KDN Pulls Out of Retail Internet Services Market in Kenya

Internet

Internet Services Providers (ISPs) facing closure following stiff competition from big Internet Protocol (IP) network provider, Kenya Data Networks, can now breathe easy after the operator announced last week it was pulling out of the retail market.

The company's move was reported by Business Daily as a tactical retreat to give the ISPs, which are its main customers, room for growth. However, the company has put all of its retail business into its sister company Swift Global.

In the last one and a half years, ISPs have been facing stiff competition from infrastructure providers and telecommunication operators who can now directly connect end users to the internet.

This came after the industry regulator, the Communications Commission of Kenya (CCK) changed the licensing regime from the previously technology-dependant to technology neutral system.

The move enabled infrastructure providers like KDN to offer both wholesale and retail services, thus eating into the market share of the ISPs that largely concentrated on the bottom end of market.

Statistics from CCK indicates that while there were 50 active ISPs four years ago, the number had reduced to less than 20 by March, this year.

KDN's chief marketing officer, Vincent Wang'ombe said the firm will now concentrate on wholesale services by developing new products tailored for mobile operators, ISPs, financial Institutions and other corporate organisations. "At some point it is almost seemed as if the company was competing with ISPs which are its key customers," said Wangombe.

"The new strategy will give the ISPs a fair platform to compete in the retail market, while enabling KDN to concentrate on the wholesale business through infrastructure-building which is our core business."

Wango'mbe said the company would slash prices for their corporate clients by either a quarter or a half in two weeks' time. For example a company that seeks it branch office to be connected within Nairobi will now pay Sh25,000 from the current Sh50,000.

Other operators who have since been awarded the technology neutral free licence are Safaricom, Zain Kenya and Telkom. To achieve this. Safaricom had to partner with Jamii Telecoms. Unlike Jamii and KDN, Safaricom has not invested in fibre optic infrastructure across the country.

The deal thus gave it an opportunity to use Jamii's resources to be at par with other competitors either eyeing the sector or already in it such as AccessKenya and Wananchi Online Jamii Telecommunications is one of Kenya's leading broadband infrastructure providers and has laid over 1,000 kilometres of fibre optic cable network in cities such as Nairobi and Mombasa.

Safaricom expects to realise these savings as it replaces its old transmission network with fibre to exploit the advantages that the Jamii infrastructure gives them in accessing large corporates, homes and small and medium enterprises.