Kenyan State beats retreat on regulation of competition

Telecoms

Telecoms operators which opposed to newly gazetted regulations on competition, got a temporary reprieve after the government promised to open fresh talks with the industry for a possible review of the contentious segments.

Information minister, Mr Samuel Poghisio, said the review would aim at fine-tuning certain aspects of the regulations for clarity and to address the feeling among certain operators that they were being unfairly targeted.

Telecoms market analysts, however, described Mr Poghisio’s move as cosmetic and merely aimed at appeasing investors who have expressed nervousness about the Kenyan market since the regulations were introduced.

“Legally, a gazette notice can only be nullified through publication of a subsequent one and not by merely addressing a Press conference,” said a lawyer who requested not to be named.

The government’s retreat is partly being seen as an indicator of the immense clout that Kenya’s leading mobile telecoms service provider, Safaricom, has and a damage control measure aimed at foreigners who have invested in Kenya’s information sector.

Dr Bitange Ndemo, the Information permanent secretary, promised to publish specific details about the amendments to be discussed with the stakeholders.

Mr Poghisio, however, reaffirmed the government’s commitment to implementing the Fair Competition and Equality of Treatment Regulations 2009 and the Kenya Communications Tariffs Regulations 2009 – clearing any doubts about this latest move.

“The consultations will not affect the implementation of the regulations,” said Mr Poghisio.

The contentious regulations, aimed at curbing anti-competitive behaviour in the telecoms market, have met fierce opposition from the dominant player Safaricom, which insists it has not abused its market dominance and is therefore being unfairly targeted.

The regulations allow the Communications Commission of Kenya (CCK) to impose certain conditions, aimed at levelling the playing field, on a player who has been declared dominant and is found to be abusing its market leadership position.

CCK, the agency that is tasked with identifying the dominant players in various telecoms markets and thereafter, establish whether they are abusing their dominance, said it would forge ahead guided by the regulations.

“We plan to conduct the study as provided for under the regulations. The process is ongoing,” said Mr Charles Njoroge, Director-General of the CCK. “We will be looking for specific instances where dominance is seen to have been abused.”

Mr Njoroge also said his office would wait for the said amendments before acting, but he confirmed that the rules remained in force beginning on the date of their publication in the Kenya Gazette.

Notably, the State signalled its intention to widen its net to include more players in the country’s telecommunications scene.

Mr Njoroge said the rules would apply to all telecoms players including those in the data, voice and infrastructure fields— meaning more players will come under CCK’s microscope in the coming months.

This is likely to have wider implications for industry players such as Telkom Kenya, whose range of data products and extensive fibre network are unmatched by any other player.

The development follows a barrage of claims from a section of players that the new rules would stifle growth in the sector.

It is hoped that the new regulations will provide a framework for determining tariffs and tariff structures while promoting fair competition in the industry.

Most operators agree that the regulations will benefit the industry even as some of their counterparts vigorously opposed them.

Safaricom has been the most vocal opponent of the regulations citing the sections that give CCK the right to control interconnection tariffs.

Mr Michael Joseph, the Safaricom chief executive, has specifically singled out Sections 7, 8 and 9 of the new Tariff Regulations, which state that dominant operators cannot review or reduce retail tariffs without the approval of CCK and that give CCK leeway to advise on tariff structures, as unacceptable.

“This is clearly an introduction of price controls in what is a liberalised and indeed very competitive sector of the economy. I do not believe that the Kenya government endorses price controls and this should not be allowed in the telecommunications industry,” said Mr Joseph.

Mr Poghisio said that his ministry was not in a position to implement price controls.

“Our regulations cannot override the country’s fiscal policy. Neither the ministry nor CCK has the mandate to control prices,” said Mr Poghisio.

Although the government appears to have softened its stance following a rise in industry tensions after the new regulations were published, it did not retract any part of the current legislation.