Telcos CEOs on the spot in push to declare Safaricom dominant

Listers,Victor,I agree with Victor regarding general  Competition Law.However, it happens that,as an exception , the unique nature of the telecommunications industry is also recognized under Kenya Information and Communications(Amendment )Act 2013  .Please see Section 84(W)(3)(4)(5) of the Act. 

John Kariuki
On Tuesday, July 31, 2018, 9:50:02 PM GMT+3, Victor Kapiyo via kictanet <kictanet@lists.kictanet.or.ke> wrote:

Let me just place the relevant provisions of the Competition Act (No. 16 of 2014) on the table:
In Kenya, being dominant is not illegal. It is the abuse of the dominant position which is regulated as per the provisions below. The Act deals with dominance in two forms i.e. in terms of market share or market power. There is a presumption of dominance once an undertaking controls 50% of the market (s.23), or if its share is below 40%, where the entity has market power. Market power is defined as the power of a firm to control prices, to exclude competition or to behave to an appreciable extent, independently of its competitors, customers or suppliers. 

23. Criteria for determining dominant position(1) For purposes of this section, “dominant undertaking” means an undertaking which—(a) produces, supplies, distributes or otherwise controls not less than one-half of the total goods of any description which are produced, supplied or distributed in Kenya or any substantial part thereof; or(b) provides or otherwise controls not less than one-half of the services which are rendered in Kenya or any substantial part thereof.(2) Notwithstanding subsection (1), an undertaking shall also be deemed to be dominant for the purposes of this Act where the undertaking—(a) though not dominant, controls at least forty per cent but not more than fifty per cent of the market share unless it can show that it does not have market power; or(b) controls less than forty per cent of the market share but has market power.
The Act proceeds to define some of the instances where abuse can be seen to have occurred under s.24 below. The list is not exhaustive.
24. Abuse of dominant position and buyer power(1) Any conduct which amounts to the abuse of a dominant position in a market in Kenya, or a substantial part of Kenya, is prohibited.(2) Without prejudice to the generality of subsection (1), abuse of a dominant position includes—(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;(b) limiting or restricting production, market outlets or market access, investment, distribution, technical development or technological progress through predatory or other practices;(c) applying dissimilar conditions to equivalent transactions with other trading parties;(d) making the conclusion of contracts subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject-matter of the contracts; and(e) abuse of an intellectual property right.
It will be interesting to see how this law develops to clarify these questions especially in the ICT sector. It must be noted though, that there are undertakings that continue to engage in restrictive trade practices within the sector. I think discussions on dominance should focus on abuse and restrictive trade practices, regardless of the entity in the sector. Being dominant is no offence. Sometimes small players in order to gain market share engage in restrictive trade practices. 
The CAK is developing a number of regulations to clarify provisions and provide for relevant procedures under the Act. Once these are done, there should be greater clarity in the sector. It will over time need to develop the competence, courage and muscle in the scale of the EU Competition Commissioner, who recently slapped Google and Qualcomm with EUR 2.42 billion and EUR 997 million fines respectively for abusing their dominance. 

Victor Kapiyo
Partner | Lawmark Partners LLPSuite No. 8, Centro House, Westlands, Nairobi | Web: www.lawmark.co.ke ====================================================
“Your attitude, not your aptitude, will determine your altitude” Zig Ziglar

On Tue, 31 Jul 2018 at 19:59, Walubengo J via kictanet <kictanet@lists.kictanet.or.ke> wrote:

@Andrew,
Very true. Do not punish the dominant player, as long as they are NOT abusing their dominance. Agreed.
Imagine this country where the dominant player is NOT guilty of abusing the dominance. He is innocently working hard, plays clean, innovates regularly and thus retains dominance year in year out – without  hurting anyone.
How will that address the fact that when that innocent dominant player sneezes,
1) 67 % of mobile subscribers will not make a voice call.2) close to 70% of Kenyans will not connect on the internet.3) 81% of mobile money subscribers will not transact (basically the economy can come to a halt)(Ref Q3 2017/18 CA Report @ http://www.ca.go.ke/images/downloads/STATISTICS/Sector%20Statistics%20Report%20Q3%202017-18%20.pdf
Listers, this debate should never be about Safaricom per se, nor its competition.  It is about what options Kenya as a nation has, in the unlikely event  that Safaricom goes down – which we must admit is rare, but we still must plan for such events.
One option is to work extra hard to ensure that Safcom never goes down.  The other option is to ensure that if it does, the Statistics above are contained within a ‘manageable size’ of the market.  My take is that we should try and  do both.
If the above principle is agreed. The rest, as they say will be details.
walu.

