<html><head><meta http-equiv="content-type" content="text/html; charset=utf-8"></head><body dir="auto"><div>Alison and all</div><div><br></div><div>Interesting insights and discussions. </div><div><br></div><div>Incumbency here in Kenya would be Telkom Kenya. Even with the financial muscle of France Telkom they were unable to exploit their legacy infrastructure and role out high speed Internet ubiquitously across the country. In fact I would even go one step further and say that despite Government 'Favoritism' giving them the management of the National Optic Fibre Infrastructure (NOFBI) what has come of it?</div><div><br></div><div>There is definitely a bigger role to play from a regulation perspective. One of the issues that are really critical to broadband penetration in Kenya I believe is the fact that regulation hasn't done enough to 'force' players in the telco industry to share infrastructure. This list has discussed at length the seemingly ludicrous behavior of MSPs and ISPs individually digging up our streets to lay fibre where they could have collaborated and possibly done more for the investment they have. Now if this is not regulated properly we will wake up one day and realize the country's information superhighway is owned by one or two players. What would happen if one infrastructure company owned all the roads in the country and decided who should or should not drive a car on them? Isn't that what this is? </div><div><br></div><div>Disruption of markets happen when players offer something that is so uniquely compelling that the competition is left gasping for breath.</div><div><br></div><div>In the banking sector Equity disrupted the whole cushy and fat banking industry who had no clue of the value awaiting to be mined from the Bottom of the Pyramid. Hardly had that settled down did Mpesa come and threatened to disrupt Equity Bank. Equity has rapidly evolved to counter this with sleek mobile banking offerings. Commercial Bank of Kenya stepped up and partnering with Safaricom offered MShwari with startling results. Over Kshs 3 billion deposited in less than 3 months and 10% of that disbursed as loans, that fact alone debunked the myth of Kenya not being a saving country.</div><div><br></div><div>My point is that we are living in a hyper and rapidly evolving environment that it would call for out of the box and in the box thinking to create an environment that will push Africa in general and Kenya in particular to a level of development and prosperity never heard of before. It would take visionary leaders to embrace the concept of the private for profit sector, non profit sector and governments working together unequivocally and selflessly to ensure that we have as perfect a market as possible in this sector. </div><div><br></div><div>And market disruptions will continue. Governments the world over are still grasping with a regulatory framework on how to deal with the new type of Monopoly - one willingly given by consumers and not governments - Google,with over 60% of the search market, Facebook with over a billion users on its platform, before the Internet disrupted the whole Operating System model Microsoft with over 90% of the market, now Google with its super successful Android mobile operating system which it gives for 'free' to hardware makers like Samsung, LG etc. I suspect the rule book for this type of regulation hasn't been written yet.</div><div><br></div><div>Interesting times indeed!</div><div><br><div><span style="font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.292969); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); -webkit-text-size-adjust: auto; ">Ali Hussein</span></div><div><span style="font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.292969); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); -webkit-text-size-adjust: auto; ">CEO | 3mice interactive media Ltd</span></div><div><div style="font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.296875); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); -webkit-text-size-adjust: auto; ">Principal | Telemedia Africa Ltd</div></div><div style="font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.296875); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); -webkit-text-size-adjust: auto; "><br></div><div style="font-family: Helvetica; font-size: medium; -webkit-tap-highlight-color: rgba(26, 26, 26, 0.296875); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); -webkit-text-size-adjust: auto; ">+254 713 601113</div><div><span style="-webkit-tap-highlight-color: rgba(26, 26, 26, 0.292969); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); "><br></span></div><div><span style="-webkit-tap-highlight-color: rgba(26, 26, 26, 0.292969); -webkit-composition-fill-color: rgba(175, 192, 227, 0.230469); -webkit-composition-frame-color: rgba(77, 128, 180, 0.230469); ">"The future belongs to him who knows how to wait." - Russian Proverb</span></div><div><br></div>Sent from my iPad</div><div><br>On May 18, 2013, at 10:58 PM, Grace Githaiga <<a href="mailto:ggithaiga@hotmail.com">ggithaiga@hotmail.com</a>> wrote:<br><br></div><blockquote type="cite"><div>
