data. The disclosed architecture includes a centralized server, and a plurality of distributed, mobile client workstations that are remotely located from the centralized server. The mobile workstation includes a substantially portable two-way communications link (e. g., a land-based or satellite-based mobile radiotelephone) that may be used to place the mobile workstation in communication with the centralized server”
This earlier invention primarily practices the invention now claimed by Technocrat IT, I must also say that Technocrat IT’s invention/patent is not an improvement to this earlier invention), it is important to note that in determining the novelty of an invention or as to whether it results from an inventive activity, the Patent Act states that the invention itself must not form a part of or obviously follow (either as to the methods, or the product which it concerns, or as to the industrial results it produces) from the state of the art which the Patent Act defines under Section 1 (3) as:
concerning that art or field of knowledge which has been made available [not necessarily patented] to the public anywhere [in the world] and at anytime whatever…before the date of filing of the patent application…
The court in interpreting the above provision will exercise flexibility and will not be restricted to only evidence of the state of the art available in Nigeria neither would it be limited to evidence of a prior Patent grant obtained in Nigeria as the standard of been made available does not necessarily entail the prior grant of a Patent but rather that information concerning the patent or claimed invention has been previously disclosed to the public by way of a written or oral description, by use or in any other way.
In the English case of Windsurfing International Inc. v Tabur Marine (GB) Ltd. [1985] RPC 59, the plaintiff were the manufacturers of the first commercial windsurfer/sailboard and patented their design for sailboard with a Bermuda rig and a wishbone spar in the UK and elsewhere. The plaintiffs subsequently sued another company for patent infringement as a result of making and selling a similar sailboard in the UK. The validity of the patent was challenged by an the defendant on the fact that in 1958, at least 10 years before the grant of the patent a 12 year old boy called Peter Chilver had built an early version of a sailboard which was evidenced by film footage taken off the coast of Hayling Island. They alleged that this proved that the subject of the plaintiffs' patent had been anticipated
The Court upheld the defendant's claim that the boy's invention predated the plaintiff's application for a UK patent and the patent was rendered invalid notwithstanding that Chiver’s sailboard was of a slightly different design.
Conclusively, this evidence of an earlier invention which predates Technocrats IT’s Patent grant will not only destroy their case but nullify the earlier grant of the Patent under Section 9 (1) a of the Patent Act since it does not meet the standards of Patentability (Novelty/New and resulting from an Inventive Activity) as set out under Section 1 of the Act.
PS: On a lighter note, reading over the weekend about the injunction obtained against INEC on a similar ground of Copyright/Patent Infringement, I am beginning to be concerned as to when exactly I would be able to make my vote count.
Monday, November 15, 2010
WILL ALL VOICE CALLS IN NIGERIA BE SUBJECT LAWFUL INTERCEPTION: A BRIEF COMMENTARY OF THE PROPOSED TELECOMMUNICATIONS FACILITIES (LAWFUL INTERCEPTION OF INFORMATION) BILL, 2010.
Introduction
The impressive growth recorded in the Nigeria telecommunications market has unfortunately been challenged by criminal activities. Recent evidence emanating from Law Enforcement Agencies have indicated that criminal activities such as [Armed] Robberies, Advance Fee Fraud (aka 419 named so after the popular section 419 of the Nigerian Criminal Code) and more recently detonating an explosive device have been facilitated with the aid of mobile phones.
The House of Representative in responding to these threats initiated legislative proposal titled HB: 395 titled “An Act Requiring Telecommunications Facilities To Facilitate The Lawful Interception Of Information Transmitted By Means Of Those Facilities And Respecting The Provision Of Telecommunications Subscriber Information; And For Other Matters Connected therewith”[1] This Bill in its explanatory memorandum states:
This bill seeks to require telecommunications service providers to put in place and maintain certain capabilities that facilitate the lawful interception of information transmitted by telecommunications and to provide basic information about their subscribers to the Nigeria police force and the state security service.
The legal question therefore becomes will all voice calls be subject to lawful interception taking into consideration the rate at which telecommunications services have evolved in Nigeria from a teledensity of about 508,316 connected lines in 1999 to about 74,000,000 connected lines in 2009.[2]
This question will form the basis of my commentary.
