Regulator struggles to catch up with disruptive third-party apps

Regulators will always fall behind innovations by industry, goes one technology cliché.

The reverse is where the regulators move ahead of the industry.

This has been frowned upon as a sure way to kill innovation and possibly end up with a stagnant industry struggling to keep abreast with the rest of the world while stuck with obsolete technology.

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The local industry has had a predictable path even as some innovations stayed ahead of regulation.

There has never been a major cause for alarm. But as third-party apps such as Whatsapp, messenger, and Skype disrupt the telecommunications sector, Kenyan regulators face policy dilemma on how to ensure a fair playing field between traditional service providers and the new entrants.

The Communications Authority (CA), formally Communications Commission of Kenya was carved out of the Kenya Post and Telecommunications, KPTC almost 20 years ago.

The split is responsible for creating Kenya’s leading telecommunications services provider Safaricom which later listed on the Nairobi Securities Exchange in 2006 - ushering in an age of private sector-led approach to the crucial telecoms sector.

Mobile money

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Since then, Safaricom has ventured into mobile money services, healthcare, home entertainment, health insurance, and agriculture among other areas.

However, the regulatory authority has remained relatively the same even as numerous startups and global tech giants made an entry to the market with a wide array of offerings for consumers that transcend the traditional gamut of products and services.

The CA was formed to police the sector. This challenge came to the fore recently when the CA slapped Safaricom with a Sh490 million fine for failing to allow calls from smaller firms – Elige Communications Ltd and Geonet Communications – to terminate on its network.

This meant that subscribers from the two firms could not call Safaricom’s customers, against CA’s licensing conditions.

According to the CA, Safaricom erred in blocking local connections for the two operators that run international voice services over the Internet.

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“The authority considers this an act of blatant disregard of not only other licencees’ rights but also the authority’s directives and in contravention of license conditions,” the CA said in the letter dated August 1.

While the regulator appeared decisive on the move, especially the hefty fine, it is now having second thoughts about the issue. It appears indecisive in handling the case of the two providers that are licensed as Voice Over Internet Protocol firms.

The subscribers of the two operators do not have SIM cards and instead require subscribers to download mobile applications that they use to make calls and access other services.

This would be the same with services offered by Whatsapp and Viber but which are regulated to an extent in other jurisdictions.

In the case of Kenya, the regulations are limited to operators delivering such services using SIM cards.

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Mr Wangusi said CA would temporarily suspend the services of Geonet and Elige Communications as it evaluates how their ‘SIM card-less’ operations fit into the legal framework.

“In so far as those that are using apps to get subscribers, we are looking at that. We are looking at whether or not, at this point in time, we will be able to allow them to continue with their services when they cannot be able to meet the requirements of the SIM card registration,” said Wangusi in an interview last week.

“We have asked them to bring us the names of their agents, the number of subscribers they have acquired on their networks and a host of other requirements that will enable us to make some decisions.”

“In the meantime, we will write to them and ask them to suspend their services until such a time that we are quite okay with that system which they are using.”

National security

He, however, noted the challenge that CA was going through was the oversight role that requires it to safeguard consumers as well as national security, while at the same time trying not to be the party popper that kills innovation.

“Of course we cannot do away with technology but we also have to ensure that it is secure and must have rules around it to protect consumers of the service,” said Wangusi.

CA is not clear as to whether the fine on Safaricom still stands.

Safaricom, however, contested the fine in court, denying the claims of violating the licence terms, and blocking illegal calls that were terminating on its network as local calls but were, in reality, international calls.

Instead, the telco said the two operators – Geonet and Elige Communications – were running services that could facilitate questionable operations like terrorism and money-laundering that the CA was unable to keep tabs of.

It also said it was blocking calls of companies terminating international calls

Safaricom said its concerns were on the background of fraud that its customers have been exposed to, whereby they have received missed calls from international numbers and on returning them resulted in their airtime accounts being drained as the calls are diverted to premium services.

Communications AuthorityNairobi Securities ExchangeSafaricom