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<div dir="ltr"> @ Edith+ 1 .<br><br><div><hr id="stopSpelling">From: <a href="mailto:eadera@idrc.ca">eadera@idrc.ca</a><br>Date: Sat, 18 May 2013 19:52:20 +0000<br>Subject: Re: [kictanet] [mediaeditors] Safaricom's Super Profits<br>CC: <a href="mailto:mediaeditors@lists.kictanet.or.ke">mediaeditors@lists.kictanet.or.ke</a>; <a href="mailto:christoph.stork@googlemail.com">christoph.stork@googlemail.com</a>; <a href="mailto:kictanet@lists.kictanet.or.ke">kictanet@lists.kictanet.or.ke</a><br>To: <a href="mailto:ggithaiga@hotmail.com">ggithaiga@hotmail.com</a><br><br>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">Alison,</span></p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">This provides some interesting insights. To what extent is consumer behaviour a factor in the equation here? Kenyans seem to be very peculiar. For e.g. the
Ghanaian market seems to have different consumer behaviour resulting in very vibrant tariff offerings lowering prices compared to Kenya and consumers move to other networks when unsatisfied, we simply don’t, why? So in Ghana you have MSPs tripping over each
other offering all sorts of incentives – so you have a semblance of true competition. I wonder what your RIA results for Ghana show over the past decade?</span></p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">RIA may want to explore a qualitative study (if you haven’t already done so) to accompany your current analysis to explain the numbers and trends with a human
face.</span></p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">Indeed, I look forward to the results of your study on Kenya (with some comparative analysis) and the face2face interaction. I do hope you will have a structured
debate on KICTANET once you study results are out.</span></p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">Edith</span></p>
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<p class="ecxMsoNormal"><b><span lang="EN-US" style="font-size:10.0pt;font-family:"Tahoma","sans-serif";">From:</span></b><span lang="EN-US" style="font-size:10.0pt;font-family:"Tahoma","sans-serif";"> Alison Gillwald [<a href="mailto:agillwald@researchictafrica.net">mailto:agillwald@researchictafrica.net</a>]
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<b>Sent:</b> May 18, 2013 10:11 PM<br>
<b>To:</b> Ali Hussein<br>
<b>Cc:</b> Edith Adera; KICTAnet - Media Editors Forum; <a href="mailto:alice@apc.org">alice@apc.org</a> Munyua; Christoph Stork; KICTAnet ICT Policy Discussions; Margaret Nyambura<br>
<b>Subject:</b> Re: [kictanet] [mediaeditors] Safaricom's Super Profits</span></p>
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<p class="ecxMsoNormal">Interesting discussion!</p>
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<p class="ecxMsoNormal">In response to Ali's comments I would point out that infrastructure industries are by nature imperfect markets because of the bottleneck facilities or natural monopoly elements in them. That is why we need effective regulation of them.
It is true that privatisation turned the old PSTN around, but it was also able to exploit its incumbency. The dominance of historical incumbents of the backbone facilities or even just the significant market power that Safaricom has leveraged off that
in the mobile market makes it very difficult to compete in any of these markets, especially when Safaricom is able further to leverage its scale in the marker to extend it scope with new services and applications - especially killer applications such as
Mpesa, as mentioned - and not very attractive for new market entrants. </p>
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<p class="ecxMsoNormal">Competitors really require their strategies to be disruptive if they are going to succeed in such entrenched markets, but even then this is very difficult as it requires the competitor to do something that the dominant operator cannot
simply emulate. Celtel/Zain tried this with the one network, which was good for consumers in that it ended roaming charges across East Africa (and indeed their extended networks into central and west Africa) and had it worked might have given Zain's mobile
money offering at the time the step up it needed to compete in the early days of Mpesa, but Safaricom responded to this threat by joining forces with the dominant operators in Uganda and Tanzania to offer free roaming across their networks and the rest, as
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<p class="ecxMsoNormal">Bharti Airtel tried to disrupt the market with its low cost mobile business model across its African markets as it had done successfully in India, but even the significant call termination (monopoly element) rate reductions did not enable
it to do so (and the moratorium on rate reductions did not help). Yet our RIA data shows that although Safaricom's mobile prices remain the most expensive, there has been considerable competitive pressure on them and they have reduced their prices significantly
during the period of the glide path. And though there marketshare is marginally down, their traffic and profits are up (despite all the complaining)! (In Nigeria as someone mentioned, MTN's dominance of the market and pricing, without as significant interconnection
regulation, has not been shaken at all and Airtel has not been able to disrupt that market with their low cost mobile model and is now very marginal there, while MTN too enjoys super-profits).</p>
