The dominance conversation: Why the Consumer Should be Centric to the Debate.

By Soko Directory Team / May 16, 2018


Competition is an activity involving two or more firms, in which each firm tries to get people to buy its own goods in preference to the other firms’ goods.

Dominance is where a firm is or has services and or goods that are more important, strong, or noticeable than anything else of the same type in a similar sector or industry.

These two words have been the denominator of any conversation in the telecommunications industry for the foreseeable past. No conversations have made sense unless you threw in either of these words.

I have read lots of opinions on the same. Most business shows have had analysts go ahead and explain what is happening. The two words have pitted several firms in the telecommunications industry against each other.

I have seen facts dismissed in plain sight of facts and the conversation has somehow lost its credibility and purpose and has digressed to emotive issues that are being pushed by those who are afraid to reason, have a dislike to reading wide on any subject matter and are at the mercy of politics hence their intentions questionable.

Analysys Mason was selected by the Communications Authority of Kenya (CA) through a competitive procurement process to provide consultancy services to undertake a telecommunication competition market study (contract CA/LS/RFP/071/004/2016).

The essence of this consultancy was to establish there is any firm in the telecommunications industry that has a dominant position and if and where necessary, what would be the recommendations.

My biggest issue and challenge to my reasoning and hindrance to my ability to have an honest, impartial conversation is what is the driving force behind this dominance talk. Is it political or is it pure business concerns or is it the concerns for the consumer.

I believe for me, my stand will always be at the behest of public interest. The growth of the telecommunications industry has seen a lot of changes in this country and courtesy of that, we are respected worldwide for our innovative moves and creative products and services.

Reports are complex and normally directed towards a particular audience. I would like to have a different opinion on this whole dominant talk and my aspect is that my focus is on the consumer. Who is complaining about the dominance issue, is it the consumer or the players in the telco sector? This clearly defines where the issues are coming from and how best to address them.

My reasons for focusing on the consumer is because the population is key and according to the report; the current population of Kenya is estimated at 47.3 million, which is similar to South Africa (55.0 million), Tanzania (55.2 million) and Uganda (41.5 million). The population of Kenya is considerably lower than that of Nigeria (187.0 million) and significantly higher than that of Ghana (27.5 million), Burundi (10.9 million) and Rwanda (11.9 million). The size of a country’s population is a relevant indicator because it might be reasonable to expect that countries with large populations can support more mobile operators than countries with small populations.

Do our population indices support the theory that we can support many telcos? Are the consumers happy with the services they are getting? Is there a consumer body that has supported the report or denounced it and given its views? Because for me, as a consumer, if the situation was ideal, I would focus on the quality and affordability of the services and the products offered.

Devoid of politics and business interest, the needs and desires of the consumer should be able to drive the conversation on how best the telco sector should grow and be regulated. In an ideal situation, I would love to be able to do the following on my mobile network;

  1. Send money to any network, from any agent without regard to what my mobile network is at costs that are similar across the board
  2. Be able to call any network with the airtime that I have not only on my on net calls but across the board
  3. Be able to text across any network without regard to any cost implications as they are the same across the board
  4. Be able to monitor the usage of my data bundles in a way that is similar across the board the networks. Where we have a system or framework that determines how bundles are spent either per second or per minute or per KES.
  5. Be able to receive incentives based on my usage of mobile money or airtime bundles.

For me, that would be ideal, especially in a retail market situation. If there was a standard rate that can define and determine the above, then the question would be, what the quality of the service that is available is. What is the availability of the same service across the country? What is its signal strength? What is the availability of customer care shops or offices across the country? These are the basic questions that an average consumer is asking. Anything else beyond here is not retail and is either corporate or wholesale aspects. Which in essence play a key role in defining how the markets should be and what should be acceptable.

The report gave the way forward on summarized competition issues and offered whole remedies as follows:

Towers.

Safaricom should be required to provide other Tier 1 mobile operators with access to its sites in 7 designated counties where there is the largest disparity between the number of Safaricom sites and the number of sites deployed by the other two Tier 1 mobile operators.

The price for site sharing at these sites should be based on the long-run average incremental cost (LRAIC) of providing these sites. Access should be provided on a non-discriminatory basis via a Reference Access Offer (RAO) detailing the commercial and technical terms that apply to regulated site sharing. The regulated prices should be available on all new site shares agreed in the next five years in the designated counties and the regulated price shall apply for a minimum of five years at each individual site. Where it is demonstrated that a site needs strengthening or other essential work to accommodate additional operators, the access seeker should be responsible for the associated capital expenditure.

Call and SMS termination on mobile networks.

Each mobile operator should continue to provide termination services on its network to any other network operator on a nondiscriminatory basis with rates set by the CA based on LRIC (for the avoidance of doubt, we are not proposing any immediate changes to the current mobile termination rates). Each operator should prepare an RAO detailing the commercial and technical terms that apply to call and SMS termination.

Call termination on fixed networks.

Each fixed operator should continue to provide termination services on its network to any other network operator on a non-discriminatory basis with rates set by the CA based on LRIC (for the avoidance of doubt, we are not proposing any immediate changes to the currently fixed termination). Each operator should prepare a Reference Interconnection Offer (RIO) detailing the commercial and technical terms that will apply to call termination by dominant operators. This is already provided for in the Interconnection and Provision of Fixed Links, Access and Facilities Regulations, 2010.2

USSD and STK access on mobile networks.

All licensed mobile operators should be required to provide USSD access on request to all licensed content service providers on a nondiscriminatory. Prices should be based on LRIC but, given the cost and time required to prepare a suitable cost model, if each operator were to agree voluntarily to a price below KES1 per session (or if charged per hop, a price reaching the equivalent result) then the CA should give due consideration to accepting this offer as a short-term alternative.

Each operator should prepare a RAO detailing the commercial and technical terms that apply to USSD access. STK access for third-party providers would be desirable in terms of ensuring a ‘level playing field’ for all market players but we propose that this more intrusive remedy should not be made mandatory at this stage since it could raise practical implementation difficulties.

My question is, do these remedies help the consumer enjoy better services? Do they ensure that we have better quality services? Do these remedies encourage more investment in the sector? Is it fair to any player?

Removing telecommunications politics from the fold and any other form of politics, I believe the report offers a good foundation to start a better and credible conversation on how best to make the telecommunications sector better.

I believe Safaricom has done a lot for itself and to have a credible conversation around the dominance issue, without looking like a witch-hunt, then the consumer needs to take center stage in the deliberations. Nothing more. Nothing less.

The issues of data usage. Data pricing. The issues of airtime pricing. Are of great concern and these should form the basis of any conversation, no matter how mundane they might be.



About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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