[kictanet] CCK issues press statement on Mobile Termination Rates

Wed Oct 10 16:52:41 EAT 2012

Listers, 

PRESS STATEMENT 

10th October 2012

NEWS EDITOR 

RE:  PRESS STATEMENT ON MOBILE TERMINATION RATES

The attention of the Communications Commission of Kenya (CCK) has been
drawn to reports and commentaries in some sections of the media
appearing to suggest that the CCK Board has been unable to make a
decision on the way forward on the implementation of the glide path on
the Mobile Termination Rates (MTRs). The said reports further suggest
that the CCK is hostage and beholden to certain political and business
interests, thus casting aspersions on the ability of the Communications
Commission of Kenya (CCK), as presently constituted, to effectively
regulate the fast-growing ICT sector.  The reports have elicited
disquiet in the local ICT market, and therefore merit a response. 

Contrary to the said reports, the CCK Board and management are, and have
always been committed to promoting a conducive regulatory environment
for effective competition in the ICT industry in Kenya. This commitment
explains why there is hardly any market segment in the entire
communications sector today where competition does not exist. We
appreciate that one of the key drivers of competition in any mobile
telecommunications market is the regulation of interconnection.
Interconnection serves as a critical public policy tool for the proper
functioning of a competitive communications market. It is out of this
understanding that the CCK commenced regulation of interconnection in
1999 following the licensing of two additional mobile operators - namely
Essar Telecoms Kenya and Orange Telecoms. 

Indeed, the local communications market witnessed significant market
developments in the period between 2007 and 2010. Over and above the
entry of two new operators, other notable developments that took place
in this period included the introduction of the Unified Licensing
Framework (ULF), landing of three undersea cables and the roll out of
terrestrial optic cables, and tremendous growth in both subscriber
numbers and call and data volumes.   

In order to capture these developments and also include new and
up-to-date data in the network cost modeling, CCK undertook a detailed
and consultative review of the Network Cost Study in 2010 with the
objective of developing a new interconnection framework that promotes
competition, operational efficiency of the firms and further growth of
the sector through continued investments and innovations.  

Following the review, CCK issued the Determination No.2 on
Interconnection Rates for Fixed and Mobile Telecommunications Networks;
Infrastructure Sharing and Co-location; and Broadband Interconnection
Services on 16th August 2010. The Determination was to operate from 1st
July 2010 to 30th June 2013. Furthermore, the Determination was updated
on 30th December 2010 to include Short Message Service (SMS) Termination
Rates effective from 1st January 2011 to 30th June 2013.  According to
this determination, the glide path for Mobile Termination Rates was to
proceed as follows:

1.                 Call Mobile Termination Prices

Nominal KES.

1st July 2010

1st July 2011

1st July 2012

1st July 2013

Mobile Termination

2.21

1.44

1.15

0.99

Following the issuance of the Determination No.2 of 2010, retail price
competition in the mobile voice services intensified with actual retail
off-net call prices falling from a high of KES 12 per Minute in August
2010 to between KES 5 and 3 per Minute currently. In addition, on-net
call retail tariffs dropped significantly from a high of KES 8 per
Minute to KES 3 per Minute over the same period. The industry also
witnessed a significant growth in the number of promotions and special
offers as the operators sought to attract and retain subscribers.
Moreover, mobile operators also intensified efforts to generate new
revenue streams from non-traditional services such as SMS based
applications, Internet offerings and mobile money transfer services
through cutting edge innovations. In addition, important industry
demographics such as mobile subscription and penetration levels improved
significantly during the period. 

Despite these positive signals in the market, some sections of the
mobile telecoms industry and some government agencies raised concerns
that the ensuing retail price competition arising from the reduction in
mobile termination (wholesale) prices was detrimental to the continued
growth of the sector and the economy. In particular, concern was raised
that the retail price competition in the mobile voice market would
adversely affect Government Tax Revenues, stability of the stock market,
the Government's macro economic agenda on employment and investments;
and the profitability and viability of telecommunication enterprises.

The CCK Board considered these issues and at its Meeting held on 20th
May 2011 decided to freeze the mobile and fixed termination rate for
year 2010/2011 for a further one year as the Commission evaluated the
veracity of the issues raised by stakeholders. Consequently, on 8th June
2011, the Commission issued Addendum No.2 to the Determination No.2 of
2010 revising the mobile and fixed termination rates and the attendant
glide path as follows:

1.       Call Mobile Termination Prices

Nominal KES.

1st July 2010

1st July 2011

1st July 2012

1st July 2013

1st July 2014

Mobile Termination

2.21

2.21

1.44

1.15

0.99

CCK has since contracted the services of a consultant to undertake a
study on the impact of the ensuing competition in the retail mobile
voice market on the Government Tax Revenues, stability of the stock
market, Government macro-economic agenda on employment and investments;
and the profitability and viability of telecommunication enterprises.
The consultant has submitted an inception report and is due to present
the interim report to the CCK Management and Board soon. 

I wish to assure the mobile telecoms industry, consumers of ICT services
and other stakeholders that CCK shall make a decision on the MTR as soon
as we receive the final report from the contracted consultant. Our
decision shall be fair and in the wider interest of consumers and mobile
telecoms industry, and without influence from any quarter.

I also wish to take note of the ongoing discussions on the need to align
our current legal framework - that is the Kenya Information and
Communications Act, CAP 411A - with the requirements of the Constitution
of Kenya 2010. The overriding goal of the alignment is to further
insulate CCK from commercial and political interests. We appreciate that
the rule and law-making responsibility in the sector falls within the
remit of the Office of the Minister for Information and Communications.
CCK, as an important stakeholder in this process, has already given its
input on this ongoing process. CCK is fully in support of this process,
and it is our hope that the debate shall be healthy and balanced and in
the wider good of the ICT sector. We are confident that the Ministry of
Information and Communications shall midwife this process successfully. 

Issued by:

Francis W. Wangusi

DIRECTOR-GENERAL

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