[kictanet] Call for opinions - CCK vs Safaricom-is internet regulation next?

Walubengo J jwalu at yahoo.com
Sat May 8 11:08:33 EAT 2010


MM, Andrea et al,
 
These are quite deep insights...my focus has mainly been on Consumer Internet Prices which would most likely fall under "what is to be regulated" as a result of being one of the critical services in the hands of a "dominant player".  The pressure to regulate this service is particularly high given the investments the Government made in the TEAMS project (undersea cable) on behalf of the public (tax-payers) who are really yet to see meangful CONSUMER internet price reductions...
 
Whereas as a consumer,  I would be happy to see price reductions in Internet consumer prices, am not quite sure that a regulatory approach to this would be sustainable.  At the moment I pay for about 13USD (1,000Ksh) for 400MB of mobile internet.  Lets say the regulator using their informed formulae comes up one morning and forces the dominant player to make this tariff read something like 6USD for the 400MB - what would be the likely visa-viz the expected outcomes of such a move in the market? 
 
a) Would this necessary lead to an increase in  number of citizens using the internet service or would it simply mean the current privilaged number of users enjoy better prices with little  impact on new internet users?
 
b)How would this then impact on the (dominant) Operator, Regulator, Competitors, Investors and other stakeholders?  
 
walu.
 
   


--- On Fri, 5/7/10, muriuki mureithi <mureithi at summitstrategies.co.ke> wrote:


From: muriuki mureithi <mureithi at summitstrategies.co.ke>
Subject: Re: [kictanet] Call for opinions - CCK vs Safaricom
To: jwalu at yahoo.com
Cc: "'KICTAnet ICT Policy Discussions'" <kictanet at lists.kictanet.or.ke>
Date: Friday, May 7, 2010, 9:07 PM








Just checking my  old notes  for context on how we came to  where we are  - and how we can get out!!
 
Kencell was awarded a licence to operate on 23/1/2000 while Safaricom   under Vodafone management took over on 20/7/2000. Both operators launched their operations on 24/8/2000 ( Kencell) and 21/10/2000  ( Safaricom) and by dec 2000 , Kencell had 39300 customers while Safaricom was far behind at 29100 customers .  Safaricom was the smallest player in the market! Indeed the situation did not change immediately and by march 2001 kencell was still leading at 126000 against Safaricom’s 93700.  At the time, Telkom had  seemingly unassailable lead of 300000 controlling 60% market share  with Safaricom trailing  the pack.  By June  however, things starting changing  with  the last overtaking  both  by the end of year  and positions reversed  - it seems forever. Note that  at the time , TKL could not change its tariffs without authority from CCK  as the incumbent dominant player not to ‘kill’ the nascent players. The cellular operators 
 needed only to file their tariffs  with CCK
 
While Safaricom took off behind Kencell    by 3 months it had  17000 customers  on its list inherited from TKL, it also had  some goodies  by virtue of its closeness to TKL – interconnection, access to tkl property to build cellsites etc. these  however cannot account for its growth today. It is a question of strategies both companies took –one focused on the   high value niche market  emphasising post-paid  requiring PIN certificates those days , the other focused on the mass market  with tools like per second billing, no charge on customer number etc. branding , level of investment  and consistent  brand . these   were a major differentiator and all have contributed to make the difference we see today.  While we are very price conscious , there are many other elements built around of the network we chose  and   affect the decision of choice . last year for example  the networks invested  41% of their revenues  for network
 expansion. This is a massive  investment  and certainly  biggest investor must expert to get the most out of   its investment.   the new operators tried to fight on price alone but  certainly that    did not dent  the market shares and  in a market where 99% of the market is pre paid  and  can vote with their  legs and churn with least effort with or without MNP.   
 
 So, are regulatory tools  based on tariffs   adequate   to reign-in market dominance as proposed in the regulations? NO.  it cannot account for the investment,    strategies , innovation and risk taken by the dominant player. Equally , it does not jerk up  the smallest players  either.   Strategies define who dominates or lose .  The incumbent cellular operators in Tanzania and Ghana collapsed when new operators  came to the market , MTN Uganda on its launch registered more customers on day one than the incumbent Celtel.  We need tools that really jerk up those    behind  to really exploit  the national resource  ( spectrum etc )  they are holding 
 
It’s true that dominant players can easily use their might to squeeze smaller ones out of the market with disastrous long term consequences to the consumer and the market . Tariffs is not the only  tool available to an operator. We should not forget   the wide range of services  operators launch to increase stickiness to its services .   The government and by extension CCK has a duty to protect the consumers and having chosen   competition as a foundation to customer   protection and choice   in the  National ICT Policy , it must safeguard the competition process.  A starting point is  clear boundary that defines   when competition  fuses into abuse and at a higher level when market failure affects competition. 
 
