Kenya has ushered in the new decade with a number of ICT policies and regulations that have put the Government and industry players on a collision course. Zachary Ochieng and Alex Owiti give an insight. The growth in the Information and Communication Technology (ICT) sector has resulted in tremendous improvements and unprecedented opportunities for Africa’s participation in the global knowledge economy. It follows that as a new decade dawns, new ICT policy and regulations have to be put in place to sustain this momentum. Kenya, for instance, is poised for a major shift as the ICT sector was liberalised before the requisite laws and regulations were put in place. New regulations relating to fair competition The Communications Commission of Kenya (CCK)—the industry regulator—is coming up with new regulations relating to fair competition among the GSM operators, new postal regulations as well as those involving electronic transactions.

“We have not had these regulations in the country before. As we move forward with the sector itself, we need to create laws and policies to make it conducive for people to do business in this country. Because we have migrated to digital TV, and with a lot of opportunities especially in e-commerce, it would now be possible for people to do business effectively once these laws and regulations are in place. So, 2010 is a major year for us. Our objective is to develop a regulatory framework that is dynamic and forward looking,” says Bitange Ndemo, Information and Communications Permanent Secretary.

Information and Communications assistant minister George Khaniri says the new ICT regulations will be critical in attracting and sustaining investments in the country with the ability to synergize on the objective of delivering value to the consumers. “E-commerce is yet to catch on in our country largely due to lack of a conducive legal environment until very recently. In today’s interdependent and highly networked global economy, we cannot survive as a country unless we scale up our commercial interactions and presence online. This was one of the motivations for enacting the Kenya Communications (Amendment) Act, 2009 to leapfrog the country into the digital era”, says Khaniri.

Affordable and equitable access a critical issue

Still, for a good policy to be effective, an efficient information and communication infrastructure must be in place. A study conducted by the UN Economic Commission for Africa (ECA) notes that in spite of efforts made to date by most African countries to create the necessary environment for ICT development, majority continues to face challenges relating to the availability, quality and affordability of ICT infrastructure. Titled NICI e-strategies: Best practices and lessons learnt, the study says that although the basic infrastructure to connect to the global information network exists in some countries, affordable and equitable access remains a critical issue for economic empowerment and Foreign Direct Investment (FDI) attraction. Ndemo concurs.

“For me and for everybody worldwide, we must cut the cost of access for the ICT policy to be effective. As you know, we have invested heavily in infrastructure in order to reduce the cost of access. We now need to cut down the cost of hardware and we have already made significant progress”, says Ndemo. In Ndemo’s assessment, the Government has done very well in terms of development of infrastructure.

Regional hub for ICT

“The two undersea cables are complete. We may see another new two coming into Kenya this year, effectively making Kenya a regional hub for ICT. We have also finished the National Fibre Optic Backbone. We have linked to Ethiopia, Uganda, Southern Sudan, and Tanzania, so all our neighbours will benefit. On the Government side, we have done the Government core network linking all ministries. This year, we are going to concentrate on taking advantage of this investment to bring more efficiency to Government in service delivery.” Economists argue that in order to achieve more than the current GDP growth of 2.5 percent at a value of Ksh 12 billion ($160 million), the ICT sector in Kenya requires favourable policies and enabling laws to catapult itself to an economic independence and stability.

 ICT master plan gathering dust

But it is ironical that the Government’s ICT master plan has been gathering dust in the shelves for the past two years. Ndemo says the plan will soon be taken to stakeholders for consultation before being published. According to Aida Opoku-Mensah, Director, ICTs and Science &Technology Division, ECA, the budget component is also fundamental in formulating a good ICT policy.

“countries need to realise that investing in ICTs requires a need for a prediction on ‘return on investment’ – how much will it cost, what impact it will have on the bottomline. The key challenge is how to regulate the sector to achieve its full impact”, says Opoku-Mensah.

In Kenya’s case, battle lines are already drawn as CCK moves to implement the new regulations. Notably, the dominant operator, a concept that restricts the dominant operator from engaging in activities that amount to abuse of its dominant position, has not gone down well with Safaricom.

Dominant operator

 “I am not denying the fact that we are a dominant operator, especially with our more than 20 percent market share. But we shouldn’t be punished just because we are a dominant operator. As long as we are not abusing our dominant position, I don’t understand why we should be punished”, says Safaricom CEO Michael Joseph. “If, for instance, I was charging Ksh 1 per minute just because I am a dominant operator, that would amount to abusing my dominant position. But I am not doing that. I am selling at the same level as my competitors.” However, Joseph would not say much at the moment as the regulations are still undergoing redrafting. “We have submitted our comments to the regulator, in an open forum and they are now redrafting. So we’ll see what comes out of it.”

