IEA pokes holes on CA report on mobile telco dominance

April 4, 2018

NAIROBI, Kenya, Apr 4 – The Institute of Economic Affairs (IEA) has raised concerns over the Communication Authority of Kenya (CA) proposal to restrict tariff innovation citing that it will harm the consumers.

In its competition report analysis of the telecommunication sector, CA proposes specific restrictions on the variety of tariffs, schemes, and promotions in a bid to even the mobile telco playing field.

IEA Chief Executive Kwame Owino says to restrict the ability of firms to set their own prices is a price control scheme that is inconsistent with Kenya’s overall economic policy posture and would violate norms of policymaking in the country.

Owino says the policy would raise the cost of services to all consumers of service.

“Based on the presentation made during the dissemination workshop, this appears to specifically target Safaricom Limited and is purely directed at curbing the range of marketing options that the firm may adopt,” Owino said.

The Institute is of the view that the recommendations are out to unfairly regulate Safaricom because of its dominance.

“Being dominant is not a crime, but abusing dominance is, the CA analysis does not indicate that Safaricom is abusing its dominance,” Owino said.

They also criticized CA on declaring Safaricom dominant, pointing out that it was the work of the Competition Authority of Kenya to do declare dominance.

“CA said that they worked with CAK on the report, but we can’t see this anywhere on the report,” he noted.

According to Owino, the problems being faced in the industry are out of regulatory errors that happened years ago with the government only allowed two operators to be in the market.

“By the time they opened the market to other players, the major player had already invested heavily and its hard for any firm to compete on the same footing,” he analysed.

According to the CA report Safaricom was declared dominant in three sectors that include Voice, SMS and Mobile Money.

The firm also owns about 65 percent of transmission infrastructure and CA wants Safaricom to share the infrastructure with other market players in seven counties that include Garissa, Turkana, Marsabit, Mandera, Samburu, Wajir, and Isiolo.

“Safaricom being compelled to lease its facilities to willing competitors for a fee determined by CA through regulatory price setting is indefensible, CA should explore use of the Universal Service Fund to establish infrastructure in the seven counties because this responsibility is legally placed in its domain,” he said adding that Safaricom invested about Sh50 billion in this infrastructure.

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