[kictanet] [preliminary analysis] After Access report launch

Sat May 18 21:38:43 EAT 2019

 Hi Barrack,
I'm still studying it but can share my initial thoughts... I had a quick look at GSMA's mobile economy report 2019 (link #5 below) and it pegs Kenya's internet penetration number at ~24% up from 16% based on lagging indicators (2014-2017). It also says 3G coverage was 85% as at 2017 with 4G reaching more than a third of the population (~16.7 Million people assuming ~50M total). 

The GSMA report is alluding to a high supply - low demand situation (high network coverage and low internet uptake) which is congruent with Research ICT Africa's findings. 

The data (and economic theory - see link #1 below) is telling us not to focus on supply side but to develop the demand side - because supply is abundant - but there is something that is impeding demand. 

This means looking at whether internet pricing (a factor of value perception) or internet quality (or both) are impeding penetration. It's hard to argue that QoS is a significant factor with 85% 3G coverage - because 3G internet is pretty good (even for compressed video 240-480p which is adequate for budget phones).

 The more credible explanation for low demand is affordability - and this has been alluded in several studies - including Research ICT Africa's study. Majority of Kenyans are poor - yet mobile service pricing is inequitably skewed in favor of the urban middle-class or higher who comprise < 12% of our 26.8Million (~57%) labor force, say ~3.2 million people filing tax returns as a rough indicator (see link #3 for Kenya's demographic profile).

So ~88% of the work-capable population gets to pay a significantly higher premium per MB, as well as for voice and SMS. 

The poorer you are the heavier you are penalized. A 6MB for 3/- offer bundle with 24hr validity works out to 2MB per shilling. But if you can afford to pay 50/- for an hour you get ~40MB per shilling. The poor person pays 20 times more for the same commodity than the wealthier person. This is penalizing poverty - and quite ruthless, considering the essential nature of the services. 

Economic theory says that when supply is high and the pricing is uncompetitive in a market characterized by low disposable incomes, it can be expected that the demand would be low (unless some coercive factors exist e.g. for utilities like Kenya Power). The data supports this.

The data is also challenging the procurement driven narrative that internet coverage is driven by technical gaps (coverage and capacity), rather than underlying economic issues (lack of quality jobs and stifled opportunities). So what should be examined instead is the relationship between disposable income, bundle pricing and internet uptake. 

Although one service provider in Kenya is making super profits, and has been growing in double digits, the broader economy does not reflect their vibrancy (the disparity is so wide, it is like the company exists in another dimension or on another planet) - which is a compelling indicator of serious market dysfunction e.g. unfair competition, excessive market power by one player, economically risky dominance and/or predatory practices (see link #4).

When market dysfunction persists for long it can be an indication of regulatory capture or excessively high economic dependency, such that regulator is afraid to interfere - which severely degrades economic resilience via single point of failure scenario, and allows the problem to baloon to catastrophic levels over time (see link #2).

More telling is the fact that we don't have a "number two" in terms of profits. So the demand/supply data is supporting the oft posited assertion that there is an unfair competitive landscape and monopolistic practices in the Telecomms sector (e.g. customer lock-in via network effects thus high switching costs / stifled innovations when the leader wants to get involved in everything - from taxi services to selling vegetables online etc).  
What the data is telling us is that initiatives like the National Broadband Strategy should focus more on addressing demand side factors (e.g. deploying USF towards local content production, seed funding for startups and so on). Increasing supply at this time will be inefficient and wasteful (only a few will benefit at the expense of majority). 

Good evening. 

Links / References:
1. Market gap analysishttp://www.consumerpsychologist.com/dist_Gap_Analysis.html
2. Regulatory Capture: A reviewhttps://www.jstor.org/stable/23606888?seq=1#metadata_info_tab_contents
3. Kenya Demographic Profile 2018
https://www.indexmundi.com/kenya/demographics_profile.html
4. Market Failure 
https://en.wikipedia.org/wiki/Market_failure
5. GSMA Mobile economy 2019
https://www.gsma.com/r/mobileeconomy/
Brgds,Patrick.
[Cross-domain Innovator | Independent Public Policy Analyst - Indigenous Innovations]

    On Saturday, May 18, 2019, 7:02:58 PM GMT+3, Barrack Otieno <otieno.barrack at gmail.com> wrote:  

 Hi Patrick,
Whats your position on the issue? Assuming you have done some analysis.
Regards
On Sat, 18 May 2019 14:33 Patrick A. M. Maina via kictanet, <kictanet at lists.kictanet.or.ke> wrote:

 Ali, interesting... so you are casting aspersions on a data driven study that you don't agree with, based on.. what? your own personal views and/or preferences?
Without some kind of rational analysis of why X is better than Y, it looks like you are cherry picking, making convenient assumptions and jumping to wild conclusions. Why would you do that?

On CA's report, you make a FACTUAL assertion (framed as a "universal truth") that the report is exaggerated, then you immediately cast doubt on your own factual claim (thereby demolishing its credibility) by asking CA to correct you? So were you stating a universal fact or a personal belief?
Let's have a high quality discussion please.
What exactly makes GSMA's report more believable?

Good day & brgds,Patrick.
Patrick A. M. Maina
[Cross-domain Innovator | Independent Public Policy Analyst - Indigenous Innovations]

    On Saturday, May 18, 2019, 12:12:39 PM GMT+3, Ali Hussein via kictanet <kictanet at lists.kictanet.or.ke> wrote:  

 There must be something seriously wrong with these statistics.  We know for a fact that CA Statistics are exaggerated (for example they use sim card connections as a unique identifier as opposed to say Identity Card) - And CA can jump in here and correct me if my assertions are wrong. However, even in the wildest dreams, I can't believe that our internet penetration rates are that low!! 26%? I'd rather go with the GMSA report which gives an indicative figure of around 70%. 
Maybe this report alludes to Broadband Penetration? That would be a lot more believable.
Regards

AliHussein

Principal

AHK & Associates

Tel: +254 713 601113

Twitter: @AliHKassim

Skype: abu-jomo

LinkedIn: http://ke.linkedin.com/in/alihkassim

13th Floor , Delta Towers, Oracle Wing,

Chiromo Road, Westlands,

Nairobi, Kenya.

Any information of a personal nature expressed in this email are purely mine and do not necessarily reflect the official positions of the organizations that I work with.

On Thu, May 16, 2019 at 7:40 PM Margaret Nyambura Ndung'u via kictanet <kictanet at lists.kictanet.or.ke> wrote:

Listers, the  attached  after access report  by Research ICT Africa was
launched today at the Stockholm Internet forum.   "A comparative analysis
of demand-side view of mobile Internet from 10 African countries².

As noted at the broadband meeting last Friday, available demand side data
on Internet and mobile use in Kenya and many other countries is
insufficient.  The report attempts to bridge that gap.

Interesting statistics with Internet penetration in Kenya at 26% in line
with ITU statistics.  Differences are noted in other countries highest
being in Rwanda with an 11% difference (See table 3).

Rgrds,
Nyambura

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