Cheers 
MM
 
 

From: kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke [mailto:kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke] On Behalf Of Andrea Bohnstedt
Sent: 07 May 2010 18:28
To: mureithi at summitstrategies.co.ke
Cc: KICTAnet ICT Policy Discussions
Subject: Re: [kictanet] {Disarmed} RE: {Disarmed} Re: Call for opinions - CCK vs Safaricom
 
I think there are several interesting points here: 

Yes, a regulator should keep an eye on monopolistic and oligopolistic developments. But, as Michael Joseph said, dominance should only be penalised if abused, and in order to do so, this abuse needs to be defined in the regulations - which has not been done, he says, despite repeat reassurances given to him by both the Ministry of Information and the CCK (see http://www.ratio-magazine.com/201005052971/Kenya/Kenya-Safaricom-Willing-to-Sue-Against-New-Tariff-Regulations.html)
Celtel/Zain clearly didn't start out to be a 'feeble player', nor were they a late entrant, as the figures I cited show. So is it fair to penalise Safaricom for Celtel's inability to retain market share and capitalise on having been in the market for more than a decade? 
Orange: France Telecom bid around USD100m more for Telkom Kenya than their nearest competitor in the privatisation. Was that price justified? Nobody else seems to think so, not even France Telecom anymore, since they are now reportedly trying to get some or all of that money back. 
Yu: Econet couldn't get going for ages because their local partner could raise their financial contribution. Was that a sensibly chosen local partner? 
Obviously it's not ideal for the market and customers to have such limited competition, but then a) the regulation lacks a crucial element, and b) the competition seem to have been quite adept at shooting themselves in the foot. Is it fair to punish Safaricom for that? 

Andrea 

On 7 May 2010 18:04, Pius Walela <PWalela at strathmore.edu> wrote:


Recent  developments  in the mobile telephony  sector are  of concern   . I  opine  that for a true  capitalist society to manifest the market  should be subject  to  forces  of demand and  supply to create conducive conditions   for  the  market to  thrive  and in extension to ensure its longevity. However  Oligopolistic  and monopolistic  tendencies  in the  market  ought  to be  constrained  to  cushion feeble  players and  potential  new entrants from eventual  or outright  failure, as  such  regulation  is  essential  however these regulations  have  to  be  moderated.
 
 

From: kictanet-bounces+pwalela=strathmore.edu at lists.kictanet.or.ke [mailto:kictanet-bounces+pwalela=strathmore.edu at lists.kictanet.or.ke] On Behalf Of Andrea Bohnstedt
Sent: Friday, May 07, 2010 5:57 PM
To: Pius Walela
Cc: KICTAnet ICT Policy Discussions
Subject: {Disarmed} Re: [kictanet] Call for opinions - CCK vs Safaricom
 
Amusing little factoid: 

In 2004, when Celtel acquired Kencell: 
'Kencell, with about 1.2 million subscribers, has recently lost market share to rival Safaricom, a joint venture of Kenya's state-owned Telkom Kenya and Britain's Vodafone. Safaricom's subscribers have grown to 1.8 million, increasing its share to 60% from about 50%.

So Celtel/Zain managed to work their way down from 50% to 14% or so over the past six years. Must have been quite a slippery playing field. 

(http://www.regulateonline.org/2003/intelecon/2004/May/A-Kenya-040525.htm)

On 7 May 2010 17:38, Walubengo J <jwalu at yahoo.com> wrote:




MM,

this Kwame guy is an interesting read!. One amusing message I picked says that the regulator should be protecting consumers - not competitors ;-)

..and from the "streets" some analyst said that Safcom may have exploited its dominance position; but that was in the beginning (ref: interconnection tariff wars with Kencell 6-8yrs ago). Currently, it will be a tall order to get evidence of the yet to be defined "exploiting" dominance postion"

walu.

