Competition Authority chief Francis Wang’ombe says regulation will help consumers to choose preferred providers. PHOTO | FILE
What you need to know:
The Competition Authority of Kenya (CAK) has engaged a consultant to study how Safaricom, Airtel and Orange charge banks and other providers to connect to their network through USSD technology.
The competition watchdog is seeking to regulate fees charged by telecommunication companies for cash transfers through mobile phones in a bid to make transaction costs more transparent.
Fees charged on mobile phone-based cash transfers such as those offered on KCB M-Pesa, Kopa Stima, M-Shwari and Elma by Craft Silicon vary widely, making it difficult for customers to choose a service provider.
The Competition Authority of Kenya (CAK) says it has engaged a consultant to study how Safaricom, Airtel and Orange charge banks and other providers to connect to their network through USSD technology.
“We want to establish why there is that big discrepancy in the rates and if there is a discriminatory pricing that leaves the small providers with no alternative,” said the CAK director general Francis Wang’ombe in an interview.
Big banks and other service providers that have a large customer base generally have an upper hand when negotiating with the telcos compared to smaller companies which have weaker bargaining power.
“Ours is to come up with policy recommendations that will allow for transparent negotiations,” he said.
The consultant is also expected to recommend a price cap, similar to the Mobile Termination Rates (MTR) between rival telcos introduced in 2010.
The MTR saw tariffs on calls made between rival companies fall from a high of Sh12 per minute to the current average of four shillings. Tariffs for calls made within the same network dropped from Sh7 per minute to three shillings.
The Unstructured Supplementary Service Data (USSD) technology that CAK is seeking to regulate is used by mobile phone companies for pre-paid callback service, mobile-money services and location-based content services.
The technology does not rely on Internet connection, hence the high interest it is attracting among financial institutions to reach the unbanked.
“Harmonisation will introduce predictability and uniformity across the rates that mobile operators charge, which would be beneficial to individuals and businesses that are seeking to use USSD services,” said Safaricom director for corporate affairs Steve Chege.
Safaricom charges an average of Sh3 to banks and other firms that seek the USSD services, he added, but the companies then determine their markups to get the total costs levied on customers.
Mr Wang’ombe said that consumers need to know the charges to make informed decisions.
A recent study revealed that mobile operators charge between one and ten shillings as the interconnection rates to banks and other providers. Banks are capitalising on mobile money transfer services to deepen financial inclusion.
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