As can be gleaned from the Bill’s explanatory memorandum, the Bill will require that that all telecommunications service providers have technical capability for lawful interception. The Bill sets forth assistance capability requirements, compelling telecommunications service providers to build and sustain their equipment in a manner that allows authorized law enforcement agents to lawfully intercept communications. The Bill therefore preserves the ability of law enforcement agencies to execute authorized electronic surveillance by requiring that telecommunications service providers have the technical capability to intercept communications.
Interception under section 53 (1) (c) of the Bill “includes listen to, record or acquire a communication” Lawful Interception generally refers to the lawfully authorized interception and monitoring of communications traffic (which could either be voice, data, audio or a combination of any or all of them) pursuant to the order of an authorized person for the purpose of gathering evidence or forensic analysis.
With the rapidly expanding telecommunications infrastructure, Nigeria currently has capability for two types of voice calls; telephone calls made through a telecommunications facilities or network as rightly defined under Section 53 of the Bill and Voice over Internet Protocol (VoIP) which is voice communications over the internet or any packet switching network; the most popular of these been Skype and Yahoo Messenger Call.
It is important to note that VoIP services is derived from Internet services, the meaning of which was neither provided for in the Bill nor was it defined in the earlier Nigerian Communications Act, 2003, however the internet in its most fundamental level is simply the interconnection of computer networks that is so seamless as to appear to the user as one network, this service in itself is entirely different in terms of technical architecture and communications protocols from Telecommunications Service.
Going forward, Section 53 of the Bill defines communications as any “communication effected by means of telecommunications and includes any related transmission data or other ancillary information” while telecommunications service under the same section is defined as a “service or a feature of a service, that is provided by means of telecommunications facilities, whether the provider owns, leases or has any other interest in or right respecting the telecommunications facilities and any related equipment used to provide the service”. It is important to note that the use of the words “Telecommunications Services” is intended to exclude other forms of internet services like email, Internet, Voice-over-Internet Protocol (VoIP) provided by internet service providers.
However, the implication of this provision is subject to Section 6 of the Bill which retains the capability of telecommunications service providers to intercept communications, even when they offer new services, as long as such a service is provided through their network. In essence, where a telecommunications service provider provides other forms of information services like internet services or VoIP through its network, such a service would be subject to intercepts by law enforcements agents.
The long and short of this legal analysis is that VoIP services provided by internet service providers are not subject to the proposed bill unless such services is provided via telecommunications service networks, however it is important to note that Section 147 of the Nigerian Communications Act, 2003 will subject both telecommunications service providers and internet service providers to lawful interception on the determination of the Nigerian Communications Commission.
Friday, October 1, 2010
NETWORK NEUTRALITY LAW AND ACCESS TO BROADBAND SERVICES IN NIGERIA
2010, Nigeria; the International Internet Connectivity (ICC) is currently dominated by three major players providing bandwidth access on a wholesale and retail basis to the Nigerian end users. These players are the state owned Nigerian Telecommunications Limited (NITEL) providing access via the SAT-1 submarine cable, Glo through the GLO-1 submarine cable and MainOne Cable company via the MainOne submarine cable, of these cables, only the GLO-1 and MainOne submarine cables have broadband (or high speed) internet access capability.
In recent times, global policy issues on broadband internet access have focused on network neutrality, that is whether broadband network operators should be allowed to favor (or as is emotionally argued; discriminate) one data traffic over another one that passes through its network.
This is the main thrust of this paper. Arguments in support of network neutrality have tended to lean towards the belief that discriminating data traffic is anti-consumer and may be capable having an anti-competitive effect under certain conditions. With the current expansion of internet services in Nigeria and particularly the current investment in broadband infrastructure, the need arises to revisit the issue of network neutrality in the Nigerian context. In considering the question of network neutrality, guidance is sought from the Nigeria Communications Act 2003 (NCA) and the relevant regulations made under the Act.