--- On Fri, 5/7/10, muriuki mureithi <mureithi at summitstrategies.co.ke> wrote:

From: muriuki mureithi <mureithi at summitstrategies.co.ke>
Subject: Re: [kictanet] [ke-internetusers] {HIJACK} Call for opinions - CCK vs Safaricom
To: jwalu at yahoo.com
Cc: "'KICTAnet ICT Policy Discussions'" <kictanet at lists.kictanet.or.ke>, "'ke-users'" <ke-internetusers at bdix.net>
Date: Friday, May 7, 2010, 3:32 PM


Kui
For  a local context  from an economic perspective , read the attached 
Regards 
Muriuki Mureithi 
 

From: kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke [mailto:kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke] On Behalf Of John Kariuki
Sent: 07 May 2010 08:09
To: mureithi at summitstrategies.co.ke
Cc: KICTAnet ICT Policy Discussions; ke-users
Subject: Re: [kictanet] [ke-internetusers] {HIJACK} Call for opinions - CCK vs Safaricom
 




Kui,

For some background information  on Competition, Dominance,etc you could check on the following information resources which should be available on-line:

1.Oftel, January 2000- The application of the Competition Act in Telecommunications Sector.

2. INTUG - Anti-Competitive Conduct and Competition Policy in Telecommunications,ITU,Geneva 22 Nov.2002

3.EU Directive 2002/19/EC 0f 7/3/2002 (Access Directive)

4. European Court of Justice in " United Brands v. Commission(1978) ECR. 207

5.Telecommunication Regulation Handbook(Module 5 - Competition Policy) by INFODEV, 


Good  Luck,

John Kariuki

--- On Thu, 6/5/10, Marie-Anne Kinyanjui <mkinyanjui at nation.co.ke> wrote:

From: Marie-Anne Kinyanjui <mkinyanjui at nation.co.ke>
Subject: [ke-internetusers] {HIJACK} Call for opinions - CCK vs Safaricom
To: "McTim" <dogwallah at gmail.com>
Cc: "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>, "ke-users" <ke-internetusers at bdix.net>
Date: Thursday, 6 May, 2010, 8:47

Is there anyone on the list with a firm grasp of the industry (and who is not directly involved :-) who is wiling to offer their objective views on this subject for publication in Business Daily?
400-600 words please.

Thanks.

Kui Kinyanjui
Business Daily

-----Original Message-----
From: kictanet-bounces+mkinyanjui=nation.co.ke at lists.kictanet.or.ke [mailto:kictanet-bounces+mkinyanjui=nation.co.ke at lists.kictanet.or.ke] On Behalf Of McTim
Sent: Thursday, May 06, 2010 8:15 AM
To: Marie-Anne Kinyanjui
Cc: KICTAnet ICT Policy Discussions; ke-users; Angela Nganga- Mumo
Subject: Re: [kictanet] [ke-internetusers] Re: {Disarmed} Re: CCK vs Safaricom?- and now Safcom vs the Rest?

On Thu, May 6, 2010 at 7:35 AM, Solomon Mburu Kamau
<solo.mburu at gmail.com> wrote:
> This is great Angela.
> I really need to know why the 'big boy' is suddenly crying foul.


Let's re-examine our assumptions of who the "Big Boy" in the Kenyan
Telecommunications market is.

The GoK owns a huge minority shareholding in Telkom.Orange (and may in
future own a majority share).  When Orange makes a profit, so do its
owners.

The GoK owns a huge minority shareholding in Safaricom.  When SafCom
makes a profit, so do its owners.

The GoK collects a tremendous amount of VAT and other taxes from the
telecoms market players.

The GoK collects a tremendous amount of license fees and frequencies
fees from the telecoms market players.

The GoK sets policy via the CCK and the Ministry.

So from my POV, the GoK is the BIG BOY, it seems to me that this is
the "elephant in the room" that no one is talking about.

In any case on this specific regulation, I applaud the intent of
creating a level playing field.  However, I see no monetary "teeth" or
enforcement measures (read fines) in this single doc (I have yet to
read the others).

My main objection is the 25% rule.  My reading of this is that there
MUST always be at least one dominant provider.  Let me use a poker
game analogy to make my point.  Before the first hand is dealt, all
players will have an equal amount of chips.  After the first hand (and
subsequent hands) there will (most likely) be a "chip leader" and a
"short stack".  It is not likely that there will ever be equilibrium
in the game (or in the telecoms market).

I would suggest that this clause is not helpful, at least at the 25%
value at which the trigger is now set.

No wonder Safaricom is complaining.

