Kenyan regulator acts on anticompetitive practices

The Communications Commission of Kenya has stirred up the country's telecom market by introducing a regulatory regime aimed at curbing anticompetitive behavior by the dominant service providers in the ICT sector.

The regulations are meant to level the playing field for smaller players, promote fair competition and equal treatment for players, and protect against abuse of market power.

Kenya has joined South Africa in attempting to deal with complaints of anticompetitive behavior by established players, especially in mobile services, which is the most developed ICT sector in the countries. Nigeria has also indicated that it is developing a price regulation regime. In the past, regulators were only involved in licensing.

"We are beginning to see in many African telecom markets the first signs of regulators beginning to flex their muscle, especially in dealing with dominant players around many issues including interconnection, quality of service, retail pricing as well as anticompetition practices," said Tinyiko Valoyi, CEO of Mavoni Telecoms, a company operating in several African markets.

The steps taken in Kenya, Nigeria and South Africa have been cited as beneficial to consumers given the high cost of communications and poor investment in network upgrades. Consumers seemed divided on the effect of the rules although there was agreement that something needs to be done to tame the price wars and poor services in the communications sector.

"The market should be subject to forces of demand and supply to create conducive conditions for it to thrive, and in extension to ensure its longevity; however, oligopolistic and monopolistic tendencies in the market ought to be constrained to cushion feeble players and potential new entrants from eventual or outright failure," said Paul Walela, a consumer commenting on an online forum debating the regulations.

The regulations in Kenya were published after weeks of complaints by Zain and Orange against the US$25 million price tag CCK had slapped on 3G spectrum. Only Safaricom has paid for a license, and is now saying that all providers should pay the full fee. Potential competitors insist the fee must be lowered because Safaricom has already taken a huge chunk of the 3G market and other providers are not likely to recoup the fee.

Although regulations are targeting the whole communications sector, Safaricom, the largest mobile services provider in Kenya with 80 percent of the 17 million subscribers, criticized the CCK, saying that the regulations are calculated to punish it for being the dominant player. Safaricom argued its case in an advert placed in local newspapers.

The following day, the other mobile service providers -- Zain, Orange and Yu -- placed an advert jointly praising the CCK for taking steps to level the playing field. The situation created an impression that the rules were specifically targeting Safaricom.

The CCK defended its position, saying that the regulations were not intended to work against Safaricom.

The regulations have stirred discussion in the communications sector over whether new rules should be put in place when a dominant player has abused its position, or whether regulations should act as a deterrent so that dominant players do not have an opportunity to abuse their positions in the first place.

"The developments we are seeing in Kenya, Nigeria and South Africa are the first signs of African regulators beginning to exercise their authority to the benefit of consumers; but we need to exercise caution not to go on a witch hunt against dominant operators simply because they are perceived to be abusing their position," Valoyi said.

The rules address the thorny issue of telecom interconnection pricing, which has posed a headache for ICASA, the regulator in South Africa. It has been argued that dominant players in the market set higher interconnection charges, which makes it harder for smaller players to make money.

"The Commission may request the dominant telecommunications service provider to prove that its interconnection charges are based on actual cost and, where necessary, request an adjustment of the charges or impose default interconnection charges in the event the proposed adjustment is not implemented by the dominant telecommunications service provider," the regulations reads in part.

The situation in Kenya has been complicated by the fact that it owns minority shares in both Safaricom and Orange (Telkom Kenya), which creates challenges in enforcing the regulations, given Safaricom's profits and the taxes it pays.

"I applaud the intent of creating a level playing field; however, I see no monetary 'teeth' or enforcement measures in the regulations," said Tim McGinnis, an independent Internet and telecom policy consultant.

Meanwhile, the number portability process has begun, allowing subscribers to move among providers without having to change phone numbers. This is expected to enable more competition. The contract to provide the technical underpinnings for number portability was awarded to Porting Access BV, based in Holland.