NETWORK NEUTRALITY
The internet in its simplest terms refers to a system of decentralized, interconnected network of computer networks that allows computers to communicate with each other. The internet has come a long way since 1960 when it was then known as the Advanced Research Projects Agency Network (ARPANET), the first operational packet switching network owned by the United States Department of Defense. The internet as we know it today has evolved rapidly and extended far beyond the territory of the United States. As at 2008, almost 1.6 billion people worldwide had access to the internet, of these figures only 23, 982, 208 had access from Nigeria.
The growing rate of internet penetration in Nigeria has closely been linked to the Global System for Mobile Communications (GSM) revolution; where GSM service providers have also been capable of providing access to the internet via their mobile network infrastructures.
Today, the geometric growth rate of the Nigerian telecommunications market has created a demand for bandwidth intensive application such as cloud computing (especial software-as-a-service; SaaS), streaming media and Voice-over-internet protocol (VoIP) services which has necessitated the investment in the provision broadband services.
Network neutrality as a principle recommends that all internet traffic passing through a network should be treated alike irrespective of the source of the traffic, destination or nature of the traffic. According to Google, Network neutrality is the principle that Internet users should be in control of what content they view and what applications they use on the Internet. The Internet has operated according to this neutrality principle since its earliest days... Fundamentally, net neutrality is about equal access to the Internet. This definition is based on the notion of a free and fair internet and that broadband should be available to users who have paid to access this service. This definition is centered on the four basic “Internet Freedoms”.
The concept of network neutrality can be traced to the end-to-end principle which sees the internet as a “dumb” network designed to treat all data traffic equally. In this sense, the network doesn’t ask questions about the sender of the traffic, the recipient or its content; it simply analyzes the traffic and passes it onward for delivery to the end user through the next available node.
A related concept to network neutrality is access tiering which refers to the models used by a particular network operator in treating its traffic. This can be manifested by the network operator in giving bandwidth priority to websites and online service providers that pay for Quality of Service (QoS), websites owned by or in partnership with; or that have paid a premium to the network operator This ultimately means that the content of such favored websites/online service providers would ride faster over the operators last mile to the subscribers.
The different models (which are the subject of network neutrality) used for access tiering are:
a) The “best efforts” rule. Here, the network operator treats all data traffic equally. By this rule, the first data traffic in, is the first the data out. The rule however is subject to variable performance and periods of congestion. This rule seems to assume a similar stance with the maxim in equity … the first in order of time shall prevail.
b) “Needs-based discrimination” treats all data traffic in accordance with the best effort rule until such a time when there is network congestion. At this point certain time sensitive data traffic (such as live streaming or internet telephony data streams ) are moved to the front of the queue for onward delivery to the recipient.
c) “Active discrimination” This is forms the subject of this discourse. The discrimination occurs where a network operator without any reasonable justification prioritizes data for delivery to the end-user in accordance with pre-defined rules. This discrimination may be as a result of the origin, destination or nature of the data traffic.
In the words of American Professor of Law Tim Wu, ”The basic principle behind network [neutrality] regime is to give [internet] users the right to use non-harmful network attachments or applications, and give innovations the corresponding freedom to supply them.” The principle of network neutrality works to prevent the unnecessary restriction of how the end-user accesses the internet, this no doubts creates value in the use of a particular network. These discriminatory practices are well illustrated by these hypothetical cases.
a) Service provider discrimination: An operator such as MainOne Cable Company may enter into company with (or even own) live streaming service A under which A’s content is favored over the contents of live streaming service B. In such scenarios, it’s possible for the internet end users who subscribe to B’s services to become frustrated at the slow pace at which they receive B’s service, this may result in their migration to A’s service due to the faster and better performances offered.
b) Application discrimination: Though this form is not relevant under the current discourse, nevertheless a network operator may discriminate against time sensitive applications such as streaming services or VoIP applications over less time sensitive data traffic like emails.
This priorisation and de-priorisation of internet traffic (otherwise known as access tiering) forms the core of the network neutrality debate. This debate has assumed some measure of popularity in the United States where many have been prompted to ask whether some form of regulatory intervention should not be introduced to curtail instances of internet data discrimination. The fear in the United States is hinged on what network operators might be tempted to do rather than what they are currently doing in the absence of any network neutrality law. The Madison River case further lays credence to this claim. In that case, an Internet Service Provider (ISP) allegedly blocked its customers from accessing a competing VoIP provider. The ISP entered into a consent decree with the sector regulator, Federal Communications Commission (FCC) that prohibited the ISP from blocking ports used for VoIP traffic. The ISP also made a voluntary payment of $15,000 to the US treasury.