--
Cheers,

McTim
"A name indicates what we seek. An address indicates where it is. A
route indicates how we get there."  Jon Postel






>
> On 06/05/2010, Carole K <mhariricarole at gmail.com> wrote:
>> Thank you Angela, you are a star! The rest of us can now be informed about
>> this new "unfair" regulation.
>>
>> CK
>>
>> On Wed, May 5, 2010 at 7:51 PM, Angela Nganga- Mumo <
>> anganga at orange-tkl.co.ke> wrote:
>>
>>> Dear All,
>>>
>>> Please find a PDF copy of the regulations.
>>>
>>> Regards,
>>>
>>>  logo2
>>>
>>>
>>>
>>> Angela Ng'ang'a - Mumo
>>>
>>> Head of Corporate Communications
>>>
>>> Landline:                      + 254 20 3232011
>>>
>>> Orange Fixed Plus :       +254 20 2454233
>>>
>>> Orange Mobile:               +254 772 548 066
>>>
>>> Email :                         anganga at orange-tkl.co.ke
>>>
>>>  cid:image003.jpg at 01C9FEEE.6AAFAFA0
>>>
>>>
>>> -----Original Message-----
>>> From: ke-internetusers-bounces at bdix.net
>>> [mailto:ke-internetusers-bounces at bdix.net] On Behalf Of
>>> bitange at jambo.co.ke
>>> Sent: Wednesday, May 05, 2010 7:41 PM
>>> To: Andrea Bohnstedt
>>> Cc: KICTAnet ICT Policy Discussions; ke-users
>>> Subject: [ke-internetusers] Re: {Disarmed} Re: [kictanet] CCK vs
>>> Safaricom?- and now Safcom vs the Rest?
>>>
>>> Will send it tomorrow.
>>>
>>>
>>> Ndemo.
>>>
>>>
>>> > I'd like to see the text, too. Dr Ndemo, could you or one of your
>>> > colleagues
>>> > email round a pdf with the regulations, please? Easier and a bit nicer
>>> on
>>> > the environment than all of us running downtown to buy paper copies.
>>> >
>>> > Thanks, Andrea
>>> >
>>> > On 4 May 2010 09:32, Walubengo J <jwalu at yahoo.com> wrote:
>>> >
>>> >> the drama continues,
>>> >>
>>> >> in a louder paid-up advert in today's press Yu, Orange and Zain
>>> support
>>> >> the
>>> >> CCK regulations and dispute yesterday's Safcom's complaint.  All
>>> these
>>> >> without the public (or is it me?) not having copies of what they are
>>> >> arguing
>>> >> about!
>>> >>
>>> >> Someone told me the copies of this regulations are available at the
>>> >> Government Printers at a small fee.  Halloo? Assuming I leave in
>>> >> Lokichoggio, Should i spend two days on the road to come and pickup
>>> some
>>> >> hard-copy regulations that should be downloadable?
>>> >>
>>> >> Sergon, can you help me, where does this leave you with your
>>> eGovernment
>>> >> stories?
>>> >>
>>> >> walu.
>>> >>
>>> >> --- On *Mon, 5/3/10, Walubengo J <jwalu at yahoo.com>* wrote:
>>> >>
>>> >>
>>> >> From: Walubengo J <jwalu at yahoo.com>
>>> >> Subject: Re: [kictanet] CCK vs Safaricom?
>>> >> To: jwalu at yahoo.com
>>> >> Cc: "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>
>>> >> Date: Monday, May 3, 2010, 10:55 AM
>>> >>
>>> >> Just seen a loud complaint from Safcom in today's Daily Nation.  They
>>> >> quoted four regulations that have been gazetted and I have searched
>>> >> www.cck.go.ke to get a mouse on them but failed.
>>> >>
>>> >> Anybody with e-copies on these regulations or specific url can plse
>>> >> update.
>>> >>
>>> >> walu.
>>> >>
>>> >>
>>> >>
>>> >>
>>> >> -----Inline Attachment Follows-----
>>> >>
>>> >> _______________________________________________
>>> >> kictanet mailing list
>>> >>
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>>> et.or.ke>
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>>> >>
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>>> >>
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>>
>
>
> --
> Solomon Mbũrũ Kamau
> P.O. Box 19343 - 00202 Nairobi
> Cell: (+254-0) 735 431041
>
> Man is a gregarious animal and enjoys agreement as cows will graze all
> the same way to the side of a hill!
>
> AND
>
> It is better to die in dignity than in the ignomity of ambiguous generosity!
>
> http://smiley2.wordpress.com
> http://mburu.sikika.co.ke
>
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--
Cheers,

McTim
"A name indicates what we seek. An address indicates where it is. A
route indicates how we get there."  Jon Postel

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www.ratio-magazine.com 
 



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