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Ideas & Debate

Deepen telcos infrastructure sharing to boost competition

There is also a strong case for regulatory
There is also a strong case for regulatory intervention in retail market. FILE PHOTO | NMG 

Sometime in August 2018, the Competition Authority of Kenya (CAK) issued an advisory memorandum to Parliament’s Committee on Communication, Information and Innovation on the state of competition in Kenya’s telecommunication sector. In the memo, the CAK raised three fundamental issues in the sector.

First, they hold the view that the dominant player, Safaricom, does not hold significant market power in the voice, mobile data and mobile money core markets, for the primary reason that it has over time been losing market share in those segments. Consequently, it has advised against ex-ante regulations in the sector. Generally, ex-ante is an action aimed at forestalling the occurrence of an event in the future.

In telecommunications, ex-ante regulations are imposed to prevent or remedy entrenchment or abuse of dominance and create a level playing field. The converse is ex-post regulations (or competition laws), which are generally aimed at correcting market infractions, which have already occurred.

According to the CAK, because the dominant player has been losing share in the core markets, there is some level of market dynamism and the market is becoming less concentrated. Consequently, the sector’s primary regulator, the Communications Authority, only needs to watch out for infractions. Well, the jury is still out on this call.

Secondly, it advises on the need to lower switching costs among the networks. Indeed, switching costs between the networks, both monetary and non-monetary, are steep. For instance, if a consumer wishes to switch providers via porting, they must incur a cost as well as wait for more than 24 hours of execution. Additionally, operators offer huge discount sizes to keep subscribers locked. For instance, on-net promotions that award subscribers with bonus airtime which they can only use within the network.

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In my view, the regulator should not be approving anymore on-net discount promotions as part of efforts to lower switching costs. In fact, there has even been calls from some quarters for the mobile termination rates (MTRs) to be dropped to zero to douse off-net and on-net price differentials. MTRs, simply put, are charges that mobile operators levy on each other for termination of each other’s call(s).

Broadly, empirical results have demonstrated that reducing consumer switching costs will benefit small operators and increase competition. However, I must give credit to the operators for implementing mobile wallet-to-wallet interoperability, but a lot more still needs to be done on that front. Finally, it puts out a case for the deepening of infrastructure sharing. There are two ways to deepen infrastructure sharing: the first is mobile money agent interoperability. It is not just enough to make wallets interoperable. Can they also go ahead and enable a consumer to withdraw money from any agent, whether Telkom, Safaricom or Airtel. And this is something they can easily implement.

This can be achieved through the leasing of excess spectrum capacity, a concept which is already in force in the market. But talking about spectrum, the CAK questioned current spectrum allocation criteria and called for a transparent and predictable allocation mechanism. They noted that the country lacks a market-oriented process for spectrum assignment, which could become a challenge in the current scenario where new available spectrum is assigned.

In summary, inasmuch as the telecommunications market is beginning to exhibit some dynamism, there is a strong case to deepen infrastructure sharing among operators. There is also a strong case for continued regulatory intervention in the retail market to bring down consumer switching costs.

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