Supernormal profits

At a stakeholders’ forum convened by CCK in November last year, Nzioka Waita, Safaricom’s Head of Legal and Regulatory Affairs, vehemently opposed the dominant operator rule and asked for the deletion of the clause, instead proposing a replacement of the provision with a new one that reading, abuse of dominance since according to him it is illogical to punish dominance. The provision describes a dominant operator as ‘one holding more than 25 percent market share and earns supernormal profits.’ In a heated argument, CCK Director General Charles Njoroge challenged Safaricom to understand that the new regulations were not meant to target a particular operator but to offer a level playing field for everyone.

“As a commission, we have the mandate to protect investments in the country through a fair regulatory environment and manage competition without penalising anyone. And therefore we have no intentions whatsoever to implement laws that will target only one investor but to ensure that the business environment is fair for all”, said Njoroge.

But Zain Kenya Managing Director Rene Meza supports the dominant operator rule, saying it ensures fair competition. “Robust regulatory environments have the concept of dominant operator in their regulations. They realise that size if abused can destroy a market, drive out competitors and harm consumers through high monopolistic prices. We commend the CCK for taking a step in the right direction and look forward to the implementation of the regulations on competition”, says Meza. It is noteworthy that in other markets, such as the EU, dominant companies like Intel and Microsoft have been punished for abusing their dominance position.

$25 million spectrum fee

 Another regulation that has not gone down well with the operators is the upfront $25 million 3G spectrum fee charged by the regulator.

“The fee is prohibitive and serves as an entry barrier for smaller operators. Other African countries, Uganda, Tanzania, Botswana and South Africa gave these frequencies to operators for free”, says Meza. According to Zain Kenya boss, the real value of these frequencies is not in the upfront charge collected by government but in the stimulus it provides to the economy through the proliferation of data services.

“Due to the dynamic nature of the telecommunications industry, we shall continue engaging our customers with a view to ensuring that we provide products and services that are tailored to their needs. The recent developments in the sector indicate that innovations/ product roll outs will be mainly centred around data and value added services.” “We believe that the CCK should take a long term view on this matter and forgo the upfront fees.”

But while the smaller operators such as Zain and Orange have been advocating for a waiver of the exorbitant 3G licence fee, Safaricom, which has already paid for the licence would hear none of it, arguing that operators should be treated equally. “We paid $25 million for our licence. Yes, we made the investment and it’s paying off. Now people coming later want a reduction in the licence fee saying Safaricom is going to hit hard. Anyway, I don’t have a problem with the reduction of the licence fee. But if this is done, I would be happy to get some of my money back”, says Joseph.

CCK however is optimistic that the spectrum fee will be reviewed.

“Within three years, the spectrum fee will be revisited. We intend to review it either upward or downward after getting a comparison of the global trend. But they will be reviewed on the basis that the benefits will be passed on to the consumers,” says Njoroge. Also causing jitters to the operators is the impending introduction of number portability, which will enable subscribers to move to the operator who offers the best value while at the same time retaining their numbers. A number of operators have been opposed to this but Ndemo says it is not for them to decide. “We have already decided we are going that direction. The consumers have decided as much”.

Regulations not yet drafted

 On his part, Meza supports number portability, but with reservations. “Operators will incur some costs to put up the data bases that support number porting. However, we do not believe Kenya is ready for the implementation of number portability. It is a prerequisite that number portability is preceded by regulations that determine how operators are to deal with each other in number porting. At present the regulations have not been drafted and they would need to be published for public consultation before they have the force of law.”

Either way, ICT regulatory environments need to be supportive of private investment.

“The ICT industry has undergone and continues to undergo a disruptive phase of development in Africa due to convergence and the rapid diffusion of mobile/internet-related applications. Therefore convergence has to be addressed through ICT policy and regulatory frameworks. This is an important issue as adapting to convergence through regulation will expand ICT access, open up markets and attract investments, particularly from the private sector if the markets are left to operate”, says ECA’s Opoku-Mensah.

According to her, there should be an emphasis on independence of regulators, with minimum interference from governments so that they can facilitate investment into the communications industry, promote fair competition in the market place and the prevention of anti-competitive practices. But analysts’ opinion is sharply divided as to whether this situation obtains in Kenya. Media owners are on the warpath following the new broadcast regulations that came into effect early this year.

 Restrict cross media ownership

In a nutshell, the Kenya Communications (Broadcasting Regulations) 2009 law will restrict cross media ownership; reduce foreign content on television and radios; bar foreign ownership of broadcasting stations except on a reciprocal basis; stop unfair business practices in the sector; and eradicate hate speech. The Information and Communications minister seeks not only to control content, but even how news is reported as well as crafting apologies and shareholding patterns. It also introduces punitive licensing procedures as well as rules on such internal matters as advert placement and running time.

