KENYA SPECIAL: ON THE MAP AS MIDDLE LEAGUE PLAYER DESPITE EVERYTHING
30 November 2001
Kenya’s government has shambled its way through privatising its key asset Telkom and has recently called a halt to the process. "Wait until after the elections," local cynics respond. Despite widespread government corruption, a severe economic downturn, high crime in "Nairobbery" and the lack of a clearly articulated ICT policy, Kenya has already become one of Africa’s larger middle league players in connectivity terms. But will things change and let real growth occur?, asks Russell Southwood after a recent visit.
Kenya has about 90 licensed ISPs but there are only around 20 that are actually operating. Most agree that there are between 20-30,000 dial-up subscribers, although getting accurate figures for individual ISPs proved much more difficult than elsewhere. There’s a lot of "churn" in subscriptions, especially around the time school fees have to be paid.
There is currently a "cap" on market growth because Telkom’s copper infrastructure is "exhausted" as one local ISP put it and consumers often find it difficult to get a phone line. In order to "prioritise" your order on an exchange at full capacity, you can pay US$100 to get the next phone line disconnected.
Put another way, there are customers willing and able to pay but Telkom can’t deliver them a service. Telkom controls all access to international connectivity through its subsidiary Jambonet. Without these limitations, many believe that the dial-up market has the potential to be as large as 60,000-100,000.
Monthly prices vary from KS850 to KS8000, with an average price of KS3000. Most people believe that the cheaper end of the market is simply unsustainable based on current connectivity charges. The market is currently segmenting and as one local ISP owner puts its:" There’s simply too many players. They’ll be blood on the floor by next year." The main players are: Africa Online, ISPKenya (2500), Wananchi, NairobiNet (e1000), Swift Global (2-3000) and Kenya Web: together these account for about 60% of the market. 90% of all dial-up subscribers are in Nairobi and in nearly all rural areas you have to dial long distance to get a connection.
NairobiNet has recently opened a POP in Kisi where it is seeking to replicate its current business: a mixture of dial-up, corporate connection and a cyber-cafe business. It currently has 15 dial-up subscribers and a regular customer base of between 100-200 people at its cybercafe there. It is also pioneering an e-learning package that helps explain how to use the computer and the internet to new users.
Corruption seems to run through any government business and the internet market is no exception. For example, a well-known and widely respected ISP has an interesting scam going in one Kenyan town. Its rivals sign up a customer and before they know it this ISP is round calling on that customer trying to sell them an alternative. If the customer persists, the supplier of the line Telkom, is more than usually tardy in supplying it and it is subsequently not very reliable. In due course the customer switches to the more assured service offered by the company that has made "an arrangement" with what must be a local Telkom manager.
Kenya has a Nationwide Taskforce on eCommerce that was launched in May 1999 but as yet there is little operating e-commerce at a local level. The banks have not proved very willing to open up their credit verification databases to those wanting to enter the market. Some of the supermarkets have SAP systems and African Lakes Technologies has sold systems to a couple of the local banks.
On the content front, Africa Online is planning to team up with the regional youth magazine PHAT with them offering youth-oriented, entertainment pages. There are two swahili language portals.
Nairobi has seen an explosion of cybercafes and as in places like Accra supply is outstripping demand (more on this in a later issue) . Many have been set up by redundant civil servants who are using their "golden handshakes" to open them and have found themselves on a steep learning curve. At the more professional end, the local supermarket chain Nakumatt has opened a cybercafe that combines a bookshop with computer access and has plans to roll this out more widely. Africa Online is piloting phase 2 of its eTouch product as a franchise and there are 8 pilot centres in Nairobi. Users tend to be young and well-educated.
Rates vary between 2-3 Kshillings an hour to as low as 25/50 cents an hour. Those offering the lower prices are generally doing it to attract business into a cafe, restaurant or some other form of retail outlet: in other words it is a "loss leader" of sorts. The market impact has been such that cybercafe owners are talking of forming a professional association and seeking to regulate the market. This seems a forlorn hope (as the matatuts have shown regulation in Kenya is not a very successful activity) but a more interesting approach was discussed after the recent Kenya Information Society meeting. Why not band together as a co-operative to get cheaper bandwidth?
Some cybercafes (at least six by one estimate) offer VOIP calls and Jambonet has closed off access to popular sites that offer this service:"The regulations are simply disregarded because there is a demand from the public." But much as cybercafe operators will find it difficult to hold up prices in an over-supplied market, Jambonet (and Telkom) are already seeing an emerging "grey market" in connectivity. One person claimed that there were at least five unlicensed VSAT operations.
TESPOK, the association of local operators, has played a "long game" and has at last been able to open a local internet exchange that will allow traffic within Kenyan to be routed directly to another ISP without needing to leave the country.
Kenya’s is already developing a role as a potential hub because of its financial sector. One of the banks is already running its regional operations from a single centre in Nairobi. The longer-term potential of regional exchange points offer a further area for growth.
Many feel that Kenya’s regulator will slowly begin to create new areas of competition in the data field. However thus far it has tended to act to protect Telkom: it turned down a proposal by Kenya Power Corporation to build and lease an alternative fibre network.
So what will happen to Telkom? No-one really knows but the Govenment is talking about finding someone to manage it and perhaps selling off those parts which have a sale value (its share in Safaricom). But it is hard to imagine who would want to take on the management of a company whose owner (the government) cannot afford to invest in its network.
So how will things change? One person we spoke to talked about "the state withering away but not quite as Marx envisaged it." What he meant was that a cash-strapped government has simply withdrawn from what many might conceive of as its responsibilities (eg a reliable power supply) and that the vacuum might be filled by others. The private sector - particularly the ICT sector - has maybe more power to change things than might seem possible at first sight. It has the capacity to keep investing where Government does not and therefore may have some leverage in the policy process. The commercial good sense underlying the local internet exchange proposal has not been the only reason for its success. It has helped to mobilise a united voice for change.
The other as yet untested force for change is consumer pressure. Kenyans read with avid interest The Watchman’s Cutting Edge column in The Nation that highlights consumer injustices. There was some discussion at the Kenya Information Society meeting about the need for an internet consumer group who can put pressure on Telkom to address its many failings.
Until there is some real change, Kenya remains a classic African story: great potential waiting to be realised.
My thanks to Gabriel Kago and Dan Deya of the Kenya Information Society, Ben Parker of African Online and many others.
(100 Kshillings = £1 sterling)
SOMALIA: A bad attack of the gremlins on the Somali story in issue 87: Of course, the cutting off of Somali Internet did not cut the country off from the world. There are two other cities in Somalia that have public internet access that are still operational, one POP is based in Boosaaso (Bender Qaasim). Thanks to Steve Huter for that. And as Brian Longwe of ISPKenya pointed out on the Africadaily list:"...the US cannot truly "shut down" a country’s/or company’s internet access - if the backbone links run to the US, then those links can be severed, but there’s nothing to stop the company from buying access from a non-US provider, in Europe, Asia or Middle East..." Finally Abdi Mohammud works for Somali Telecom, not Somalia Internet as stated.
BOTSWANA: UUNet would like to make clear that whilst as stated in the Botswana Special in issue 87 it would like to offer VOIP between corporate offices that "UUNET under no circumstances knowingly provides any services not licensed to and as voice is excluded from its license we will not. UUNET is very firm about operating within the regulatory framework of the country it is in".
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