Competitive telcos market good for user

The ongoing debate on the state of Kenya’s telecommunication industry is an opportunity for the country to consider how to maximise benefits from this rapidly growing mobile eco-system. The elephant in the room remains the existence of an operator with a large market share and power that has not been declared dominant.

Kenya’s telco industry has the highest market concentration in the world with one player controlling 95 per cent of the industry’s value and share. No country in the world allows such a structure. This is ultimately harmful to the economy in the long term, limiting competition and investments, putting us all at risk.

Locally, this situation is only comparable to the monopolies before liberalisation. We cannot therefore continue to claim that the telco industry is competitive. There is an urgent need for industry regulation.

The long awaited Telecommunication Competition Market Study, by Analysys Mason, commissioned by the Communications Authority (CA) was finally released six months ago. The report provides clear remedies to address the imbalance of the telecom market in line with international practice.

The main objective of regulatory intervention is not to punish the big player in a market but is essentially as a consumer protection tool. What regulation does is to foster sustainable competition and to enable all telcos to deliver more choice to customers.

Indeed, the benefits enjoyed by Kenyan consumers today are the results of a time when competition was healthy; something that cannot emerge from the current market structure.

The move from per-minute billing to per-second billing, for instance, was a result of operators trying to outdo each other. To have the current set of players in the market accomplish such a state of competition today would not be possible. This is why a market regulator’s responsibility never stops. It is the continued review of checks and balances that keep the level of competition and market scales in check.

This is especially critical with regard to the ICT sector, where innovation requires competition. Innovation, in turn, creates job opportunities and platforms for doing business. The telco consumer also benefits from this desired level of competition, through better pricing and the introduction of a wider variety of products that consumers can choose from.

The argument that smaller players “avoid the hard work and investment costs required to roll out services to customers” is misleading. The current shareholders of Telkom would not have come into this market without the intention to invest. We have made massive investment and intend to continue doing so.

Telkom has, for instance, invested more than Sh8 billion in network expansion and infrastructure rollout in the past two years. This is in addition to strategic investment in three undersea cables connecting Kenya to Africa and the world; and more than 7,300 kilometres of fibre countrywide. All this is guided by the view that Kenya is an attractive investment destination. For us to continue on this path of innovation, there remains urgent need to implement regulation.

With good regulation, robust and consistent competition will thrive, spurring innovation and pulling down prices of mobile services. This is good for the consumer.

The need to implement market-wide regulations is urgent if we are to continue innovating for the sector and thus benefiting the consumer. Without proper regulation, certain innovations may not be scalable due to artificial barriers. A good illustration is the ongoing rollout of mobile money interoperability between M-Pesa and Airtel Money, with T-Kash joining soon.

Safaricom has imposed a long customer journey as well as the need for a SIM card change for cross-network mobile money transactions. This is further compounded by no effort being put in place to educate consumers on the immense benefits of conducting cross-network transactions. Such a trend discourages consumers from taking up products that will enable them to experience the benefits of an open system.

In the absence of effective competition, the dominant operator can influence market prices to the detriment of consumers. It is the role of the regulator to ensure the market remains sustainable for the good of the consumer. This is a mechanism to sharpen competition, grow the market and protect consumer interests. Without balance, it is the consumer who loses out.

An ideal market has several operators competing to satisfy the wants and needs of a significant number of consumers. No single operator should dictate how the market operates and consumers should not be ring-fenced by a single operator.

The regulator needs to urgently declare dominance and implement curative measures with the consumer as the biggest beneficiary.

This is how the rest of the world’s telco markets are regulated and are now thriving.

Like Safaricom, we are opposed to the CA's approach to regulating market dominance. Shelving market study reports without taking corrective measures has proven to be detrimental not only to the ICT sector but the Kenyan economy as a whole.