CA seeks powers to reduce Safaricom’s market share

The telecoms regulator is seeking fresh legal muscle to investigate abuse of dominance in the telecommunications and broadcasting market.

The proposed set of 11 regulations meant to come into force by mid-June, include a Fair Competition and Equality of Treatment clause that empowers the Communications Authority of Kenya (CA) to automatically declare any telecommunication firm with a market share of more than 50 per cent as dominant.

Under the proposed broadcasting rules, pay television service providers like MultiChoice — owners of DStv — may be compelled to resell exclusive premium content such as the English Premium League to rivals.

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Previously, regulations in the telecommunication sector fixed the threshold for dominance at 25 per cent of the gross turnover of the entire telecoms market.

The Kenya Information and Communication (Amendment) Bill 2013 pushed the threshold for dominance to 50 per cent of the relevant gross market, putting it at par with the CA’s threshold.

Francis Wangusi, the CA director general, said the previous law had made it impossible for the regulator to declare any operator dominant or punish abuse of market dominance.

“We have deleted Section 3A, in the previous law that demanded that before we declared an operator dominant, we must prove that it was actually abusing its dominance. This has in the past four years made it difficult for us to punish those abusing their dominance,” Mr Wangusi said, in apparent reference to past unsuccessful attempts by Safaricom’s rivals to have the giant telecoms operator declared dominant.

The move is also in line with the quest to align the existing law to the Kenya Communication Amendment Act 2013 and the Constitution.

If gazetted, the proposed regulations that are now subject to public input will require an operator who has been declared dominant to seek the CA’s authority before increasing or reducing tariffs. The current law only requires such authorisation for proposed tariffs increment.

Broadcasters and telecommunication firms will however not be required to file quarterly returns under the proposed rules. The reports will be submitted annually, offering reprieve to smaller operators who do not the capacity to compute such data every three months.

Current regulations also require all licensees to run separate accounts for each segment of their business — a rule that will now only apply to players who have been declared dominant.

The rules come in the wake of a December 23, 2014 letter that Information secretary Fred Matiang’i wrote to Mr Wangusi demanding a brief on what the watchdog was doing in preparation to declare Safaricom a dominant player.

“The Kenya Information and Communications Act Section 84W gives the Communications Authority of Kenya powers to declare a service provider dominant if their market share is at least 50 per cent of the relevant gross market segment,” Dr Matiang’i said.

“This is, therefore, to request you to provide information on the exercise of your powers, as provided for in the Act, to address the issue of dominance in the telecommunications sub-sector. I look forward to your prompt advice on this matter.”

The CA, which is the sector regulator (telecommunication and broadcasting) also announced that it is working with the Competition Authority of Kenya (CAK) on a memorandum of understanding on joint future operations.

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John Omo, the CA’s secretary, said the absence of an MoU between the two regulators, had provided an opportunity for providers to seek redress from a regulator they deemed won’t make a hard ruling on them.

“From our observation, operators usually ran to the CA or CAK depending on the nature of the case with the hope that the rulings will favour them. These are some of the issues we need to improve on and ensure better competition and for the good of the public,” he said.

Under the proposed regulations, any operator found to have abused its dominance or engaged in anti-competitive conduct will be liable to a fine not exceeding the equivalent of 10 per cent of its gross turnover in the preceding year, for each financial year that the breach persists.

The new law provides for the threshold be pegged on control of 50 per cent of the relevant gross market, meaning an operator may be declared dominant if it controls 50 per cent of revenue in specific segments such as voice (either mobile or fixed), data or mobile money transfer.

On Tuesday, Safaricom chief executive Bob Collymore said the proposed laws are still under public participation and Safaricom was ready to make an input.

He, however, reckoned it was not right for the regulator to come up with regulations that aim to punish providers simply because they were market leaders.

“It is unfair to punish someone just because they have a high market share. A high market share does not mean abuse of dominance, but rather it is a process of sound business management and independent customers’ choices,” Mr Collymore said.