It is important to bear in mind that this debate is two sided, on one side are the operators of internet/broadband networks who claim that any form of network neutrality regime is likely to impede broadband internet access and may actually be disadvantageous to innovation. Their belief is that effective network management strategies may require that certain internet data traffic be favored over others. They also contend that a small number of end users can degrade network performances through the use of bandwidth-intensive applications such as live streaming video services and peer-to-peer (p2p) applications. They further contend that network resources may not be capable of accommodating such situations and that network expansion may be expensive, leaving them with the only viable alternative of the cost effective method of network management. On the issue of technology innovation, advocates argue that network operators should be allowed to innovate freely with their different service offering which is the real essence of competition, for them any network neutrality regime is a restriction of new types of competition which in turn restricts innovation. According to them experimenting freely with new service offerings is likely to benefit competition and enhance efforts in innovations in the belief that where failures result from such innovations, network operators are likely to learn from their mistakes in other to compete effectively in the market.
ASSESSMENT OF NETWORK NEUTRALITY UNDER NIGERIAN COMPETITION LAW
The primary aim of all Competition regimes is to ensure the existence of a state of affairs in which output is maximized, price is minimized and the consumers are able to make their own choices. The overall intention of Competition policies is to protect the consumers from unfair market practice. For this, there arises the need for the Government to intervene to stimulate and preserve a competitive environment. Phrases like “substantially lessening of competition,” “anti-competitive agreements and practices” and “abuse of dominant position” are relevant and come within the scope of a Competition regime.
As no general competition law currently exist in Nigeria at the moment, the relevant competition provisions are embedded in the NCA & its subsidiary Competition Practices Regulations (CPR) 2007 which are both applicable in the Nigerian Communications market.
The competition concerns of network neutrality can be viewed from various angles in Nigeria, for instance and depending on the particulars of a conduct, it seems likely that blocking access to broadband access (for the purpose of inducing a subscriber to migrate to another service) or discriminating in favor of a service provider with whom the broadband network provider has some sort of contractual relationship with, is likely to be caught by Sections 9 e and 14 e of the CPR which respectively provides:
discriminating in the provision of interconnection or other communications services or facilities to competing Licensees, except under circumstances that are objectively justified based on supply conditions, such as discrimination based on differences in the costs of supply; and
exclusive dealing agreements, pursuant to which a Licensee enters into an agreement with another party for the supply of products or services on an exclusive basis, and where that exclusivity has or may have the effect of substantially lessening competition in related communications markets.
For instance an exclusive dealing agreement precludes a supplier’s competitors from doing business with the buyer during the agreed period. In the broadband market, an ISP might enter into agreement with content or application providers to provide exclusive, or preferential, access to consumers. In such instances, an ISP might arrange to allow access only to a single service provider and the other service providers are then be denied last-mile access to that ISP’s customers or end users.
In enforcing these provisions, the Nigerian Communications Commission (NCC), the sector regulator will be guided by the provisions of Section 91 (2) of the NCA and Section 6 of the CPR which both emphasize that in assessing whether any conduct is capable of “substantial lessening of competition” reference will be made to the following circumstances; the relevant economic market, the impact of the conduct on existing market players, the impact of the conduct on barriers to market entry and the impact of the conduct on consumers. The test here is to determine the extent of encumbrance against market competition which results in a significant injury to either the competitors or consumers or both. In the case of an exclusive dealing arrangement the assessment goes beyond the number of competitors closed out, as competition authorities worldwide seem to have a convergent opinion in assessing exclusive dealing arrangements where the market definition, the amount of foreclosure in the relevant market, the duration of the contracts, the extent to which entry is deterred, and the reasonable justifications, if any, for the exclusivity are all taken into account.
