<html><head></head><body bgcolor="#FFFFFF"><div>In my view, the issue of mobile termination rates and the dominance Safaricom and Telkom in their respective sectors are separate issues and must be dealt with as such. </div><div><br></div><div>The objective of lowering of the MTR might be to improve consumer welfare but this must be weighed against its detrimental impact on the telcos. As other listers have pointed out, of what use would rock bottom prices be where the resultant effect is deterioration of services or collapse of the providers. In fact, lowering of these MTR can be viewed as anticompetitive predatory pricing which is ultimately bad for the consumer.</div><div><br></div><div>The issue of dominance by Safaricom and Telkom is one which would be better handled though the Competition Act. If it can be shown that they are abusing their dominance with prices that are unfair, then the Competition Authority has jurisdiction to impose appropriate penalties.</div><div><br></div><div><br><br>Regards, <div>Harry Karanja<div><div><br></div><div>Sent from my iPad</div></div></div></div><div><br>On Aug 29, 2012, at 6:32 PM, John Kariuki <<a href="mailto:ngethe.kariuki2007@yahoo.co.uk">ngethe.kariuki2007@yahoo.co.uk</a>> wrote:<br><br></div><div></div><blockquote type="cite"><div><div style="color:#000; background-color:#fff; font-family:times new roman, new york, times, serif;font-size:12pt"><div style="RIGHT: auto"><span style="RIGHT: auto">Walu,Edith,Listers,</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">The issue we face now seems to be a challenge facing many democratic governments(right from Canada through US,UK upto Australia) in the 21st century in an era of liberalization and globalization.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">Authors Warwick Funnel,Robert Jupe and Jane Andrew in their book "IN GOVERMENT WE TRUST",2009 have outlined these issues and quoted cases .</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">Let me quote just two lines on pages 48 and 49 of the book.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">They quote the concerns expressed by Adam Smith about "the tendency for the powerful in business to ingratiate themselves with goverment so that they might pursuade it to use its powers for their own benefit',p48</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">"....'powerful capital interests could influence state policy to benefit them at the expense of labour'.,p49.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">Regarding our Mobile Termination Rate debate, the matter is one of competition law in telecommunications sector. In this case Safaricom has the largest mobile network by far and Telkom has the largest fixed network. So if you wish to call fixed line,there is no choice but to terminate in Telkom.Therefore there is little,if any, competition in the fixed termination market segment.They are virtually a monopoly in that market segment.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">In nearly similar situation, a very large number of mobile customers are on Safaricom network.If you wish to call them,there is really no choice but to terminate in the Safaricom network. By virtue of their size ,it is not difficult to notice that they have significant market power in that market segment.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">It is therefore in the interest of Safaricom and Telkom to keep mobile termination rates as high as possible since there is little or no competitive pressure in that market segment for them.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">In almost similar case involving Vodafone and others in UK in January 2003, the Competition Competition concluded that....."There is vigorous competition amomg MNOs(mobile network operators)<var id="yui-ie-cursor"></var> to attract and sign up subscribers to their networks.......but this is funded by excess returns from termination charges......this 'distorts the volume and direction of traffic on the network,leading to a distorted pattern of usage by consumers'.</span></div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto"></span> </div>
<div style="BACKGROUND-COLOR: transparent; FONT-STYLE: normal; FONT-FAMILY: times new roman, new york, times, serif; COLOR: rgb(0,0,0); FONT-SIZE: 16px; RIGHT: auto"><span style="RIGHT: auto">John Kariuki</span></div>
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<div style="BORDER-BOTTOM: #ccc 1px solid; BORDER-LEFT: #ccc 1px solid; PADDING-BOTTOM: 0px; LINE-HEIGHT: 0; MARGIN: 5px 0px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; HEIGHT: 0px; FONT-SIZE: 0px; BORDER-TOP: #ccc 1px solid; BORDER-RIGHT: #ccc 1px solid; PADDING-TOP: 0px" class="hr" readonly="true" contenteditable="false"></div><b><span style="FONT-WEIGHT: bold">From:</span></b> Walubengo J <<a href="mailto:jwalu@yahoo.com">jwalu@yahoo.com</a>><br><b><span style="FONT-WEIGHT: bold">To:</span></b> <a href="mailto:ngethe.kariuki2007@yahoo.co.uk">ngethe.kariuki2007@yahoo.co.uk</a> <br><b><span style="FONT-WEIGHT: bold">Cc:</span></b> KICTAnet ICT Policy Discussions <<a href="mailto:kictanet@lists.kictanet.or.ke">kictanet@lists.kictanet.or.ke</a>> <br><b><span style="FONT-WEIGHT: bold">Sent:</span></b> Wednesday, 29 August 2012, 16:13<br><b><span style="FONT-WEIGHT: bold">Subject:</span></b> Re: [kictanet] Kibaki, Raila meddling stalls CCK actions<br></font></div><wbr>
