State takes aim at big telcos with fresh dominance rules

Cabinet Secretary Ministry of Information Communications and The Digital Economy Eliud Owalo at a past event on November 9, 2022. PHOTO | LUCY WANJIRU | NMG

The State will raise the threshold for telecoms firms to be declared dominant to more than half of the gross turnover of the entire market, strengthening its focus on big tech companies.

A government-backed Bill has pushed the limit for dominance from 25 percent of the relevant gross market, fixing it at par with that set by the Competition Authority of Kenya (CAK).

The conflicting provisions had made it difficult for the Communications Authority of Kenya (CA) to declare any operator dominant or punish the abuse of market dominance.

The proposed law puts heavy operational obligations on an operator who has been declared dominant and imposes punitive penalties for abuse of dominance.

Analysts reckon the 25 percent threshold had captured many operators, defeating the purpose of the law, which is to focus on dominant players.

“At 25 percent we would have captured a number of operators and the net effect is we would have lost focus on the dominant players that the law intended to regulate,” said a source at the CA.

Market leader Safaricom’s rivals have pushed for the government to declare the firm a dominant telecoms operator to ensure the competitors were not pushed out of business.

Safaricom maintains that its success should not be punished, arguing that it does not hinder competition.

The firm was at the end of December commanding 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 shall consider —the market shares of the telecommunications service provider being at least 50 percent of the total revenue of the entire telecommunications market,” says the Bill by ICT and Digital Economy Cabinet Secretary Eliud Owalo.

The current law requires telcos declared dominant to “file 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 have required that the operator who has been declared dominant must get its tariffs approved by the communications regulator before they are launched in the market.

The regulations meant that a dominant operator was no longer able to adjust its tariffs upwards or downwards without getting the CA’s approval.

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A telco declared a “dominant player” by the regulator faces other stringent operating conditions in line with the Kenya Information and Communications (Fair Competition and Equality of Treatment) Regulations, 2010.

The 2010 regulations state that a telco will be deemed dominant if, among other things, it has the ability to “materially” raise prices without suffering a corresponding loss in service demand to other telcos or has the ability to erect or benefit from barriers to market entry.

The regulations, therefore, bar dominant players from unilaterally dictating their tariffs or prices and must set prices through consultation with the regulator.

“The Authority may direct dominant service provider to cease a conduct in that market which has or may have the effect of substantially reducing competition in any communications market or to implement appropriate remedies,” say the regulations.

The dominant player will also be forced to share its capital-intensive infrastructure such as transmission masts.

Safaricom has in the past protested such a move, saying it is only reaping the dividends of investing in a strong network and its competitors should not be allowed to be free riders.

The regulations require a dominant telco to “provide interconnection facilities to other telecommunications licensees” with the same quality as it provides for its own services or connected firms.

A dominant telco is also required to “provide access to the technical standards and specifications” of its telecommunications network with which other telcos will be interconnected.

Airtel in 2021 cited eight African nations where operators had been declared market-dominant with even lower thresholds than Safaricom’s control in segments such as voice, messaging and mobile money.

These include Burkina Faso which declared Airtel and Telmob dominant with shares of 39.24 percent and 38.36 percent respectively of the market.

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Congo Brazzaville declared MTN and Airtel dominant with 40 percent and 38 percent shares of the market while in Nigeria, MTN was declared dominant with a market share of 44 percent.

Airtel has also argued that declaring Safaricom a dominant player is the first step to addressing the perceived uneven operating environment.

The second-largest telco has in the past blamed the CA for what it considers the skewed allocation of mobile spectrum in favour of Safaricom and failure to reduce the fees that mobile phone operators charge each other for interconnecting calls.

Kenya’s telecommunications industry is currently regulated by the Kenya Information and Communications Act, 1998, which has had minor changes despite the major changes such as the rollout of mobile money and home Internet.

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