Kenya’s President does not like low telecom prices

Posted on June 14, 2011  /  0 Comments

Usually politicians like low prices. But the Kenyan President dislikes them so much that he could not wait for the Task Force established by the Prime Minister to examine a decision by the “independent” regulator to lower mobile termination rates, an esoteric wholesale price determined by technical methods.

I have not looked at the Kenyan legislation in detail, but I’d be surprised if the legislation permits review by a Prime Minister’s Task Force, let alone the President acting after a meeting with a few of the stakeholders behind closed doors. With its “independence” in tatters, the regulatory agency did the one thing it can do to recover: it ratified the President’s unlawful act. A mass resignation would have been the more appropriate response, methinks.

This is after Safaricom and Telkom Kenya got backing from the country’s top offices — that of the President and of the Prime Minister to suspend implementation of new termination rates.

After intense lobbying from the pair, President Kibaki a week ago directed industry regulator Communications Commission of Kenya to suspend implementation of the mobile termination rates (MTRs) — the fee that operators levy calls to their networks from outside.

The directive that has since been ratified by CCK board required that rates be shelved pending a detailed evaluation of the economic impact of the current MTRs on the country’s economy.

Not knowing how the mobile termination rates were arrived at, I cannot venture an opinion on them. If they were done wrong, the place to challenge them is the court room, not the President’s office.

Why did the incumbent Safaricom fear the lower termination rates? It would have benefited from them, given lots of calls would have gone from its network to those of its competitors, perhaps more than the traffic that came to its network.

The fear was not of lower termination rates, but of lower retail prices.

But lower retail prices are the key to implementing the Budget Telecom Network (BTN) business model. Low prices bring more users on to the system and they induce greater use. This is how India managed to connect more than 10 million new users a month.

According to Nokia’s 2011 Total Cost of Ownership Study, six countries offer the same bundle of services for less than Kenya does, including Bangladesh, Sri Lanka, China, Pakistan and India. The sky has not fallen in those countries. President Kibeki should stop illegally interfering in a regulatory process that would have brought his people lower-cost voice telephony.

The full news report is here.

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