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<td valign="top">@Edith,<br><br>Ave been working on some academic model whose preliminary data seems to support Mr. Presidents interventions i.e. the Telco market must project significant Returns for the investor to continue playing. Competition is good but cut-throat competition leaves the industry (Operators, Govt and Users) worse off than before. Think about it - would you like FREE internet that is so congested that you cannot send an email? Or would you rather pay something extra for the reasonable use of the medium?<br><br>Going back to Mr. Prime ministers interventions - of protecting frequencies allegedly irregularly acquired by others. My model has not factored in frequencies yet - But I think CCK may have a bigger impact on the market by recovering frequencies held up by the Military (there's a band that ITU declared for public use but previous reports indicated our Military seems to hoard this band - not sure
if this has changed).<br><br>As to whether the President's and/or the Prime Ministers interventions are legal? It is debatable. However, I think the current legislative framework - Kenya Comm Amendment Act 2009 - provides for the government in power to direct the Regulator - BUT through Policy frameworks - rather than through specific or selected directives arising from which CEO had dinner with the President/Prime minister the previous night.<br><br>walu.<br><br> <br><br>--- On <b>Wed, 8/29/12, Edith Adera <i><<a href="mailto:eadera@idrc.or.ke">eadera@idrc.or.ke</a>></i></b> wrote:<br>
<blockquote style="BORDER-LEFT: rgb(16,16,255) 2px solid; PADDING-LEFT: 5px; MARGIN-LEFT: 5px"><br>From: Edith Adera <<a href="mailto:eadera@idrc.or.ke">eadera@idrc.or.ke</a>><br>Subject: Re: [kictanet] Kibaki, Raila meddling stalls CCK actions<br>To: <a href="mailto:jwalu@yahoo.com">jwalu@yahoo.com</a><br>Cc: "KICTAnet ICT Policy Discussions" <<a href="mailto:kictanet@lists.kictanet.or.ke">kictanet@lists.kictanet.or.ke</a>><br>Date: Wednesday, August 29, 2012, 1:06 PM<br><br>
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<div dir="ltr"><font color="#000000" size="2" face="Tahoma">Any reactions from Bwana Ndemo, who seems to have received one of the letters?</font></div>
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<div dir="ltr"><font face="tahoma">Is this also the reason why Airtel changed their rates to subscribers from 1 shilling (permanent!! - the word has earned new meaning) back to ksh 3 per minute? No one answered this question when I asked a while back. Airtel, why the change?</font></div>
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<div dir="ltr"><font face="tahoma">As stakeholders, should we accept "regulatory capture" in this industry?</font></div>
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<div dir="ltr"><font face="tahoma">Edith</font> </div>
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<div style="BORDER-BOTTOM: #ccc 1px solid; BORDER-LEFT: #ccc 1px solid; PADDING-BOTTOM: 0px; LINE-HEIGHT: 0; MARGIN: 5px 0px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; HEIGHT: 0px; FONT-SIZE: 0px; BORDER-TOP: #ccc 1px solid; BORDER-RIGHT: #ccc 1px solid; PADDING-TOP: 0px" class="hr" readonly="true" contenteditable="false"></div><font size="2" face="Tahoma"><b>From:</b> kictanet [<a href="mailto:kictanet-bounces+eadera=idrc.or.ke@lists.kictanet.or.ke">kictanet-bounces+eadera=idrc.or.ke@lists.kictanet.or.ke</a>] On Behalf Of Grace Githaiga [<a href="mailto:ggithaiga@hotmail.com">ggithaiga@hotmail.com</a>]<br><b>Sent:</b> Wednesday, August 29, 2012 12:36 AM<br><b>To:</b> Edith Adera<br><b>Cc:</b> KICTAnet ICT Policy Discussions<br><b>Subject:</b> [kictanet] Kibaki, Raila meddling stalls CCK actions<br></font><wbr></div>
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<div style="LINE-HEIGHT: 1.5em; TEXT-TRANSFORM: uppercase; PADDING-LEFT: 13px; FONT-FAMILY: Tahoma, Geneva, sans-serif; MARGIN-BOTTOM: 5px; COLOR: rgb(51,51,51); FONT-WEIGHT: bold" class="yiv221407978newstype"><font size="3">IN SUMMARY</font></div>
<div style="PADDING-BOTTOM: 0px; MARGIN: 0px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; FONT-FAMILY: Tahoma, Geneva, sans-serif; COLOR: rgb(68,68,68); PADDING-TOP: 0px">
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<li style="PADDING-BOTTOM: 0px; LINE-HEIGHT: 1.5em; MARGIN: 0px 0px 0px 1.5em; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"><font size="3">The President’s intervention, which amounts to political meddling in the work of an independent state organ, has for the second time in as many years stopped the industry regulator, the Communications Commission of Kenya (CCK), from lowering the Mobile Termination Rate (MTR).</font> </li>
<li style="PADDING-BOTTOM: 0px; LINE-HEIGHT: 1.5em; MARGIN: 0px 0px 0px 1.5em; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"><font size="3">MTR is the price that operators pay each other for calls terminating in their networks from outside and ultimately determines call costs.</font> </li>
<li style="PADDING-BOTTOM: 0px; LINE-HEIGHT: 1.5em; MARGIN: 0px 0px 0px 1.5em; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"><font size="3">Mr Kibaki, who has been acting on behalf of Safaricom and Telkom Kenya, issued the directive in a letter to Information permanent secretary Bitange Ndemo, stating that there should be no change in the MTR until a fresh study of the same is carried out.</font> </li>
<li style="PADDING-BOTTOM: 0px; LINE-HEIGHT: 1.5em; MARGIN: 0px 0px 0px 1.5em; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"><font size="3">Prime Minister Raila Odinga, jumped into the CCK’s regulatory mandate with a similar directive on behalf of yet another big business – Royal Media Services.</font> </li>
<li style="PADDING-BOTTOM: 0px; LINE-HEIGHT: 1.5em; MARGIN: 0px 0px 0px 1.5em; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"><font size="3">Mr Odinga wrote to the CCK director-general asking him to withdraw the notice he had published of intention to revoke frequencies that the media house is accused of acquiring irregularly.</font></li></ul>
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