On Tuesday, July 31, 2018, 12:45:44 PM GMT+3, Andrew Alston via kictanet <kictanet@lists.kictanet.or.ke> wrote:

I have another take on this – in terms of dominance and monopolies

 

Firstly – let me start by saying that I don’t have a problem with what I would call de-facto monopolies – that being, a monopoly that is a monopoly purely by virtue of being the primary (or only significant) player in the space – and I’m far from convinced that declaring such a player dominant and then trying to deliberately degrade their dominance is the way to go.

 

That being said – which such dominant players and potentially monopolies may exist – the key to dealing with them is to ensure that the regulatory environment exists to allow for the emergence of competition.  Basically – if a player is either dominant or a monopoly – it must be constrained from behaving in a manner that would supress the emergence of true competition that is created by the free market (I.E I believe that there should be strict limitations on anti-competitive practices that should be strongly and vigorously enforced).  This however is different from saying, a player is dominant or a monopoly, and hence we must split them up or force them into actions which actively CREATE the competition – they are very different things.

 

A classic example of this is the situation we find ourselves in with AFRINIC – They are a de-facto monopoly on the continent being the only RIR – and this would not be a problem if they a.) allowed their customers to transfer out to another RIR off continent or b.) the ICP-2 regulations allowed for the foundation of a second RIR – since (b) isn’t there, and since AFRINIC point blank refuses to implement (a) using the excuse that “the community hasn’t passed such” – I would argue they are behaving in a manner that is anti-competitive and should be subject to sanction under anti-trust regulations.

However – in the same vein – I would not advocate that AFRINIC be forced to create a competitor – they are free to keep their monopoly on continent so long as they allow their customers to up and go elsewhere should they choose to do so.

 

The same thing applies to any dominant player – ensure they are not using that dominance to supress competition and remove the ability for competition to rise – and I have no problem with it.  However, allowing them to remain dominant while adopting anti-competitive practices – that is another story all together.

 

So the question we need to ask ourselves is – are we seeing anti-competitive practices and practices designed to enforce dominance – if yes – we have a problem – if no – let the free market take care of the issue.

 

Just my thought

 

Andrew

 

 

 

 

From: kictanet <kictanet-bounces+andrew.alston=liquidtelecom.com@lists.kictanet.or.ke>On Behalf Of Ali Hussein via kictanet
Sent: 31 July 2018 10:37
To: Andrew Alston <Andrew.Alston@liquidtelecom.com>
Cc: Ali Hussein <ali@hussein.me.ke>; Admin CampusCiti via kictanet <kictanet@lists.kictanet.or.ke>
Subject: Re: [kictanet] Telcos CEOs on the spot in push to declare Safaricom dominant

 

@Walu

 

Your statement below sort of negates all that you have said, nah? 🙂

 

Infact MPESA is BOTH a platform and a product at the same time. They just chose to play by product rules when it is convenient to shield them from platform responsibilities.

 

We can continue this conversation further over a biryani lunch.. (And Steve Chege is welcome to join us) 🙂

 

Regards

Ali Hussein

Principal

AHK & Associates

 

Tel: +254 713 601113

Twitter: @AliHKassim

Skype: abu-jomo

LinkedIn:http://ke.linkedin.com/in/alihkassim

 

13th Floor , Delta Towers, Oracle Wing,

Chiromo Road, Westlands,

Nairobi, Kenya.

Any information of a personal nature expressed in this email are purely mine and do not necessarily reflect the official positions of the organizations that I work with.

 

On Tue, Jul 31, 2018 at 10:15 AM, Walubengo J <jwalu@yahoo.com> wrote:

@Ali,

 

I agree with everything you say below except on the platform thing. MPESA is a indeed a platform, even by your own definition that you shared below, which states: 

 

Platforms are structures that allow multiple products to be built within the same technical framework.