While a conduct capable of “substantial lessening of competition” seems like a potential threat to the consumers access to broadband services, the claim by proponents of network neutrality that internet data discrimination is anti-competitive seems to be forward looking as the major concern as is in the United States is focused on not what broadband network providers are currently doing, but rather on what they are capable of doing.
THE CURRENT NIGERIAN POSITION ON NETWORK NEUTRALITY
Though no specific Network Neutrality Law currently exists in Nigeria, however (bearing in mind that one of the primary goals of the NCA is to ensure that fair competition exists in the communications sector and that the rights of all consumers and service providers are protected) in the context of interconnection and access to network facilities/services embedded in Sections 96-103 of the NCA, 2003, in particular Section 97 b mandates that all interconnection agreement comply with the principles of neutrality [emphasis mine], transparency, non-discrimination, fair competition, universal coverage, access to information, equality of access and equal terms and conditions. Though neither this section nor the NCA has given a proper description of what constitutes neutrality, however it is safe to assume that this section intends to ensure the absence of prioritization measures or differential treatment of communications traffic when interconnecting with other licensees or providing access to network facilities to interested parties.
Another passive instance of network neutrality can be found in the grant of a licence for the provision of internet services under Section 32 of the NCA. In particular condition 5 of the Licence provides:
5.1 The Licensee shall not (whether in respect of charges or other terms or conditions applied or otherwise) show undue preference to or exercise undue discrimination against any particular person or persons of any class or description in respect of;
a) the provision of a service under this Licence; or
b) the connection of any equipment approved by the Commission.
5.2 The Licensee shall be deemed to have shown such undue preference or to have exercised such discrimination if it unfairly favours to a material extent a business carried on by it or by its lawful telecommunications associates in relation to any of the matters mentioned in paragraph 5.1 so as to place at a significant competitive disadvantage persons competing with that business.
These provisions without mentioning “network neutrality” has in some implicit way taken a stance in favour of network neutrality by making it a license condition that internet access providers must not show “undue preference to” any person. The subsequent provision goes further in defining a conduct indicative of “undue preference” as indiscriminately giving preference in the provision of internet service and or in the connection of any equipment approved by the commission to the business of its “lawful telecommunications associates.” A breach of these provisions is likely to entitle the NCC to revoke the internet license of the licensee.
CONCLUSION
The reality on ground is that the Nigerian broadband access market is still very much in its infancy stage, more market entry is needed for the market to be more competitive. The argument here is that increased broadband market participation is likely to reduce discriminatory practices as was noted in the US by AT & T Chairman Ed Whitacre that “Any [network] operator that blocks access to content is inviting customers to find another provider. And that’s just bad business.” Whether the likelihood of broadband discrimination is real or imagined in the absence of any network neutrality regime in Nigeria, notice must be taken of the vision of the NCA and the National Communications policy which includes inter alia, the promotion of easily accessible communications services for Nigerians.
Whichever way the pendulum swings, effective consumer protection will be needed for effective market competition to be sustained. In this vein, Service Level Agreement that addresses consumer protection concerns will play a role in clearly spelling out the terms of different broadband packages, these material terms may include traffic management practices of the network operator, after all of what use would be the effect of a competition regime if the consumers are not able to exercise their right to choose.
The dabate on network neutrality is likely to change how data is transmitted and consumed online while the question of broadband service discrimination remains alive, however, sight must not be lost of the principles surrounding network neutrality should a law for it become inevitable. These principles as stated by the US Federal Communications Commission (FCC) in its Broadband policy statement adopted on August 5th, 2005 revolves round the rights of broadband consumers to; access lawful content of their choosing, use applications and services of their choosing, connect network devises that to not degrade network performances and finally are entitled to competition among the various service providers. These principles will guarantee that these four basic “Internet Freedoms” are protected and preserved.
In recent times, global policy issues on broadband internet access have focused on network neutrality, that is whether broadband network operators should be allowed to favor (or as is emotionally argued; discriminate) one data traffic over another one that passes through its network.
