The politics of mobile termination rates reduction in Kenya

TELECOMS

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Image: Alex Gakuru. By BiztechAfrica
Alex Gakuru

By Alex Gakuru

The topic of mobile termination rates is a hot one in the telecom sector. Can you imagine what a telecom company would do if it realised that the implementation of a section of Kenya’s two year old Constitution hurts its private interest that it has enjoyed over a decade? Would it be surprising if it successfully lobbied the Commission for the Implementation of the Constitution to suspend such a section on claims of extreme adversities?

One of the telecos in Kenya approached the Commission and it grudgingly agreed to postpone the implementation for a defined time, if just to eliminate all doubts on their legal mandate. The time window expired and there were calls for a complete rewrite - never mind how long it took to get a new Constitution.

In 2006, the Communications Commission of Kenya (CCK) announced a policy resolve to shift from 'perception' to data-based telecommunications regulation. It explained the need to make rulings grounded on factual data. On the CCK website is post dated 13 April, 2006 titled: 'Commissions telecommunications network cost study'.

In six months CCK tasked analyst McCarthy Tétrault to specifically seek input from stakeholders on views on expected future development of the Kenyan telecommunications market provision of data for the market model, cost model and development of price controls. But the firm could not deliver the results in six months; an interconnection dispute between Safaricom and Telkom Kenya poured ice to their work.

The assignment was concluded on 12 January, 2007 with a presentation to telecommunications stakeholders that included a 52-page summary of three study reports: Cost model guidelines, interconnection technical guidelines, and pricing guidelines. In total, 135 pages of rich regulatory content and wherein recommended to CCK the gradual phase-out of Termination Rates (or “MTR”).

First phase of MTR

CCK implemented the first phase of MTR reduction to the delight of consumers. Online article, 'Kenya Telecoms Regulator Slashes Mobile-Phone Interconnection Fee by 50%' by Bloomberg reported. “The rate mobile companies charge each other for connecting calls across networks was reduced to KSh 2.21 (3 cents) a minute from KSh 4.42 effective immediately, Communications Commission of Kenya Director-General Charles Njoroge told reporters in Nairobi, the capital, today.

The amount will be reduced annually until it reaches 0.99 shillings in 2013, which equals the cost incurred by operators to transmit cross-network traffic, he said, citing the findings of a market study commissioned by the regulator this year. The benefit must be passed onto the consumer in terms of lower prices,” Njoroge said.

The then CCK Director General said the phenomenon is a common practice in telecommunications markets where operators with large subscriber bases price their off-network services onerously in order to discourage their subscribers from calling other networks.

Immediately after, Zain Kenya (now Airtel) reduced its call charges by half to KSh 3 per minute, the lowest in the country.

Phase II of MTR reduction was to be effected in 2011 year but lobbying led by Safaricom resulted in a temporary one year suspension. Now that the suspension has ended, there are new calls for abolishment of indisputably working consumer protection. The firm regulatory environment has resulted in Safaricom losing its choking grip on consumers. It latest moves are seen as desperate attempts to reclaim its grip on the mobile market.

The MTR issue may appear as an isolated dominant operator's market control strategy but it is a tip of the iceberg on the dangers of converged ICT-telecommunications, media and advertising consolidation. Understandably, traditional 'silo' lenses viewpoint would dictate the three are analysed separately. But in the convergence era, this viewpoint misses the point.

For example, look at the advertising industry and its cosy relationship with the media, in turn related to telecommunications and all three's symbiotic billions of shillings relationship. In Kenya, there are parallel consolidation moves by the advertising industry, locking out competition leaving a club of self selected few advertising club members dominating the market. 

Constructing New Monopolies?

On May 1 there was an article in the Financial Standard titled: 'APA working on proposals that could lock out small agencies' by Kenneth Kwama. The writer cited that Kenya’s advertising industry is amongst the most vibrant in the continent with revenues of KSh65 billion compared to KSh49 billion in 2010.

“The quest by advertisers’ umbrella body — Association of Practitioners in Advertising (APA) — to control sourcing of clients and regulate tenders in the industry could give big firms the power to squeeze smaller agencies and create a monopolistic regime. If the proposals being fronted by the APA sail through competition and regulatory authorities, advertising agencies pitching for clients in the country will look for clients through the professional body. Of the agencies that send in their bids for a job, only four will be shortlisted,” says the article.

In short, APA is seeks to monopolise advertising and determine what consumers will buy and how much they will pay.

Consumer rights as espoused on Article 46 of the Kenyan Constitution says consumers have the right to goods and services of reasonable quality; to the information necessary for them to gain full benefit from goods and services; to the protection of their health, safety, and economic interests... and Parliament shall enact legislation to provide for consumer protection and for fair, honest and decent advertising. Part III (Restrictive trade practices) Section 21 on Competition Act, 2010, Restrictive Agreements, Practices and Decisions prohibits, “Agreements between undertakings, decisions by associations of undertakings, decisions by undertakings or concerted practices by undertakings which have as their object or effect the prevention, distortion or lessening of competition in trade in any goods or services in Kenya, or a part of Kenya, are prohibited..”

APA officials are clearly conniving to violate the Constitution on their elaborately stated strategy to achieve the same.

Global outlook - telecommunications, media and advertising

While a great number of Kenyans remain in the “excitement” phase of modern Information and Communications Technologies (ICTs), rapid acquisitions mergers and consolidations in the communications industries are resulted in private monopolies whose shareholders only care as much as their Public Relations advisers insist they should, for media image purposes.

And acquisitions of media houses, a few advertising agencies and some film making here and there.

Should it be true, the Constitution of Kenya would be seriously threatened. We, The People, shall be squeezed into a tight corner.

Alex Gakuru is the Chairman of the ICT Consumers Association of Kenya. Email: [email protected]



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