Retrogressive and obnoxious

In a statement, Kenya Editors’ Guild chairman Macharia Gaitho described the regulations as retrogressive and obnoxious. “When the industry opposed repressive amendments to the Communications Act 2009, Prime Minister Raila Odinga called a meeting attended by both the ministry and media representatives. Both sides agreed on a proposal tabled by Attorney-General Amos Wako, that removed the clauses seen by the media as repressive. The ministry has now gone behind the agreement by re-introducing, under the guise of regulations, the offensive sections struck out from the Act.”

The Media Owners Association maintains the regulations were crafted in bad faith.

“We think the regulations were done in bad faith and we have no intention of respecting them,” says association chairman Linus Gitahi. “The idea was to form a Broadcasting Council to develop the regulations. No other body should have done that.”

However, Ndemo affirms that the media owners and the Media Council were asked to submit names of those who would sit on the Broadcast Council but they never did. But even the government’s own human rights watchdog has condemned the new regulations.

"Prime Minister Raila Odinga came out to resolve the contentious issues with the media and now a ministry is doing the opposite. In gazetting these laws, the Government has lost touch with reality.”, says the Kenya National Commission on Human Rights vice chair Hassan Omar Hassan.

Gagging the media

The Standard Group is of the view that the new regulations are aimed at gagging the media.

“As a media house that has in the past suffered at the hands of the State, we take great exception and call upon Kenyans — as the main stakeholders who stand to lose should the media be denied its obligation to defend matters of national interest — to resist this attempt”, the Standard Group said in a statement.

But Ndemo stands by the ministry’s decision. “There is no absolute freedom anywhere in the world. As a government we have to enforce the regulations to meet the best practices which are equally embraced across the world.”

Regulations are subject to change

That notwithstanding, all is not lost. Ndemo says the regulations are subject to change if any of the media owners felt suppressed by any of the clauses published in the gazette.

“There is no cause for alarm because regulations are not like laws and therefore they are subject to change any time.”

 He says the new regulations had to be enforced without further consultation since last year he could not get an extension of time from the parliament to allow for a miscellaneous amendment bill that would permit for the amendment of the controversial clauses in the regulation. He told the Media Owners Association to refrain from complaining since the logistics to effect the regulations were followed to the letter. This included the public foras that were conducted by the ministry and the regulator in November last year, and which, none of the media owners attended to submit their reservations about the new rules.

Withdrawal of frequencies

The penalties that will come with the new regulations will even include withdrawal of the frequencies from the broadcasters and banning them from practicing the business. One thing is certain, though. Debate on the controversy surrounding the new regulations won’t just go away. On ownership and control, Part II,SEC 10.(1) of the regulations states that none other than the public broadcaster, no one shall be awarded more than one frequency or channel for a radio or television broadcasting in the same area of coverage. “No persons may, directly or indirectly, except the public broadcaster be assigned more than one broadcast frequency or channel for radio or television broadcasting in the same coverage area. Provided the Commission shall prescribe a time frame for existing stations to comply with this requirement.”

While Ndemo maintains that this is the regulation throughout the world, he says that broadcasters with extra frequencies will be given seven years to recoup their investments, by which time technology will have changed drastically. Subsection 2 of the same regulation states that the shareholding of a licensee shall at all times comply with the Government’s Communications Sector Policy, as may be published from time to time and (3) a licensee shall notify the Commission of any proposed change in ownership, control or proportion of shares held in it at least ninety (90) days prior to effecting such change.

On the other hand, on the same clause, broadcast frequencies or channels assigned to broadcaster shall not be let or transferred to a third party unless with the explicit written authority of the Commission. On content, Part IV of the regulations says: “ (1)A licensee shall generally ensure that no broadcasts by its station:- (a)contains the use of offensive language, including profanity and blasphemy;(b)presents sexual matters in an explicit and offensive manner;(c)glorifies violence or depicts violence in an offensive manner; (d)is likely to incite or perpetuate hatred or villify any person or section of the community on account of the race, ethnicity, nationality, gender, sexual preference, age, disability, religion or culture of that person or section of the community; or has no programme rating from Kenya Films Censorship Board indicated prior to the commencement of such programmes.” And to help children from provocative and violent content from the radio and television, broadcasters will have to comply with the following regulation: A licensee shall:(1)ensure that due care is exercised in order to avoid content which may disturb or be harmful to children; such content is content with offensive language, explicit sexual or violent material, music with sexually explicit lyrics or lyrics which depict violence;(2)Shall not broadcast such programmes as referred to in (a) above during the watershed period;(3)request for permission to conduct the interview from the minor's parents or guardian before conducting an interview with a minor.” For watershed periods which are meant to protect children from the unwanted programmes, it is the duty of licensees to ensure that: “1-(a) content which depicts or contains scenes that are rated by the Kenya Film Classification Board as adult, or are of the language intended for adult audiences shall not be aired during the watershed period;(b) all programmes broadcast during the watershed period must be suitable for family audiences. The transition from family-oriented to a more adult programming after the watershed period shall be gradually ;( c) consumer advice such as warnings, labeling, classification details and other announcements shall be given prior to the telecast of a programme or its trailers.” Broadcasters will also be required to commit a minimum amount of time to the broadcast of local content and in the event of not complying with the rule, the CCK will mount a fine of an amount as prescribed by regulation. At the same time foreign media in Kenya will also be required to prescribe to a minimum local content quota.