This is the main thrust of this paper. Arguments in support of network neutrality have tended to lean towards the belief that discriminating data traffic is anti-consumer and may be capable having an anti-competitive effect under certain conditions. With the current expansion of internet services in Nigeria and particularly the current investment in broadband infrastructure, the need arises to revisit the issue of network neutrality in the Nigerian context. In considering the question of network neutrality, guidance is sought from the Nigeria Communications Act 2003 (NCA) and the relevant regulations made under the Act.
NETWORK NEUTRALITY
The internet in its simplest terms refers to a system of decentralized, interconnected network of computer networks that allows computers to communicate with each other. The internet has come a long way since 1960 when it was then known as the Advanced Research Projects Agency Network (ARPANET), the first operational packet switching network owned by the United States Department of Defense. The internet as we know it today has evolved rapidly and extended far beyond the territory of the United States. As at 2008, almost 1.6 billion people worldwide had access to the internet, of these figures only 23, 982, 208 had access from Nigeria.
The growing rate of internet penetration in Nigeria has closely been linked to the Global System for Mobile Communications (GSM) revolution; where GSM service providers have also been capable of providing access to the internet via their mobile network infrastructures.
Today, the geometric growth rate of the Nigerian telecommunications market has created a demand for bandwidth intensive application such as cloud computing (especial software-as-a-service; SaaS), streaming media and Voice-over-internet protocol (VoIP) services which has necessitated the investment in the provision broadband services.
Network neutrality as a principle recommends that all internet traffic passing through a network should be treated alike irrespective of the source of the traffic, destination or nature of the traffic. According to Google, Network neutrality is the principle that Internet users should be in control of what content they view and what applications they use on the Internet. The Internet has operated according to this neutrality principle since its earliest days... Fundamentally, net neutrality is about equal access to the Internet. This definition is based on the notion of a free and fair internet and that broadband should be available to users who have paid to access this service. This definition is centered on the four basic “Internet Freedoms”.
The concept of network neutrality can be traced to the end-to-end principle which sees the internet as a “dumb” network designed to treat all data traffic equally. In this sense, the network doesn’t ask questions about the sender of the traffic, the recipient or its content; it simply analyzes the traffic and passes it onward for delivery to the end user through the next available node.
A related concept to network neutrality is access tiering which refers to the models used by a particular network operator in treating its traffic. This can be manifested by the network operator in giving bandwidth priority to websites and online service providers that pay for Quality of Service (QoS), websites owned by or in partnership with; or that have paid a premium to the network operator This ultimately means that the content of such favored websites/online service providers would ride faster over the operators last mile to the subscribers.
The different models (which are the subject of network neutrality) used for access tiering are:
a) The “best efforts” rule. Here, the network operator treats all data traffic equally. By this rule, the first data traffic in, is the first the data out. The rule however is subject to variable performance and periods of congestion. This rule seems to assume a similar stance with the maxim in equity … the first in order of time shall prevail.
b) “Needs-based discrimination” treats all data traffic in accordance with the best effort rule until such a time when there is network congestion. At this point certain time sensitive data traffic (such as live streaming or internet telephony data streams ) are moved to the front of the queue for onward delivery to the recipient.
c) “Active discrimination” This is forms the subject of this discourse. The discrimination occurs where a network operator without any reasonable justification prioritizes data for delivery to the end-user in accordance with pre-defined rules. This discrimination may be as a result of the origin, destination or nature of the data traffic.
In the words of American Professor of Law Tim Wu, ”The basic principle behind network [neutrality] regime is to give [internet] users the right to use non-harmful network attachments or applications, and give innovations the corresponding freedom to supply them.” The principle of network neutrality works to prevent the unnecessary restriction of how the end-user accesses the internet, this no doubts creates value in the use of a particular network. These discriminatory practices are well illustrated by these hypothetical cases.
a) Service provider discrimination: An operator such as MainOne Cable Company may enter into company with (or even own) live streaming service A under which A’s content is favored over the contents of live streaming service B. In such scenarios, it’s possible for the internet end users who subscribe to B’s services to become frustrated at the slow pace at which they receive B’s service, this may result in their migration to A’s service due to the faster and better performances offered.
b) Application discrimination: Though this form is not relevant under the current discourse, nevertheless a network operator may discriminate against time sensitive applications such as streaming services or VoIP applications over less time sensitive data traffic like emails.
