The Consumer is the greatest beneficiary of anti-dominance action

By ALDO MAREUSE

The ongoing debate on the state of Kenya’s telecommunication industry is an opportunity for the country to consider how to maximize benefits from this rapidly growing mobile eco-system. The elephant in the room remains the existence of an operator with a large market share and power that has not been declared dominant.   

Kenya’s Telco industry has the highest market concentration in the world with one player controlling 95% of the industry’s value and share. No country in the world allows for such an industry structure. This is ultimately very harmful to the economy in the long term, limiting competition and investments, putting us all at risk. Locally, this situation is only comparable to the monopolies before liberalization. We cannot, therefore, continue to claim that the Telco industry is competitive. There is an urgent need for industry regulation.  

The long-awaited Telecommunication Competition Market Study, by Analysys Mason, commissioned by the industry regulator, the Communications Authority (CA) was finally released 6 months ago.

The report provides clear remedies, to address the imbalance of the telecom market, that is in line with international practice. The main objective of the regulatory intervention is not to punish the big player in a market, as Safaricom has argued, but is essential as a consumer protection tool. What regulation does is to foster sustainable competition and to enable all telcos to deliver more choice to customers.

Indeed, the benefits enjoyed by Kenyan consumers today, are the results of a time when the competition was healthy in this market; something that could not emerge from the current market structure. The move from per-minute billing to per-second billing, for instance, was a result of operators then trying to outdo each other. To have the current set of players in the market accomplish such a state of competition today would not be possible.

This is why a market regulator’s responsibility never stops. It is the continued review of checks and balances that keep the level of competition and market scales in check. This is especially critical with regard to the ICT sector, where innovation requires competition. Innovation, in turn, creates job opportunities and platforms for doing business. The Telco consumer also benefits from this desired level of competition, through better pricing and the introduction of a wider variety of products that consumers can choose from.

The argument that smaller players “avoid the hard work and investment costs required to roll out services to customers” is misleading. The current shareholders of Telkom would not have come into this market without the intention to invest; no investor comes into a market with the intention of being a cabbage. We have made a massive investment and intend to continue doing so. Telkom has invested more than KSh8 Billion in network expansion and infrastructure rollout in the past two years; in addition to strategic investment in three undersea cables connecting Kenya to Africa and the world; and more than 7,300 kilometers of fiber countrywide. All this is guided by the view that Kenya is an attractive investment destination. Moreover, Telkom’s belief in its mission; connecting the people that make Kenya move, has seen it heavily invest in market research to appreciate consumer trends and dynamics, to enable us to keep our primary stakeholder – the consumer – at the center.

Telkom continues to build a strong track record of investment and innovation. Recently, we also announced a partnership with Loon Inc., a sister company of Google, to deliver an innovative new 4G/LTE access network service, to rural and under-served areas with lower populations, using high altitude helium balloons operating in and around 50,000 feet above sea level. This will be Loon’s first commercial service in the world. We are also optimizing our current network to provide better service quality to our customers. For us to continue on this path of innovation, there remains an urgent need to implement the regulation, if we are to encourage innovation for the sector that will be of benefit to the consumer.    

It’s been 14 months since the launch of our consumer-facing brand, Telkom. Since then, we have introduced products and solutions that speak to our target customers’ needs. We launched the Amkia bundles that allowed our customers to enjoy 50MB of free Data, from 6:00 am to 8:00 am daily and also pioneered products such as Free WhatsApp and 4G for Free. All these and other products have been in response to the market’s need for more competitive products that would complement the customer’s usage and experience. We have since seen other market players adopt variations of these propositions. This confirms the impact that our brand and products are having on the market. In essence, with good regulation, robust and consistent competition will thrive, spurring innovation, leading to prices of mobile services coming down in this market. This is good for the consumer.

The need to implement market-wide regulations is urgent if we are to continue innovating for the sector and thus benefitting the consumer. Without proper regulation, certain innovations that aim to benefit the consumer may not be scalable due to artificially erected barriers. A good illustration is the ongoing rollout of mobile money interoperability between M-PESA and Airtel Money, with T-Kash joining soon. Safaricom has imposed a long customer journey as well as the need for a SIM card change for cross-network mobile money transactions thereby frustrating the consumer-focused intervention. This is further compounded by no effort being put to educate consumers on the immense benefits of conducting cross-network transactions. Such a trend discourages consumers from taking up products that will enable them to experience the benefits of an open system.         

In the absence of effective competition, the dominant operator can influence market prices to the detriment of consumers. It is the role of the regulator to ensure the market remains sustainable for the good of the consumer. This is not punishment as it has been portrayed, but a mechanism to sharpen competition, grow the market and protect consumer interests. Without balance, it is the consumer who loses out.   

An ideal market has several operators competing to satisfy the wants and needs of a significant number of consumers. No single operator should dictate how the market operates and consumers should not be ring-fenced by a single operator. This is how the rest of the world’s Telco markets are regulated and are now thriving.  

Like Safaricom, we are opposed to the CA’s approach to regulating market dominance. Shelving market study reports that clearly identify Safaricom as dominant, without taking corrective measures has proven to be detrimental not only to the ICT sector but the Kenyan economy as a whole. The regulator needs to urgently declare dominance and implement measures with consumers as the biggest beneficiary.

The writer is the CEO of Telkom