Economists warn why you could pay more for mobile services

You could soon pay higher costs for mobile services if the Communications Authority of Kenya (CA) follows through with plans to introduce price controls in the sector, economists have warned.

The Institute of Economic Affairs (IEA) said yesterday the recommendations by UK-based consultancy firm Analysys Mason, especially on price controls in its study on market dominance laid the basis for tariff hikes.

"Price controls are not effective and inconsistent with 20 years of industry liberalisation and most national economic policy," said IEA Executive Director Kwame Owino during a media briefing on analysis of the CA report on competition in the telecommunications sector in the country in Nairobi.

"Reintroduction of price controls would be a major policy reversal.”

The study presented early this year by Analysys Mason concluded that Safaricom has dominant market share currently standing at 70 per cent and 80 per cent in the mobile communications and mobile money market respectively and called for regulatory interventions.

Among the recommendations was for Safaricom to share part of its tower infrastructure with other service providers for a period of five years at tariffs prescribed by CA. "Our analysis shows this dominance has been achieved because of the risk that firms have taken to invest in tower infrastructure," said Mr Owino.

"Firms have different appetites for investment and compelling one firm to share infrastructure they’ve invested in at fixed prices is not defensible on economic grounds."

The report had initially recommended Safaricom share its tower infrastructure with Airtel and Telkom in 14 counties where telecommunications infrastructure is lacking that were then halved to seven.

Forcing infrastructure sharing among providers has also been criticised as only useful in redistributing income among existing players but stopping short of bringing costs down or improving product experience for consumers.

The IEA boss further explained that some of the recommendations in the report could see the CA overreach its mandate as a regulator, stifling innovation and product differentiation among operators.

“There is no policy justification to restrict the freedom of firms to engage in lawful marketing in any format,” said Mr Owino.

“This is the most unreasonable proposal with no benefit to aid market competition but would harm consumers.”

Analysys Mason had recommended the CA enforce a policy to limit Safaricom from promotions and loyalty schemes that can be replicated by other operators.