This priorisation and de-priorisation of internet traffic (otherwise known as access tiering) forms the core of the network neutrality debate. This debate has assumed some measure of popularity in the United States where many have been prompted to ask whether some form of regulatory intervention should not be introduced to curtail instances of internet data discrimination. The fear in the United States is hinged on what network operators might be tempted to do rather than what they are currently doing in the absence of any network neutrality law. The Madison River case further lays credence to this claim. In that case, an Internet Service Provider (ISP) allegedly blocked its customers from accessing a competing VoIP provider. The ISP entered into a consent decree with the sector regulator, Federal Communications Commission (FCC) that prohibited the ISP from blocking ports used for VoIP traffic. The ISP also made a voluntary payment of $15,000 to the US treasury.
It is important to bear in mind that this debate is two sided, on one side are the operators of internet/broadband networks who claim that any form of network neutrality regime is likely to impede broadband internet access and may actually be disadvantageous to innovation. Their belief is that effective network management strategies may require that certain internet data traffic be favored over others. They also contend that a small number of end users can degrade network performances through the use of bandwidth-intensive applications such as live streaming video services and peer-to-peer (p2p) applications. They further contend that network resources may not be capable of accommodating such situations and that network expansion may be expensive, leaving them with the only viable alternative of the cost effective method of network management. On the issue of technology innovation, advocates argue that network operators should be allowed to innovate freely with their different service offering which is the real essence of competition, for them any network neutrality regime is a restriction of new types of competition which in turn restricts innovation. According to them experimenting freely with new service offerings is likely to benefit competition and enhance efforts in innovations in the belief that where failures result from such innovations, network operators are likely to learn from their mistakes in other to compete effectively in the market.
ASSESSMENT OF NETWORK NEUTRALITY UNDER NIGERIAN COMPETITION LAW
The primary aim of all Competition regimes is to ensure the existence of a state of affairs in which output is maximized, price is minimized and the consumers are able to make their own choices. The overall intention of Competition policies is to protect the consumers from unfair market practice. For this, there arises the need for the Government to intervene to stimulate and preserve a competitive environment. Phrases like “substantially lessening of competition,” “anti-competitive agreements and practices” and “abuse of dominant position” are relevant and come within the scope of a Competition regime.
As no general competition law currently exist in Nigeria at the moment, the relevant competition provisions are embedded in the NCA & its subsidiary Competition Practices Regulations (CPR) 2007 which are both applicable in the Nigerian Communications market.
The competition concerns of network neutrality can be viewed from various angles in Nigeria, for instance and depending on the particulars of a conduct, it seems likely that blocking access to broadband access (for the purpose of inducing a subscriber to migrate to another service) or discriminating in favor of a service provider with whom the broadband network provider has some sort of contractual relationship with, is likely to be caught by Sections 9 e and 14 e of the CPR which respectively provides:
discriminating in the provision of interconnection or other communications services or facilities to competing Licensees, except under circumstances that are objectively justified based on supply conditions, such as discrimination based on differences in the costs of supply; and
exclusive dealing agreements, pursuant to which a Licensee enters into an agreement with another party for the supply of products or services on an exclusive basis, and where that exclusivity has or may have the effect of substantially lessening competition in related communications markets.
For instance an exclusive dealing agreement precludes a supplier’s competitors from doing business with the buyer during the agreed period. In the broadband market, an ISP might enter into agreement with content or application providers to provide exclusive, or preferential, access to consumers. In such instances, an ISP might arrange to allow access only to a single service provider and the other service providers are then be denied last-mile access to that ISP’s customers or end users.
In enforcing these provisions, the Nigerian Communications Commission (NCC), the sector regulator will be guided by the provisions of Section 91 (2) of the NCA and Section 6 of the CPR which both emphasize that in assessing whether any conduct is capable of “substantial lessening of competition” reference will be made to the following circumstances; the relevant economic market, the impact of the conduct on existing market players, the impact of the conduct on barriers to market entry and the impact of the conduct on consumers. The test here is to determine the extent of encumbrance against market competition which results in a significant injury to either the competitors or consumers or both. In the case of an exclusive dealing arrangement the assessment goes beyond the number of competitors closed out, as competition authorities worldwide seem to have a convergent opinion in assessing exclusive dealing arrangements where the market definition, the amount of foreclosure in the relevant market, the duration of the contracts, the extent to which entry is deterred, and the reasonable justifications, if any, for the exclusivity are all taken into account.