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<p class="ecxMsoNormal">On that score, I don't think super-profits of dominant players send positive signal to investors in regulated 'competitive' markets, especially if some players are close to exiting the market. I think it sends messages that the regulator
or competition authority are not able to adjust the dominant ( possibly anti-competitive) behaviour of the incumbent and create a level playing field for new entrants for them to see a return on the investments within a reasonable period. </p>
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<p class="ecxMsoNormal">And all that being said, what we are seeing in our analysis of price trends is a need to examine voice and data offering and pricing in relation to each other... in South Africa for example MTN has not entered into the price war on voice
(other than through MTN zone, but their standard rates remain unchanged, while Vodacom is trying to undercut, CellC and 8ta) but they are very competitive on their data offerings, and their revenues streams are showing this - but of course even this is very
difficult to measure externally as people are buying airtime for voice and loading it for data. We are working with our Kenyan network partners on an analysis on voice and data prices and regulatory implications, which they will be releasing shortly and should
shed some light on this.</p>
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<p class="ecxMsoNormal">And just to add that the regulator can only do what it can do in terms of implementing the law. If the solution lies in increasing competition (which probably won't address Safaricom's dominance on its own) or structural separation of the
incumbent into a open access common carrier, with separate service offering, which is more likely to - but would raise all the risk of dismantling the economies of scope and scale (with the associated nework effects) of vertical integration that has enabled
Safaricom's success in offering high value services to consumers - then policy makers will need to act, not the regulator (though they if they have a view I guess they could be more active in advising Government).</p>
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<p class="ecxMsoNormal">Enough.</p>
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<p class="ecxMsoNormal">Alison</p>
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<p class="ecxMsoNormal"><span class="ecxapple-style-span"><b><span style="font-family:"Arial","sans-serif";color:black;">Alison Gillwald (PhD) l Executive Director: Research ICT Africa l 409 The Studios, Old Castle Brewery, 6 Beach Road, Woodstock, Cape Town 7925l l
Tel: +27 21 4476332 Fax: +27 21 4479529 l Box 228, Green Point 8051 l </span></b></span><span style="font-size:8.5pt;font-family:"Palatino","serif";color:black;"></span></p>
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<p class="ecxMsoNormal"><span class="ecxapple-style-span"><i><span style="font-size:7.5pt;font-family:"Arial","sans-serif";color:#FF0013;">See </span></i></span><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";color:black;"><a href="http://www.researchICTafrica.net/" target="_blank"><span class="ecxapple-style-span"><i><span style="font-size:7.5pt;font-family:"Arial","sans-serif";color:#FF0013;">www.researchICTafrica.net</span></i></span></a></span><span class="ecxapple-style-span"><i><span style="font-size:7.5pt;font-family:"Arial","sans-serif";color:#FF0013;"> for
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<p class="ecxMsoNormal">On 18 May 2013, at 7:14 PM, Ali Hussein <<a href="mailto:ali@hussein.me.ke">ali@hussein.me.ke</a>> wrote:</p>
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<p class="ecxMsoNormal">Edith</p>
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<p class="ecxMsoNormal">I don't believe this is a case only for the regulator. What happens when in a few years a new player becomes dominant again? The market isn't perfect but its the best we have. </p>
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<p class="ecxMsoNormal">Regulation is part of this equation. But I don't think it should be used to break up companies or restrict them from operating because the competition proved too weak to compete.</p>
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<p class="ecxMsoNormal">What do we think the monopolies commission in this country will do? Do we have any example of what they have done to curb so called monopolies?</p>
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<p class="ecxMsoNormal">I'm not really so sure that this is a mandate of CCK to deal with. </p>
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<p class="ecxMsoNormal">How does the CCK enhance competition? In this I think CCK is executing as well as they can. It is now upon the market to correct the inconsistencies and inefficiencies. </p>
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<p class="ecxMsoNormal">In my unfinished post I meant to say for every Microsoft there is a Google lurking somewhere. What regulation and Government fails to correct the market surely will. </p>