 

I had my own definition from a leading researcher in the regulatory space, J. Bauer, (pdfs.semanticscholar.org/2c72/106282dfe7b5a35e5981cf02fe656cc7a5d7.pdf)

 

He defines a platform  as follows:

 

“technological foundations upon which other products, services,and systems are built” 

 

MPESA has provided  the foundation and APIs upon which banking, eCommerce, Payment Gateways, etc have been built.  It is a platform, irrespective of the fact that initially it was not designed as such.  Even FB, Google, AWS, and many others were initially private entities but organically grew into being platforms.

 

Which really is the regulatory crux of the matter. The owners of these emerging platforms still want to play by the old rules when their systems were Products, conveniently ignoring the fact that they are actually now Platforms.  

 

Infact MPESA is BOTH a platform and a product at the same time. They just chose to play by product rules when it is convenient to shield them from platform responsibilities.

 

But it is an interesting and wide topic.  Maybe Safcom should sponsor a 1week e-discussion to enable this to be ventilated.

 

walu.

 

  

 

 

 

On Monday, July 30, 2018, 8:11:40 PM GMT+3, Ali Hussein <ali@hussein.me.ke> wrote:

 

 

@Walu

 

I was baiting you..and you fell for it.. LOL

!

 

Let me first address the issue of Mpesa and

the

allegations that it is a Platform. I recommend the bookPlatform Revolution by Geoffrey Parker, Marshall Van Alsytne and Sangeet Paul Choudrey. 

 

According to Tech blogger Jonathan Clarks, “Platforms are structures that allow multiple products to be built within the same technical framework. Companies invest in platforms in the hope that future products can be developed faster and cheaper, than if they built them stand-alone. Today it is much more important to think of a platform as a business framework. By this I mean a framework that allows multiple business models to be built and supported. For instance, Amazon is an online retail framework. Amazon started by selling books. Over time they have expanded to selling all sorts of other things. Apple iTunes started by selling tracks and now uses the same framework to sell videos.”

 

So back to my issue of whether M-Pesa is a Platform. M-Pesa wasn’t built from the ground up to be a Platform. To claim that M-Pesa is a Platform is like saying that a VW Kombi is a Toyota VX  just because some Jua Kali mechanic decided to put a 5.7-Liter DOHC 32-Valve V8 with Dual Independent Variable Valve Timing with intelligence (VVT-i); 381 hp @ 5600 rpm; 401 lb.-ft. @ 3600 rpm into the Kombi – #JustSaying.. 🙂 With all due respect to Safaricom of course.. 

 

 

Platforms are an amazing thing to behold. Apple IOS is a Platform. The Amazon Ecosystem is a Platform. Google’s Android is a Platform. Facebook is a Platform. You get my point.

 

We spend alot of time bashing Safaricom. And it is as it should be since they are the Big Boys/Girls in our part of the wood

s

..But Safaricom has so many problems..I wish we can exploit them instead of wasting so much energy on them.. The world is full of companies that Governments were unable to break up

but the market took care of that.. The regulatory landscape is not optimal for sure..and that can be worked on..But we also need to look inwards..Barclays is already taking steps with Timiza, so is HF..And of course there is Equity..The fact is this – We are all fighting for the 80% of the 10% market Safaricom has in mobile money..#GoFigure

 

I agree with you that the Regulator needs to get up to speed with the new reality. However it’s not that simple. Remember the tussle between the CA (Communications Authority) and CAK (Competitions Authority of Kenya) on the Market Study? Add to this mix the CMA (Capital Markets Authority) and CBK (Central Bank of Kenya) to get an idea of how tough regulation is today. At the height of the dominance conversation last year I attempted to make a sense of it. See link below:-

 

 

Dominance, Regulation and the New Strategic Imperatives 

 

Here’s a fact that most of us don’t want to come to terms with. As untidy as free markets are, they are more efficient than Governments. Chairman William Kisang of the House Committee on Communication, Information and Innovation is my hero for seeing off this continuous rant on Dominance. Now he must take it one step further and create a Super Regulator (It can be that the different regulators and arms of government create a working committee that meets regularly and share notes to ensure they are on the same page when it comes to Innovation and New Business Models that transcend industries.

