Economy
The country is targeting large telecom companies with new rules of dominance
Wednesday, April 19, 2023
Cabinet Secretary, Ministry of Information Communications and Digital Economy Eliud Awalu at a previous event on November 9, 2022. Photo | Lucy Wanjiru | NMG
The country will raise the threshold for telecom companies that will declare themselves dominant to more than half of the total turnover for the entire market, strengthening its focus on big tech companies.
A government-backed bill pushed for a maximum dominance of 25 per cent of the total relevant market, establishing it on par with that set by the Competition Authority of Kenya (CAK).
Conflicting provisions have made it difficult for the Communications of Kenya (CA) to declare control of any operator or to sanction abuses of market dominance.
The proposed law imposes heavy operational obligations on an operator whose dominance has been declared and imposes punitive penalties for abuse of dominance.
Analysts believe that the 25 percent threshold has caught many players, defeating the purpose of the law, which is to focus on dominant players.
said a source in CA.
Market leader Safaricom’s competitors pressured the government to declare the company a dominant telecoms operator to ensure competitors were not driven out of business.
Safaricom maintains that its success should not be penalized, arguing that it does not hinder competition.
At the end of December, the company accounted for 66 percent of SIM card subscriptions and 96.8 percent of mobile money, while Airtel followed with 26.3 percent and 3.1 percent, respectively.
“The authority should consider that the market share of the telecom service provider represents at least 50 percent of the total revenue for the entire telecommunications market,” reads the bill issued by Cabinet Secretary for Information Technology, Communications and Digital Economy Eliud Uwalo.
Current law requires declared telecom carriers to be in control of “the profile of tariffs, rates, terms and conditions of interconnection with CA” but this is set to be dropped if the bill is adopted into law.
Previous regulations required that an operator declared in control must obtain its tariffs approved by the telecom regulator prior to being launched on the market.
The regulations mean that the dominant operator can no longer adjust its tariffs up or down without obtaining approval from the CA.
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A telecom company declared a ‘dominant player’ by the regulator faces further stringent operating conditions in line with the Kenya Information and Communications (Fair Competition and Equal Treatment) Regulations, 2010.
The 2010 regulations state that a carrier will be considered dominant if, among other things, it has the ability to “materially” raise prices without suffering a corresponding loss of ordering service to other carriers or has the ability to erect or take advantage of barriers to market entry.
Thus, the regulations prevent dominant players from unilaterally imposing their tariffs or prices and must set prices through consultation with the regulator.
“The Authority may direct the dominant service provider to cease conduct in that market that has or may have the effect of significantly reducing competition in any telecommunications market or to implement appropriate remedies,” the regulations state.
The dominant player will also have to share its capital-intensive infrastructure such as transmission pillars.
Safaricom has protested such a move in the past, saying it only reaps the rewards of investing in a strong network and its competitors should not be allowed to be free-riders.
The regulations require the dominant telecom operator to “provide interconnection facilities to other telecom licensees” of the same quality that it provides for its own services or connected companies.
The dominant carrier is also required to “provide access to standards and technical specifications” for its telecommunications network to which other carriers will be interconnected.
Airtel cited in 2021 eight African countries where operators are reported to have market dominance with thresholds lower than Safaricom’s dominance in segments such as voice, messaging and mobile money.
These include Burkina Faso which declared Airtel and Telmob dominant with 39.24 percent and 38.36 percent respectively of the market.
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Congo Brazzaville declared MTN and Airtel dominance with 40 percent and 38 percent market share while in Nigeria, MTN declared dominant with 44 percent market share.
Airtel also argued that declaring Safaricom a dominant player is the first step to addressing the perceived uneven operating environment.
The second largest carrier has in the past blamed CA for what it sees as the skewed allocation of mobile spectrum in favor of Safaricom and the failure to reduce the fees that mobile operators charge each other for connecting calls.
The telecommunications industry in Kenya is currently governed by the Kenya Information and Communications Act 1998, which has seen minor changes though major changes such as the deployment of mobile money and home internet.
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