CCK points to lower data rates

August 19, 2010
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, NAIROBI, Kenya, Aug 19- The Communications Commission of Kenya (CCK) says it expects to see a reduction in mobile money transfer service rates particularly for non-registered users and those from other networks.

CCK Director General Charles Njoroge said on Thursday that although these are value added services, the high charges imposed on those who have not subscribed to them only serves to distort competition in the market.

However, in an industry where convergence of services is the way to go, Mr Njoroge offered the commission’s assistance to any mobile phone operator(s) that intends to look at the ways that they can offer the service in a cost effective manner.

“The commission has noted the very high charges which range from Sh25 to Sh100, but we will support any operators’ request to enter into investigating the interconnectivity options for these services,” he offered.

In the meantime, the DG said they would start engaging with the Central Bank of Kenya to develop a framework that ensures the public benefits from these services at affordable rates.

Kenya has been a pioneer of money transfer service especially with phenomenal growth and success of Safaricom’s M-PESA service which has seen more than Sh30 billion transferred monthly.

The focus on the rates charged on the money transfer services stems from findings compiled by UK-based consultants, Analysys Mason that was conducting a study on call charges in the country.

It points to the regulator’s desire to ensure that costs for any service or product offered by the industry players are not prohibitive particularly taking into account the growth of the sector and the market dynamics in the last few years.

It is the adoption of these recommendations by the CCK that saw it issue new guidelines on Thursday that requires operators to lower their interconnection rates from the current Sh4.42 per minute to Sh2.21 effective immediately.

“The commission has imposed price caps on mobile and fixed termination services with a three and a half year declining glide path to attain the efficient cost levels. The glide path adopted by the CCK imposes an immediate 50 percent drop in mobile termination rate and then progressively declines by 35 percent, 25 percent and 15 percent annually in 2011, 2012 and 2013 (respectively),” said the DG.

The new framework also seeks to even out the playing field by making it hard for large players in the retail mobile and fixed to perpetuate what the industry calls the ‘club effect’ which sees them lock in their subscribers by making it difficult to call other networks.

“This pricing mindset is offensive to competition and it entrenches traffic imbalances in favour of large operators and make other networks net payers to them,” he said adding that this practice coupled with product differentiation has rendered interventions by the regulator ineffective.

For this reason, CCK therefore made known its intention to cap off-net tariffs for the dominant players in both the mobile and fixed voice markets to the level of their on-net rates.

Mr Njoroge argued that this decision by operators to have very high off-net charges was not motivated by the desire to recoup their investments but by the need to stifle competition.

On SMS charges, the CCK directed the operators to re-negotiate lower termination rates and file the new charges with regulator within three months.

The improvement of the competitive environment he emphasised would generate market efficiency to the entire industry and spur further growth. Some experts have argued that in markets where such interventions have been affected, they have curtailed the growth of the telecommunications sector. So only time will tell whether the measures have achieved the desired effects or the opposite.
 

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