 

 

We must move forward. Safaricom’s ‘dominance’ will be taken care of by the Market. With a little help from a forward looking regulator of course..I’m willing to bet my next year’s salary on it. 🙂

 

Regards

 

Ali Hussein

Principal

AHK & Associates

+254 0713 601113 

 

Twitter: @AliHKassim

Skype: abu-jomo

LinkedIn: http://ke.linkedin. com/in/alihkassim

 

“We are what we repeatedly do. Excellence, therefore, is not an act but a habit.”  ~ Aristotle

 

 

Sent from my iPad

On 30 Jul 2018, at 6:35 PM, Walubengo J <jwalu@yahoo.com> wrote:

@Ali, am with Eng Kariuki on this one 😉

 

Indeed we are in the age of platforms (read MPESA as an example).  And yes we can’t blame Safcom for milking MPESA to the hilt (eg. most government service mobile money payments have a preferred providers ;-).  

 

I would rather blame the regulator for not seeing this coming, and when they finally saw it, they dilly dallied to intervene (remember 2year market study?)  Furthermore, previous thinking that platforms are sacred corporate jewels not to be touched or  that  all markets will eventually self-correct have been proved wrong elsewhere with FB, Google, etc coming under heavy ‘regulatory fire’ in the recent past.

 

I dont claim to have the answer to Safcom dominance, but I can claim very strongly that the market forces will never self-correct the dominant position that Safcom continues to enjoy. 

 

Is dominance  a good thing? Yes, for Safcom.  Is it a bad thing?  Yes, for a country that may realize that they cannot transmit election results simply because the competing providers dont have presence in some areas under their zones. Or that you can’t access internet or send mobile money coz Safcom network sneezed for an hour or two as it happened a week ago. 

 

I have said this before, the dominance conversation must be rise above competition issues and begin to be interrogated at the level of national security.  If Safcom beats competition to pulp, it is good for its shareholders (me with my very small shares  included), BUT it is bad thing for the country that may discover they have no commensurate alternatives.

 

That said, I dont believe baby sitting competition to beat Safcom is the answer either.  

 

Only a new innovation, perhaps the next ‘MPESA on a Blockchain’ sort of thing will be able to give  Safcom the challenge it deserves.

 

walu.

 

On Monday, July 30, 2018, 6:00:10 PM GMT+3, Admin CampusCiti via kictanet <kictanet@lists.kictanet.or.ke > wrote:

 

 

John

 

Fortunately I’m not a graduate of Telecommunications Law.. So I can see clearly.. #JustSaying..

 

I have always advocated for a review of the Framework on competition in not just the Telco sector but most sectors. The Age of Platforms Is here my brother. And we ignore it or focus on old school models of competition at our own risk. The Government is a very inefficient way to correct market conditions. Look at what is happening the world over. 

 

Why don’t we go ahead and also declare Uber dominant? Let’s engage on this issue and not shoot from the hip. Chairman Kisang is my hero. He must have been smoking the right thing that morning. 🙂 

Ali Hussein

 

+254 0713 601113 

 

Twitter: @AliHKassim

Skype: abu-jomo

LinkedIn: http://ke.linkedin. com/in/alihkassim

Blog: www.alyhussein.com

 

“Discovery consists in seeing what everyone else has seen and thinking what no one else has thought”.  ~ Albert Szent-Györgyi

 

Sent from my iPad

On 30 Jul 2018, at 5:37 PM, John Kariuki via kictanet <kictanet@lists.kictanet.or.ke > wrote:

Listers, Ali. 

It is a fact that  “In certain telecommunications market segments in Kenya, SAFARICOM is dominant. Any graduate of telecommunications law will confirm that. It has nothing to do with punishing success or innovation. It is a matter of telecommunications and competition laws. If it was in UK or EU I have no doubt that the issue would not have dragged this long. Remember we also have the ‘small problem’ of Data Protection which has dragged for at least 10 years. Just to repeat what one consultant told my then bosses many years ago and I quote  “The fact that you refuse to see a problem does not mean that it does not exist”. If only we had listened! 

 

Sent from Yahoo Mail on Android

 

On Mon, Jul 30, 2018 at 14:37, Barrack Otieno via kictanet

<kictanet@lists.kictanet.or.ke > wrote:

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