Safaricom yet to get gist of dominance debate

Safaricom CEO Bob Collymore
Safaricom CEO Bob Collymore. FILE PHOTO | NMG 

Safaricom #ticker:SCOM made a presentation to Parliament’s committee on ICT, which is inquiring into legislative and regulatory gaps affecting competition in Kenya’s telecoms sector. Its chief executive Bob Collymore’s arguments as reproduced in the ‘Radar Screen’ segment of Business Daily on August 7, should not go unchallenged.

Mr Collymore said: “The Analysys Mason Report on Telecommunication Competition Market Study, the basis on which the Communications Authority (CA) seeks to declare Safaricom dominant in certain market segments, proposes a number of remedies or interventions, the import of which will punish Safaricom’s customers, stifle innovation, discourage investment and reward competitors who do not invest in their networks as they should”.

Declaring Safaricom dominant will punish Safaricom’s customers? How? Mr Collymore accused the CA of seeking to introduce retail price controls on Safaricom’s services, “effectively raising the applicable rates of Safaricom’s services, making them more expensive to the customers, and forcing migration to competitors.”

Yet such an outcome is precisely what the customers would love. That is what effective competition demands and I can bet that is precisely why the CA spent public money to get advice on how it is done elsewhere in the world.

Remember also that Safaricom cannot object to a formal, legal declaration of a simple fact on the ground, that they are dominant.

The argument that such would “punish Safaricom customers” is disingenuous in that they have argued the two ends of the same debate.

Retail price controls already exist. If they were honest, Safaricom would admit that they cannot wake up tomorrow morning and raise their current tariff rates without sanction from the CA.

A better understood and accepted example of retail price control is in the oil sector.

The Energy Regulatory Commission has a well discussed and understood formula which is applied to determine the maximum retail prices of oil products every month.

This became necessary after the oil industry consistently behaved like a cartel. Regulated retail oil prices has saved Kenyans a lot of grief.

And what about the claim that CA intends to reward Safaricom ‘competitors who do not invest in their networks as they should’?

This argument is intended to hide a nasty past. When they started, an M-Pesa agent and, by extension, the sub-agent small scale end retailer, were not allowed to deal with any other money transfer company or competitor on their premises.

This practice, although prohibited by law under the Competition Act, was strictly enforced by M-Pesa field officers.

This M-Pesa business model was one of the strategies used to dominate the market. The model was also ring-fenced by a tariff structure that made it significantly more expensive for Safaricom subscribers to send money to customers on rival platforms. These restrictive business practices were entirely illegal and became serious and blatant abuse of dominance by Safaricom.

What the law must now do is merely cautionary against further abuse of market power and Parliament’s committee on ICT must be guided by this vital caution.

The fundamental reality on the ground is that, nearly the entire infrastructure in the telecommunication sector is owned by Safaricom and only a small fraction by others. This means that the financial barrier to entering the sector by new players is insurmountable. That is untenable and unsustainable.

We insist that Safaricom Limited must be split. A new separate legal Network Facilities Licensee, co-owned by Safaricom and others in proportion to their existing infrastructure investments is imperative. Kenyans should also be able to buy shares of such entity through the stock exchange.

Whereas it is true that Safaricom has invested heavily in network infrastructure, it is also true that they have used restrictive business practices to acquire their dominant position.

Therefore, Safaricom has no moral authority to deny Kenyans the legitimate chance to establish a more equitable, more sustainable and secure market space in the telecoms sector.