Regulator in new push to rein in tech companies

Last month, the Kenyan government lost a landmark case against technology giant Google.

The outcome of the case proved a classic illustration of the regulatory challenges facing policymakers in handling data security and privacy today.

In the case, the government had sued Google’s Kenyan subsidiary after a hacker breached the systems of the Kenya Revenue Authority (KRA).

The taxman wanted Google Kenya compelled to reveal the user behind a Gmail account allegedly involved in the attack.

KRA won the initial round, obtaining orders to have Google furnish Kenyan investigators with the data. Google appealed the decision and last month the high court made a decision that swung in the company’s favour, pivoting on a familiar technicality.

Google Kenya argued that the corporate entity, Google LLC (Limited Liability Company), is registered “under the laws of the United States of America and carried out business in and from the US with no branch or operations in Kenya.”

“Google LLC is the sole owner of the domain Gmail.com and administers the emails hosted on the said domain,” said Google Kenya in its submissions in part. The firm argued it has “no technical capacity to comply with the orders as it has no access to Google LLC servers, services or products.”

In essence, Google Kenya was telling KRA that to get the data, they would have to sue Google LLC in California under the respective regulatory and legal jurisdiction.  

Once again, Kenyan authorities were stumped. The case has cast the spotlight on the legal quagmire Kenyan regulators face in attempts to introduce oversight mechanisms on global technology service providers.

More than ninety per cent of Kenya’s 41 million mobile phone subscribers access the Internet through their mobile phones with one in every four of them estimated to have a smartphone.

In addition to procuring the devices to take them online, hundreds of thousands of Kenyans today rank the Internet as a necessary utility alongside electricity and water.

Industry regulator Communications Authority of Kenya (CA) indicates terrestrial wireless data subscriptions in the country spiked by 158 per cent between 2017 and 2018 while fixed fibre optic data subscribers grew 148 per cent over the same period of time.

These figures have placed Kenya among the most-digitally connected economies in Africa and vital market for global technology players, serving up both the hardware and software needs of millions of users everyday. In recent years, however, disquiet has steadily been growing over the pervasive reach platforms like Facebook, Google, YouTube and WhatsApp have in the market.

Local content

Mobile service providers have watched for years as messaging platforms, voice and video calling apps gradually carve out a chunk from their once core business as well as the revenue that comes with it.

Efforts to introduce regulation for over-the-top (OTT) service providers in Kenya have often been met with stiff resistance (and still largely do) from service providers and their users.

When Netflix announced Kenya as one of the countries it would expand its video streaming service, Kenya Film and Classification Board (KFCB) Chief Executive Ezekiel Mutua said the company would be subject to the local content regulatory framework.

Mr Mutua drew more ire from netizens when he proposed amendments to the Kenya’s Film and Stage Plays Act Cap 222 to regulate users self-publishing on sites like Facebook and YouTube.

Despite his vocal pronouncements on social media over the years, however, Mr Mutua has been unable to extend his regulatory reach to providers like Netflix and YouTube save for one or two take-down requests each year.

Today, the government is pushing for new legislation seeking to regulate both the content and revenue of internet companies like Google, Facebook and Netflix in a move that could have far-reaching implications to these firms and the millions of Kenyan users currently using their products.

This time, government regulators are leveraging pressure from their global counterparts and a growing number of conscientious internet users who partly blame social media companies for catalysing a shift towards right-wing ideology.  

“OTTs need to come under regulation because they are eating into the revenue of local operators and are not paying taxes,” explained CA Director-General Francis Wangusi.

The regulator enjoys the implicit support of the government currently seeking avenues to raise more revenue to finance the country’s public debt burden that crossed the Sh5trillion mark this year.

After new taxes on mobile airtime, internet data and digital transactions, the Treasury has little scope left in the lucrative ICT sector from which to draw more tax revenue.

Social media platforms are thus the next port of call and this has put the tech giants behind these platforms in the cross-hairs of the government.

Bigger share

“There is capital flight to different countries and as they (OTTs) continue to get a bigger share of the service, local services will start diminishing and the impact in terms of job losses, infrastructure roll-out and tax revenue will create new challenges for the Government,” explained Mr Wangusi.

CA has begun the process of identifying a consultant who will develop a regulatory framework appropriate and specific to the Kenyan market. The regulator said the study findings would advise the next course of action that could come as early as next year.

“We expect the consultant to complete his study four months after being contracted and implementation of the recommendations will possibly be done in the next financial year,” Mr Wangusi said.

He said the government is borrowing a leaf from regulatory approaches adopted by agencies in developed countries in the recent past.

After Facebook’s Cambridge Analytica scandal, where data from more than 50 million Facebook users’ was mined and used to create hyper-targeted campaign messages to manipulate voters, telecommunications regulators in Europe and the US have been calling for more regulation of global tech giants.

Last month, Britain’s chancellor of the Exchequer Philip Hammond announced the country is introducing a Digital Services Tax for companies like Facebook, Google, Amazon and Netflix that offer services and draw revenue from the UK consumers but do not pay the commensurate taxes.

Mr Wangusi said if other countries with more developed digital economies have seen the wisdom in introducing legislation, Kenya is on the right track.  

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