Are telco feuds caused by unwilling regulator?

The expansion of the digital economy has contributed to economic growth in recent years and has transformed the Kenyan society as a whole.

It has spurred the economy by offering services through online platforms in the provision of government services, business and e-commerce, research and transfer of knowledge, among others.

The ICT output according to the 2018 Economic Survey increased by 10.9 per cent to Sh345.1 billion in 2017.

Planet mobile

In Kenya, just like other emerging economies, the mobile phone has played a pivotal role in economic transformation from a low-income nation into a middle lower economy.

In the next phase of growth, the country will need a more open and competitive telecommunication sector that responds well to our new, knowledge-based economy.

According to a 2017 telecommunication competition market study report commissioned by the Communications Authority, it concludes that the mobile communications and mobile money markets are heavily controlled by one player due to its very high market share of over 80 per cent in both instances. The major player controls more than half of the services that are rendered in the retail mobile communications market in Kenya.

Around 95 per cent of Safaricom’s voice traffic is on-net, while the other operators have 60–80 per cent of voice traffic terminate on Safaricom’s network. This scenario is as partly a result of competition laws failing to adapt to changes in technology and in the economy. However, the situation was mainly occasioned by the delay by the CA in the prohibition of on-net/off-net price differentials.

Delicate balance

The regulatory bodies need to make a delicate balance to tilt this incongruity in the telecommunication sector. We must however ensure we don’t have too much government interference thereby frustrating innovation and discourage efficient practices to the detriment of consumers. We must also avoid a totally hands-off approach that could lead to high prices and stifling new technologies to the detriment of consumers.

To strike this balance, the regulator should not be in the business of picking winners or protecting smaller players. In short, we need to have industry regulations protect competition, not individual competitors.

The CA & the CAK must constantly study the dynamics of our market and employ new dynamics into our enforcement decisions. It is in the best interest of the nation to encourage and protect the competitive process for the benefit of the consumer.

Competition law requires government intervention in the workings of the market in order to ensure that the activities of market participants do not undermine or distort the competitive process.

Fundamental questions

The key fundamental questions that we must ask ourselves is: does the firm in a dominant position have the ability to act to a significant extent independently of its competitors and ultimately of its consumers? If the answer is yes, then the consumers’ right is at risk.

The cost of establishing a new telecommunication firm is enormous and often a new entrant may not be willing to invest in a market where one player has a tight unchallengeable grasp on the market and the relevant regulators are either restrained or unwilling to act.

This means that if this market failure is not addressed, there is a risk of the sector resulting in a monopoly that will dictate the market conditions. Therefore, there will be little incentive to innovate or offer consumers the best value for money, and anything will be thrown their way.

Competition advocacy is especially crucial in protecting the consumer from a monopolistic market. Often, incumbent providers, are well organized and have the power to lobby Governments for measures restricting market entry and competition, which may adversely affect consumers.

Acknowledging that consumers cannot easily organize to make their voices heard, the Communication and Competition Authorities can amplify the voices of consumers and advocate for pro-competitive policies that consider consumers’ interests.

The ultimate goal of both competition and consumer policies is to enhance consumer well-being. Both policies of which are directed at ensuring that markets function effectively and at correcting market failures.

Mr Barasa is communication consultant and policy development scholar