Implement dominance report, departing CA boss now urges

Outgoing Communication Authority of Kenya Director General Francis Wangusi.
Kenya’s biggest telco Safaricom last month proposed the Government conduct another dominance study into competition in the telecommunications sector.

This has rekindled the long-standing debate on the competitive landscape of Kenya’s lucrative ICT industry. 

According to Safaricom, the evolution of the sector between 2016, when consultants Analysys Mason conducted the study, and now have made it necessary to conduct a new study.

Some of the developments include Airtel gaining more than two million new subscribers over the past two years, Jamii Telecom’s entry into the market and the proposed merger between Telkom and Airtel.

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“We do not expect that the study will cure the issues that existed two or three years ago because that information is not current and therefore not effective,” said Safaricom Chief Corporate Affairs Officer Stephen Chege.

“The right thing to do would be to start a new process again because we have had changes in the market such as the proposed merger.”

Market leader

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Telkom Kenya Managing Director Mugo Kibati has, however, scoffed at Safaricom’s claim and instead accused the market leader of stymieing efforts to establish a competitive playing field in the telecommunications sector.

Former Communication Authority of Kenya Director General Francis Wangusi while wading into the debate, called for the implementation of the Analysys Mason study findings and could be amended if the need arises. He, however, failed to do it during his term.

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“What we have in the current dominance report is still very relevant information,” said Wangusi in a recent interview with the Financial Standard.

“In fact, some of the proposals were made to cure the inconsistencies we have in the competitive landscape as it stands today.”  

He cited the pricing of unstructured supplementary service data (USSD) on all GSM mobile phones to allow handsets to establish connections with remote servers to exchange messages.

USSDs underlie numerous SMS applications, including prepaid balance queries, text-based web browsing and crucially for Kenya’s telecommunications sector, mobile money transfers.

According to Mr Wangusi, the pricing of USSD services in the country’s telecoms market is haphazard and favours large players over smaller ones and new market entrants.

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According to Analysys Mason’s study, each mobile network operator in the country holds a monopoly of providing and pricing USSD services within its own network.

“Because of this, mobile operators have to negotiate wholesale agreements that could be skewed in favour of large players. The report describes how competition law could be used to address the failures identified in the market for USSD,” explained the report in part.

“This would need to be based on a statutory investigation into abuse of dominance in USSD pricing and related practices in the mobile financial sector.”

According to the Analysys Mason study, regulatory intervention could be a simpler method of addressing market failure in the USSD market.

Bigger players

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This was the same recommendation given for regulation in the call termination market that is also skewed in favour of bigger players, a fact Telkom Kenya boss affirmed.

“The mobile termination rates are prohibitive for the smaller player but very minimal to the dominant player who controls a larger share of revenues in this market,” said Kibati last week.

“But for us who control a combined 10 per cent of the market, the mobile termination rates are exorbitant,” he said.

Mobile termination rates are the charges mobile network operators levy each other to allow the respective subscribers make phone calls across networks.

Mobile termination rates were the basis of the first and most significant price wars experienced in Kenya’s telecommunications sector when former President Mwai Kibaki in 2010 directed the then-Communications Commission of Kenya to slash the rates by half.

According to Mr Wangusi, there is a case to be made for the rates to go even lower than the current Sh0.99.

“One of the achievements I believe I realised in my time in office is moving the mobile interconnection rate from Sh8 to Sh0.99,” he said.

“Because of this, Kenya today has one of the cheapest communication costs and the question now is, should we bring them down to zero so each network operator manages their own traffic?”

According to Mr Wangusi, the dominance report which he failed to push through should be implemented despite the dynamics in the sector.

He reckons that the regulator and service providers could work together in filling the gaps along the way.

“Otherwise, we will be carrying out studies endlessly and never implement anything because by the time the study is complete it is outdated,” he said.

Aside from the regulation of telecommunication service providers and broadcasters, Wangusi rooted for regulation for over the top service providers such as Facebook, Google, and Netflix. 

“Over the top service providers are eating into the media space of our service providers without contributing in any way towards the government’s revenue basked,” explained Wangusi.

“At the same time, most of the OTTs are not regulated and can be avenues for the spreading of hate speech and disinformation. Because of this, we wanted to create a regulatory framework that ensures the content is not against the cultural interest of the Kenyan people.”   

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SafaricomICTTelkomAirtelFrancis Wangusi