“A licensee may be required to commit a minimum amount of time to the broadcast of local content as may be prescribed in the licence, or as may be prescribed from time to time by the Commission by notice in the gazette; provided that where a broadcaster is, unable to comply with the foregoing, the Commission shall require such broadcaster to pay such an amount of money, as may be prescribed by the Commission into the Fund; the Commission shall from time to time prescribe a minimum local content quota for foreign broadcasting stations having foot prints in Kenya.” Heavy penalties await broadcasters that do not comply with the above regulations. “Any person who contravenes any provision of these regulations commits an offence and on conviction shall be liable to a fine not exceeding Kshs 1million ($13,000) or to imprisonment for a term not exceeding three years, or both.” So much for the broadcast regulations.

Malili e-town

Away from the contentious broadcast regulations, Kenya is set to become an ICT hub on the continent as the Government is in the process of establishing ICT parks or Special Economic Zones (SEZs) that stimulate the productive and efficient use of ICTs. Dubbed Malili e-town, the zones will comprise ICT incubation centres, as well as other ICT related industries. Going by its design, Malili will be one of Africa’s largest multi-use technopolis consisting of ICT industries, Science Park, BPO Park, convention centre and a financial district as well as other necessary infrastructure. But no sooner had the Government acquired land than controversy began to dog the purchase.

“Acquiring land in Kenya is in itself a task that has many controversies. The tender process in Kenya contributes to our backwardness by at least three years. Due to corruption in Kenya, we have grown not to trust one another yet business is all about trust”, Ndemo argues. It happened that the leadership wrangles among the owners of Malili Farm, forced some of them to go to court, claiming they were not informed of the sale of the land to the Government. But Ndemo argues that the plaintiffs have no locus standi since the Government already has the title deed. At a recent talk on the ICT Park held at University of Nairobi’s Chiromo campus, Ndemo passed around the title deed to prove that the acquisition of the ladn was a done deal. On another positive note, Kenya became the second country in the continent after South Africa to migrate from analogue to digital broadcasting. Ndemo says the complete switch will be completed by 2012, three years ahead of the deadline set by the International Telecommunication Union (ITU).

“As soon as we are through with digital TV migration, radio is also going to shift from analogue to digital, meaning one frequency would be able to give you 24 stations”, Ndemo enthuses. Still, controversy surrounds the pricing of set-top boxes. While the Government says they should retail at between Kshs 3000 to 5000 ($40 to $67), some consumers have been buying the gadgets at Kshs 10,000 ($133). “For us we have created an opportunity. It is not for the Government to push entrepreneurs. Kenya is a free market economy. Once many sellers start coming on board, the prices will definitely go down”, Ndemo asserts.

 But private broadcasters have not been happy considering that the Kenya Broadcasting Corporation (KBC), the public broadcaster, will be the sole signal distributor. Ndemo however argues that it is only KBC that has extra frequencies for testing.

“Between now and 2012, KBC will be the sole signal distributor. But after 2012, any other player can come on board.”

This year will also see the operators complete the registration of SIM cards. Last year, President Mwai Kibaki gave a six-month deadline within which the registration was to be completed. Ndemo says that although the deadline has elapsed by one month, 70 percent of the SIM cards have already been registered, with some operators having registered 90 per cent. The president gave the directive in the wake of abuse of SIM cards by criminal gangs who would buy and dispose of SIM cards after committing a crime. Time is also up for the mushrooming computer colleges that offer certificates not worth the papers they are printed on. Soon, the International Computer Driving Licence (ICDL) will be the minimum computer literacy qualification recognised by the Government. Ndemo says the computer colleges have no option but to comply once the directive comes into effect. The year 2010 indeed has a lot in store for the ICT industry.