Debate on dominance should be about a sustainable telecoms market

The parliamentary committee on Communication, Information and Innovation recently conducted hearings into the contentious issue of dominance in Kenya’s telecommunications industry. Top on the committee’s agenda was finding ways to plug legislative and regulatory gaps affecting competition in the industry.

This issue of dominance arose from a competition study by the Communications Authority in 2016. The study raised several competition-related concerns including mobile money transfer fees, mobile call and SMS tariffs, and access to telecommunications infrastructure.

Notably, the committee was keen on addressing public concerns about alleged anti-competitive behavior in the market. The competition study found that Safaricom enjoys significant market power or dominance. It controls two thirds of the market for mobile communications and mobile money services.

The real numbers

According to the Communications Authority, as of March 2018, four out of five mobile money transactions in Kenya were conducted on Mpesa. Two out of three calls made and 95 per cent of short text messages originated from the Safaricom network. There were 20.5 million active Mesa subscribers. Lipa Na Mpesa, Safaricom’s mobile payment platform, handled 147.6 million transactions via 101,000 electronic tills.

The data underlines the systemic risk the dominant player poses to Kenya’s economy. What happen if, God forbid, it’s systems were all to crash? What would be the magnitude of financial exposure for individuals and businesses? Who would compensate Kenyans for the ensuing colossal economic loss?

These are the real questions we should be asking ourselves when debating dominance in the telecoms industry. It is time to seize the bull by the horns and decisively tackle the structural bottlenecks afflicting the telecommunications industry from a competition perspective. Regulatory measures to create a truly sustainable and competitive telecom market in Kenya are overdue.

The debate should not be reduced to who is “punishing” who for “being successful”. History teaches that even successful firms can suffer the innovators curse and fail. A good example is Kodak. The company invented the first digital camera but instead of marketing the new technology, held back for fear of hurting its then lucrative film business. In doing so, Kodak sealed its own fate. Had there been no competitors innovating in Kodak’s backyard, we would still be in the photo film age.

Strengthening competition in the telecommunications industry will help all players anticipate disruption and aggressively innovate to meet ever-evolving consumer needs. Healthy competition is what every player in the industry needs to survive.

Kodak example

Kodak is a good lesson for Kenya’s telco industry that healthy competition begets innovation required to expand and deepen the market and satisfy consumer needs. As a country, we pride ourselves in having some of the most innovative and disruptive mobile innovations in the world like Mpesa. But in the shifty world of technology, someone may come up with some even more disruptive platform hence the need to promote competition.

Opening the industry to innovation does not amount to hurting or destroying innovative businesses but preventing present and future anti-competitive behavior that may stifle “competition around innovation”. In short, tackling dominance should not be misconstrued as a frontal attack on any player in the market.

Having the biggest and most profitable telecommunications market in the region, is certainly something to boast of. But truth be told, we still have some way to go in addressing challenges to effective competition in the market. Tackling dominance should therefore be viewed as a positive step toward infusing competition in the telecoms industry thus creating a fertile environment for innovation that benefits the consumer.

The focus going forward should really be on nurturing a truly competitive and thus sustainable telecoms market. This will ensure large and small firms can compete effectively without any of them enjoying undue market advantage or some feeling that certain players are getting away with “regulatory murder”.

Mr Choto is a lawyer and public affairs specialist. [email protected]