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<p class="ecxMsoNormal">Have we forgotten that Kencell at some point was leading the market and thought that the mobile phone was only for the elite? That Safaricom was part of the KP&TC (for those of you who don't remember that's Kenya Posts & Telecommunications
Corporation) and that if you wanted a top up you had to go to a <b>hole in the wall</b> at Telecoms House to pay and then wait for a few hours for the airtime to be updated to your phone? </p>
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<p class="ecxMsoNormal">Safaricom was unleashed through privatization and reinvented itself. Another one is lurking in the corner to eat Safaricom's lunch and that I will bet will not be any government regulation. It will be you and me who will finally vote with
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<p class="ecxMsoNormal">Meanwhile, we continue to suffer - but clearly not in silence. :)</p>
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<p class="ecxMsoNormal"><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";">Ali Hussein</span></p>
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On May 18, 2013, at 7:33 PM, Edith Adera <<a href="mailto:eadera@idrc.ca">eadera@idrc.ca</a>> wrote:</p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">Well articulated Walu!!</span></p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">Time to hear from CCK? Wangusi? Matano and co?</span></p>
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<p class="ecxMsoNormal"><span style="font-size:11.0pt;font-family:"Calibri","sans-serif";color:#1F497D;">Edith</span></p>
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<p class="ecxMsoNormal"><b><span lang="EN-US" style="font-size:10.0pt;font-family:"Tahoma","sans-serif";">From:</span></b><span lang="EN-US" style="font-size:10.0pt;font-family:"Tahoma","sans-serif";"> kictanet [<a href="mailto:kictanet-bounces+eadera=idrc.ca@lists.kictanet.or.ke">mailto:kictanet-bounces+eadera=idrc.ca@lists.kictanet.or.ke</a>]
<b>On Behalf Of </b>Walubengo J<br>
<b>Sent:</b> May 18, 2013 5:20 PM<br>
<b>To:</b> Edith Adera<br>
<b>Cc:</b> KICTAnet - Media Editors Forum; Christoph Stork; Alison Gillwald; KICTAnet ICT Policy Discussions<br>
<b>Subject:</b> Re: [kictanet] [mediaeditors] Safaricom's Super Profits</span></p>
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<p class="ecxMsoNormal" style="background:white;">True that, Ali,<br>
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I also share your view in that ill-informed Regulatory intervention can cause more problems than what it expects to solve. For example, I would be uncomfortable with CCK slapping the internet market with Price controls similar to what we are seeing in the Energy
sector. This could be counterproductive since the investors in the telco industry may suddenly feel the sector is no longer attractive.<br>
<br>
What I expect the Regulator to do instead is to enhance competition - which obviously exists only on paper - given Safaricom close to 75% market share. I recall the former Safcom CEO, MJ saying they should not be punished for working their way to the top of
the industry but still dissect the implications of a dominant, almost monopolistic player to the overall economy.<br>
<br>
Perfect competition is known to have the highest social dividend in that users can move freely between suppliers, suppliers compete on price and so must be extremely efficient in their operations by being innovative, the move to the untapped markets (the unconnected)
etc. A monopoly tends to do the opposite and dictates pricing since it knows you are going nowhere...<br>
<br>
Am really not sure what the Regulator should do to fix a market failure - which I think is what we have in the internet sector. But that is why we pay the DG and his Directors good money to tell us what they intend to do or are already doing to address this
elephant in room.<br>
<br>
walu.</p>
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<p class="ecxMsoNormal" style="background:white;"><b><span style="font-size:10.0pt;font-family:"Arial","sans-serif";">From:</span></b><span style="font-size:10.0pt;font-family:"Arial","sans-serif";"> Ali Hussein <<a href="mailto:ali@hussein.me.ke">ali@hussein.me.ke</a>><br>
<b>To:</b> <a href="mailto:jwalu@yahoo.com">jwalu@yahoo.com</a> <br>
<b>Cc:</b> KICTAnet - Media Editors Forum <<a href="mailto:mediaeditors@lists.kictanet.or.ke">mediaeditors@lists.kictanet.or.ke</a>>; Christoph Stork <<a href="mailto:christoph.stork@googlemail.com">christoph.stork@googlemail.com</a>>; Alison Gillwald <<a href="mailto:agillwald@researchictafrica.net">agillwald@researchictafrica.net</a>>;
KICTAnet ICT Policy Discussions <<a href="mailto:kictanet@lists.kictanet.or.ke">kictanet@lists.kictanet.or.ke</a>>
<br>
<b>Sent:</b> Saturday, May 18, 2013 2:41 PM<br>
<b>Subject:</b> Re: [kictanet] [mediaeditors] Safaricom's Super Profits</span></p>
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<p class="ecxMsoNormal" style="background:white;">Edith and all</p>
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<p class="ecxMsoNormal" style="background:white;">Super profits and all I think that Safaricom is reaping from a field where others are blind (the analogy bring that it is the one eyed king).</p>
