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Kenya Telkom seems to be playing a hard cop/soft cop routine on the VOIP issue. First it tried to persuade cyber-café owners to offer a VOIP service from it. That fell apart after these discreet negotiations were unwisely announced to the press. Then Telkom Kenya tried to persuade ISPs to accept separate charging for what it claimed was voice traffic. When that failed, it returned this week to play hardball again by filtering traffic. However things have not quite turned out as they might have hoped. Hot foot from a recent visit Russell Southwood reports on this row that seems to be pointing towards a legalised VOIP service in the not-too-distant future.

Kenya Telkom wrote late last year to all ISPs asking whether they would be interested in setting up VOIP services. The ISP association TESPOK responded by saying that it was not in their licences and that therefore CCK as the regulator should be involved. On this basis, a Technical Committee was set up to look into the issue.

Telkom Kenya then wrote to the ISPs on 15 January saying that for the proportion of data traffic it had identified as voice it would be charging double the existing Jambonet data rates.

Not surprisingly this proposal went down like a lead balloon. ISPs are already being charged approximately USD5000 per meg and know that Telkom Kenya is buying the bandwidth at only USD2500-3000 a meg. However without wider competition, there is little chance that the prices will come down. The competition dam is set to burst in June 2004 when Telkom Kenya loses its exclusivity. Although the SNO has been seen as delaying further competition, there has been a lively behind-the-scenes debate at all levels and the pro-competition voices appear to be in the ascendant.

Unknown to the ISPs Telkom Kenya had been using a packet sniffer to identify the voice traffic and this has inevitably led to a fierce debate over how much voice traffic there is and what is included. Kenya Telkom claims that it is making large losses on its international traffic but has admitted privately that less than 1% of existing data traffic is voice traffic. This is puzzling as those in the ICT business we spoke to said that VOIP calling is still available from many cyber-cafes. And despite police-backed crack-downs on larger grey market operators the business appears to continue to flourish. Perhaps Telkom Kenya needs to produce its evidence so that objective judgements can be made.

In definitional terms, it has also included applications such as Net Meeting and iChat that can be identified as having multimedia protocols: for example, the camera uses the easily identifiable H323 protocol. These types of programmes are widely used by multinational companies who have been trying to cut down on air travel post 9/11.

This is significant because Telkom Kenya has identified voice traffic through one set of ports and closed them. After this happened, those offering grey market VOIP services simply disguised the traffic using multimedia protocols and port 1723 (for Windows VPN).

TESPOK members responded to the threat in Telkom Kenya’s letter by saying that it rejected the offer of doubling rates on voice traffic. It made the point that it did not advertise these services and wanted to continue being billed at the same amount. One ISP got a response from Telkom Kenya saying that as the offer had been rejected and that its monitoring showed voice traffic, it would only prioritise web, e-mail and FTP traffic. So on Friday 13 February Telkom Kenya installed bandwidth management that reduced the priority for multimedia and VPN traffic. It has also cut DNS access and as a result large numbers of websites are no longer available.

The net result has been a considerable number of complaints to the ISPs by multinational corporate customers. These is not simply the squawking of discomforted customers. On this basis, Kenya is taking a hit directly on its bottom line. An organisation called Phoenix that organises international exchange transactions on behalf of local banks was unable for two days to transact business worth USD10 million.

TESPOK maintains that if there is an issue of illegal traffic within the current regulations then Telkom Kenya should produce the evidence and ask the regulator CCK to take action. It should not act unilaterally as it does not have the legal authority to do so. It thinks that Telkom Kenya should stop the gateway filtering immediately and give assurances that it will offer a clear gateway and it should stop threatening to increase the tariff.

A meeting was called last Friday between the regulator CCK, TESPOK members and Telkom Kenya. Almost all Kenyan ISPs, including one from Mombasa attended. From the Telkom Kenya side only Managing Director John Waweru was present. The ISPs said that they wanted the filtering lifted. Initially Waweru denied it was happening but a CCK staff member said that there was actual evidence of it taking place. Waweru was forced to concede that it was taking place as part of a "network optimisation" exercise. CCK responded by saying that there must be a clear gateway as the ISPs were demanding.

The issue of having a competitive gateway to Jambonet was raised. CCK officials said this would take a long time to set up. The ISPs responded by saying that a "stop-gap" alternate gateway could be put in place within 24 hours and a more permanent solution within 20 days.

In relation to the VOIP issue, the CCK Director-General said that it was simply another technology and that the topic for the day’s meeting was the filtering issue. However a TESPOK member reminded CCK that an informal discussion about opening the market to VOIP services had begun 8 months ago between the two bodies and this was confirmed by another CCK staff member.

Telkom Kenya is just in the process of finalising a tender to install a VOIP network to operate as an integral part of its operations. Nevertheless Telkom Kenya seems to veer between the big stick and tempting words.

In autumn 2003 Kenya Telkom’s MD John Waweru opened confidential talks with CCOAK, the cyber-café owners association aimed at offering them a VOIP service: rates of KS5 per minute were discussed. These negotiations broke down after the first meeting because a lawyer associated with CCOAK made a press announcement. (see issue 171)

There are perhaps two ways out this quagmire, appropriate regulation willing. You can charge the ISPs for identifiable voice traffic against some agreed definition. This is not really a viable strategy as the ISPs then have to pass on those charges to their customers. This is not an easy thing to do as the determined grey market operator can with the assistance of external operators disguise the traffic. And as recent events have shown banning increasingly large areas of traffic will simply bring the Kenyan internet to a standstill.

The second more viable approach is for Kenya Telkom to sell VOIP services, both on a wholesale and retail basis. In this way, the service would come "above ground" and provided the rates were right would be very popular. Decisions could then be made on a business case basis. Meanwhile Telkom Kenya probably needs to at least halve its international voice rates. And to achieve that it will need to start shedding the 11,000 employees who it has identified as unproductive pretty quickly. Don’t hold your breath but it might just happen.