In the course of 2015, the Communications Authority made it quite clear that they considered some players – read Safaricom – dominant in the market, and that they would take action to rectify the situation.
Statistics from September 2015 show that Safaricom had 66 per cent of all mobile voice subscribers, 64 per cent of all mobile internet subscribers and 77 per cent of all mobile money subscribers. In other words it Safaricom leads in mobile money, voice and internet.
Its closest competitor, Airtel comes a distant second and controls only 19 per cent of the voice market, 17 per cent of the mobile internet market and 11 per cent of the mobile money market.
Safaricom has led in the various telecommunication segments over the last five consecutive years, attracting the communications regulator’s attention. The Communications Authority of Kenya correctly predicts that the market left to its own devices may not provide any change at the top over the next five years.
Safaricom has stood its ground and claimed that their dominant position was as a result of deliberate investment in innovation in order to stay ahead of the competition, and as such, it has no apologies to make and should not be punished for being a market leader in what it does best.
With investors in third placed Orange-TKL having formally given notice of their intention to pull out of the Kenyan market, and second-placed Airtel frequently threatening to do the same, the CA was under pressure to intervene.
Soon, new regulations from the CA that defined how to deal with operators who were declared dominant were published, discussed and subsequently gazetted. Key among them was the fact that once an operator was declared dominant by the regulator, then tariff regulation would kick in.
In other words, if Safaricom were declared dominant in a particular service category, then they would lose their exclusive right to determine the pricing of that service, and in case they wished to increase or reduce prices, they would need to consult the regulator and obtain its approval.
A dominant operator is assumed to exhibit monopolistic tendencies which require close supervision from the regulator to ensure consumer interests are well protected.
This was precisely what Safaricom was referring to as being punished for success, where constraining their ability to determine pricing is seen as a deliberate plan to cripple them in order to allow their competition sufficient time to catch up, in effect rewarding otherwise lukewarm competition that seems unable to make headway in the market.
Under sustained pressure, the regulator beat a retreat and said that no one was being declared dominant, at least not until a study was commissioned to determine if indeed any operator was dominant and in which service category.
Before the study was commissioned however, the Miscellaneous Amendment Bill 164 of 2015 was passed into law in December 2015. A clause in this miscellaneous redefined a dominant operator by stating that a
"dominant telecommunications service provider" means a licensee determined to be a dominant telecommunications service provider pursuant to the criteria set out in sections 4 and 23 of the Competition Act, 2014".
NEED TO PROVE ABUSE
In one fell swoop, the CA suddenly found itself limited in as far as the question of declaring an operator dominant, and protested the legal amendment. However, The CEO of the Competition Authority (CAK), Mr. Wang'ombe Kariuki, argues that the question of dominance is supposed to be handled jointly between the two agencies
After all, the CA still retains the technical specifics required to establish dominance and simply submits the same to the CAK for review and concurrence.
Furthermore, he adds, there may be need for the communications regulator to prove abuse of a dominant position since that is when sanctions against an operator should be applied.
An operator would only be declared dominant if both agencies are in agreement. Only then would consumer protection mechanisms, such as tariff regulation, kick in.
The legal amendment may have given Safaricom some breathing space for now, but there is little to suggest they are truly out of the woods.
Mr Walubengo is a lecturer at the Multimedia University of Kenya, Faculty of Computing and IT. Email: [email protected], Twitter: @jwalu