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<p class="ecxMsoNormal" style="background:white;">Safaricom is definitely extremely sensitive to product innovation and working towards engaging their customers more. However my suspicion is that they haven't even started scratching the surface. Quality issues
aside if they really really started monetizing their most critical asset (real time customer information and habits) and started putting them to use they will easily double the super profits.</p>
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<p class="ecxMsoNormal" style="background:white;">Safaricom is 'suffering' from the Network effect. Loosely defined is the lethargy and lack of incentive for customers like you and I to move to another network even as we complain about it's arrogance. They have
been so successful in keeping you in their gilded garden that for you to move means that you are literally pushing yourself out of n ecosystem that works reasonably week.</p>
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<p class="ecxMsoNormal" style="background:white;">I'm not sure whether this is a regulator issue as it is a Market issue. Or maybe a combination of both? That is a case study waiting to be written. The history of regulation is littered with Governments attempts
and ultimate failure to break up monopolies created not out of Government action but by sheer entrepreneurial and management chops. Cases that come to mind include:-</p>
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<p class="ecxMsoNormal" style="background:white;">1. The Anti Trust Laws of the late 1890s in the US that broke up Standard Oil into bits and pieces. It took less than 50 years for the offspring of that juggernaut to dominate again.</p>
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<p class="ecxMsoNormal" style="background:white;">2. The attempted and almost successful break up of Microsoft by Government. It took the market to make Microsoft irrelevant. Google, Facebook, Amazon anyone?</p>
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<p class="ecxMsoNormal" style="background:white;">3. Recent noi</p>
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<p class="ecxMsoNormal" style="background:white;"><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";">Ali Hussein</span></p>
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<p class="ecxMsoNormal" style="background:white;"><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";">CEO | 3mice interactive media Ltd</span></p>
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<p class="ecxMsoNormal" style="background:white;"><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";">Principal | Telemedia Africa Ltd</span></p>
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<p class="ecxMsoNormal" style="background:white;"><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";"> </span></p>
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<p class="ecxMsoNormal" style="background:white;"><span style="font-size:13.5pt;font-family:"Helvetica","sans-serif";">+254 713 601113</span></p>
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<p class="ecxMsoNormal" style="background:white;">"The future belongs to him who knows how to wait." - Russian Proverb</p>
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<p class="ecxMsoNormal" style="background:white;">Sent from my iPad</p>
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<p class="ecxMsoNormal" style="background:white;"><br>
On May 18, 2013, at 1:23 PM, <a href="mailto:otieno.barrack@gmail.com" target="_blank">
otieno.barrack@gmail.com</a> wrote:</p>
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<p class="ecxMsoNormal" style="background:white;">+ 1 Walu,<br>
Speaking from an Internet Society perspective whose mission statement is the Internet for all, I think the Universal Access fund has to be used to create the right balance, I think too many Telcos are focusing on slicing Safaricoms Market share instead of venturing
into the untapped and unprofitable market segments in the Bundu's, IMHO, therein lies the problem, we want to see whether the Universal Access fund board itasema, na itende.<br>
<br>
Best Regards<br>
Sent from my BlackBerry®<br>
<br>
-----Original Message-----<br>
From: Walubengo J <<a href="mailto:jwalu@yahoo.com" target="_blank">jwalu@yahoo.com</a>><br>
Sender: "kictanet"<br>
<<a href="mailto:kictanet-bounces+otieno.barrack=gmail.com@lists.kictanet.or.ke" target="_blank">kictanet-bounces+otieno.barrack=gmail.com@lists.kictanet.or.ke</a>>Date: Sat, 18 May 2013 03:16:11
<br>
To: <<a href="mailto:otieno.barrack@gmail.com" target="_blank">otieno.barrack@gmail.com</a>><br>
Reply-To: Walubengo J <<a href="mailto:jwalu@yahoo.com" target="_blank">jwalu@yahoo.com</a>><br>
Cc: KICTAnet - Media Editors Forum<<a href="mailto:mediaeditors@lists.kictanet.or.ke" target="_blank">mediaeditors@lists.kictanet.or.ke</a>>; Christoph Stork<<a href="mailto:christoph.stork@googlemail.com" target="_blank">christoph.stork@googlemail.com</a>>;
Alison Gillwald<<a href="mailto:agillwald@researchictafrica.net" target="_blank">agillwald@researchictafrica.net</a>>; KICTAnet ICT Policy Discussions<<a href="mailto:kictanet@lists.kictanet.or.ke" target="_blank">kictanet@lists.kictanet.or.ke</a>><br>
Subject: Re: [kictanet] [mediaeditors] Safaricom's Super Profits<br>
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