While a conduct capable of “substantial lessening of competition” seems like a potential threat to the consumers access to broadband services, the claim by proponents of network neutrality that internet data discrimination is anti-competitive seems to be forward looking as the major concern as is in the United States is focused on not what broadband network providers are currently doing, but rather on what they are capable of doing.
THE CURRENT NIGERIAN POSITION ON NETWORK NEUTRALITY
Though no specific Network Neutrality Law currently exists in Nigeria, however (bearing in mind that one of the primary goals of the NCA is to ensure that fair competition exists in the communications sector and that the rights of all consumers and service providers are protected) in the context of interconnection and access to network facilities/services embedded in Sections 96-103 of the NCA, 2003, in particular Section 97 b mandates that all interconnection agreement comply with the principles of neutrality [emphasis mine], transparency, non-discrimination, fair competition, universal coverage, access to information, equality of access and equal terms and conditions. Though neither this section nor the NCA has given a proper description of what constitutes neutrality, however it is safe to assume that this section intends to ensure the absence of prioritization measures or differential treatment of communications traffic when interconnecting with other licensees or providing access to network facilities to interested parties.
Another passive instance of network neutrality can be found in the grant of a licence for the provision of internet services under Section 32 of the NCA. In particular condition 5 of the Licence provides:
5.1 The Licensee shall not (whether in respect of charges or other terms or conditions applied or otherwise) show undue preference to or exercise undue discrimination against any particular person or persons of any class or description in respect of;
a) the provision of a service under this Licence; or
b) the connection of any equipment approved by the Commission.
5.2 The Licensee shall be deemed to have shown such undue preference or to have exercised such discrimination if it unfairly favours to a material extent a business carried on by it or by its lawful telecommunications associates in relation to any of the matters mentioned in paragraph 5.1 so as to place at a significant competitive disadvantage persons competing with that business.
These provisions without mentioning “network neutrality” has in some implicit way taken a stance in favour of network neutrality by making it a license condition that internet access providers must not show “undue preference to” any person. The subsequent provision goes further in defining a conduct indicative of “undue preference” as indiscriminately giving preference in the provision of internet service and or in the connection of any equipment approved by the commission to the business of its “lawful telecommunications associates.” A breach of these provisions is likely to entitle the NCC to revoke the internet license of the licensee.
CONCLUSION
The reality on ground is that the Nigerian broadband access market is still very much in its infancy stage, more market entry is needed for the market to be more competitive. The argument here is that increased broadband market participation is likely to reduce discriminatory practices as was noted in the US by AT & T Chairman Ed Whitacre that “Any [network] operator that blocks access to content is inviting customers to find another provider. And that’s just bad business.” Whether the likelihood of broadband discrimination is real or imagined in the absence of any network neutrality regime in Nigeria, notice must be taken of the vision of the NCA and the National Communications policy which includes inter alia, the promotion of easily accessible communications services for Nigerians.
Whichever way the pendulum swings, effective consumer protection will be needed for effective market competition to be sustained. In this vein, Service Level Agreement that addresses consumer protection concerns will play a role in clearly spelling out the terms of different broadband packages, these material terms may include traffic management practices of the network operator, after all of what use would be the effect of a competition regime if the consumers are not able to exercise their right to choose.
The dabate on network neutrality is likely to change how data is transmitted and consumed online while the question of broadband service discrimination remains alive, however, sight must not be lost of the principles surrounding network neutrality should a law for it become inevitable. These principles as stated by the US Federal Communications Commission (FCC) in its Broadband policy statement adopted on August 5th, 2005 revolves round the rights of broadband consumers to; access lawful content of their choosing, use applications and services of their choosing, connect network devises that to not degrade network performances and finally are entitled to competition among the various service providers. These principles will guarantee that these four basic “Internet Freedoms” are protected and preserved.
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