IEA position on CA’s Analysys Mason Dominance Report

Dear All,

Greetings from the Cofek team!

We are requesting your kind response to the article below as carried by “The
Standard” today. Your response would inform our view on the State of
Consumer Protection Report on ICT sector in regard to this specific issue.We
also hope that Mr Matano Ndaro, CA Director of Competition can also give us
his take.

By the way – should CA license and “regulate”” on competition” at the same
time? Could it present a conflict of interest that the licensee of MNOs is
also prescribing and enforcing competition? Kindly give us your feedback
asap.

You could soon pay higher costs for mobile services if the Communications
Authority of Kenya (CA) follows through with plans to introduce price
controls in the sector, economists have warned.

The Institute of Economic Affairs (IEA) said yesterday the recommendations
by UK-based consultancy firm Analysys Mason, especially on price controls in
its study on market dominance laid the basis for tariff hikes.

“Price controls are not effective and inconsistent with 20 years of industry
liberalisation and most national economic policy,” said IEA Executive
Director Kwame Owino during a media briefing on analysis of the CA report on
competition in the telecommunications sector in the country in Nairobi.

“Reintroduction of price controls would be a major policy reversal.” The
study presented early this year by Analysys Mason concluded that Safaricom
has dominant market share currently standing at 70 per cent and 80 per cent
in the mobile communications and mobile money market respectively and called
for regulatory interventions.

Among the recommendations was for Safaricom to share part of its tower
infrastructure with other service providers for a period of five years at
tariffs prescribed by CA. “Our analysis shows this dominance has been
achieved because of the risk that firms have taken to invest in tower
infrastructure,” said Mr Owino.

“Firms have different appetites for investment and compelling one firm to
share infrastructure they’ve invested in at fixed prices is not defensible
on economic grounds.”

The report had initially recommended Safaricom share its tower
infrastructure with Airtel and Telkom in 14 counties where
telecommunications infrastructure is lacking that were then halved to seven.

Forcing infrastructure sharing among providers has also been criticised as
only useful in redistributing income among existing players but stopping
short of bringing costs down or improving product experience for consumers.

The IEA boss further explained that some of the recommendations in the
report could see the CA overreach its mandate as a regulator, stifling
innovation and product differentiation among operators.

“There is no policy justification to restrict the freedom of firms to engage
in lawful marketing in any format,” said Mr Owino. “This is the most
unreasonable proposal with no benefit to aid market competition but would
harm consumers.”

Analysys Mason had recommended the CA enforce a policy to limit Safaricom
from promotions and loyalty schemes that can be replicated by other
operators.

Kind regards,

Onesmus Mutungi

Program Assistant

Consumers Federation of Kenya (Cofek)

Rehema Place, Block F Suite 45

P.O Box 28053-00200, City Square

Tel. +2540202615496, 3861718

Mobile: 0715555550, 0733180008

Email : <mailto:hotline@cofek.co.ke> hotline@cofek.co.ke

Web : www.cofek.co.ke

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