KISERO: Analysys Mason ideas might not work in our environment - Daily Nation

Analysys Mason ideas might not work in our environment

Wednesday April 11 2018

Communications Authority of Kenya

The offices of the Communications Authority of Kenya in Nairobi. PHOTO | FILE | NATION MEDIA GROUP 

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Those who follow trends in regulation of competition in the telecommunications sector will know the Mexican telecoms tycoon Carlos Slim.

In 2014, Slim was regarded as the richest man with an estimated wealth of $79.6 billion (Sh8 trillion). But I read that by 2016 he had dropped to fourth place in the Forbes rankings, valued at $47.1 billion (Sh5 trillion).

How did this dramatic shift in fortunes come about?

It was mainly because the shares of his pan-Latin American mobile operator Movil dropped drastically in 2015 in the wake of competition regulations by the government of Mexico.


That shows poorly designed rushed regulations can affect the health of even the most profitable listed company.

The Communications Authority of Kenya (CA) is preparing to implement recommendations of Analysys Mason — the experts who conducted a study to inform a new framework for regulating abuse of market dominance.

Methinks the best way to approach these recommendations is subject them to deeper interrogation, not rush to implement them.

We need to discuss how dominance by one player came about in the first place and figure out whether what is suggested is, in the long term, in the consumer’s interest. Expertise in an area is not the same thing as infallibility.


The recommendations would have far-reaching implications – a long list of controls including administratively determined floor prices, forced sharing of towers and at prices determined by bureaucrats, as well as regulation of promotion and loyalty programmes.

But I fault the experts for their failure to appreciate the broader political context of competition regulation.

A good competition regulation regime must seek to achieve, first, high quality of services and affordable prices to consumers; and secondly, provide access to advanced services in all counties at prices comparable to what is charged in urban areas. Thirdly, it must bring access to advanced telecom services to schools, healthcare facilities and libraries.

In our context, the experts’ prescription cannot take us where we want to go. As I read the recommendations, the following questions popped up in my mind.


First, do we really have a powerful competition authority that has the independence to make professional decisions on merit? Secondly, do we have a regulator that enjoys strong enforcement powers — has deep domain knowledge and experience on the subject matter — and exhibits an inclination to approach issues with even-handedness?

When you introduce intrusive regulations and laws as proposed and put execution in the hands of a weak authority, you will have created the perfect environment for regulatory uncertainty and distortions in the telecoms market.

We don’t have a functioning competition authority. As a matter of fact, the function of competition regulation is shared between the CA and the National Treasury-based Competition Authority of Kenya (CAK). The CA itself is a weak institution that is constantly subject to bullying by the political elite.


Just the other day, in the wake of the controversial suspension of its chief executive, Mr Francis Wangusi, it was revealed that bureaucrats at the ICT ministry routinely collect money from the CA to purchase airline tickets for ministers and principal secretaries travelling with their personal assistants to attend feel-good trips abroad.

Then there is the issue of governance. Despite the law stating that a director cannot serve for more than two three-year terms, the recently appointed chairman, Mr Ngene Gituku, has just begun a new term after sitting in that board since September 2012.

One of the reasons why the governance of the CA is a mess is that its board is packed with too many civil servants with little knowledge and experience in modern regulation of the telecommunications sector.

You have a better chance of helping the consumer if you start with a properly functioning and independent competition authority.


And what really shapes our regulatory choices?

Sometimes the government behaves as if what it just wants to maximise revenues from the auctioning spectrum. This was amply demonstrated when President Uhuru Kenyatta recently directed the CA to fund a cyber security project for the government.

And there are occasions where the government behaves as if it is just too interested in the revenues it collects from the biggest taxpayer, Safaricom, of which it owns 35 per cent.

Well, let’s wait and see how far the recommendations of Analysys Mason will go.