Thorny Consumer Protection

Challenging networks control of users

Kenya telecommunications private sector has failed to effectively compete to realise envisaged benefits to consumers, but we are not alone.

Basic telephony cost has risen over five-fold from the 1999 pre-liberalization tariffs and besides mobility, other offing remain unaffordable. Mobile internet surfing, multimedia messaging, SMS-based computer program, chat, and other wonderful mobile services have failed to take off due to impossible tariffs.

In 1999, a 1-minute call cost 1 shilling but today the same call costs 5 shillings and 40 cents via Telkom network – indisputably still the cheapest. At 5 shillings per SMS, one could have talked for 5 minutes back then had liberalisation never taken place. In today’s context, a 1-minute call via Telkom mobile CDMA costs the same amount as an SMS in the Safaricom and Celtel networks.

The irony presented in cheaper mobile CDMA phone calls to other networks compared to calls within the same GSM networks only proves highly inflated tariffs and there can be no excuse for the sustained high prices.

“Flashing” and “flashback” continue to be popular ways of communicating; flashers hoping they would be called back (celcos are yet to introduce a free “I am also unable to call you” re-flash back service). Well, there may be seven million mobile subscribers in Kenya, but it would be quite interesting to find out how many of these phones ever ring, how long the conversations last, and the last top-up amount.

Subjected to a thorough cost-benefit analysis, local Information and Communication Technologies (or ICTs) have turned out to be impecunious instruments rather than prosperity enablers elsewhere in the world.

Although Telkom’s CDMA sms cost only 2 shillings and 50 cents per message, this rate could drop further and be more affordable considering West African mobile operators, for example in Senegal, offer free sms as part of their Universal Access Service contribution and they still record good profits. Consumers should urge operators to also start offering free sms in Kenya.

Scratch cards outlets at bus stop, for example, have got shoeshine and roast maize jua kali businesses crying foul and driven to near extinction and GSM companies continue to eat into other small industries earnings and trades as substitute consumption reality hit hard.

Bar owners report reduced sales with widespread mobile phones in their pubs. South Africans brewers accuse mobile phones for 20 per cent sales reduction.

Despite international satellite bandwidth prices dropping, more ISP and Internet gateways licenses, Internet end-user prices remain high, while quality deteriorates and Internet users increase. In the UK, BT Online, VirginNet, and others charge 2,400/= shillings (US$ 30) per month for a 512Kb ADSL connection while Telkom Kenya charges shillings 10,000/= for a 128 Kb ADSL. GSM companies’ charges are volume-based and vary depending on the amount of data passing through their networks.

Whether internationally recommended internet sharing ratio (or contention ratio) of 1:100 is followed is a question for another day. This ratio assures Internet “congestion” is minimised for the end users.

The essence of liberalizing the telecommunication sector was to foster competition of services, narrow development gaps and work towards universal telecommunications service, and to contain then perceived market abuses by the former state monopoly, Kenya Posts and Telecommunications Corporation (KP&TC).

Commenced through the Kenya Communication Act, 1998 the law that hurriedly split KP&TC and created the Communication Commission of Kenya. The law was very closely followed by the operational commencement of seemingly waiting mobile companies and little attention was paid to consumer protection.

In the only reference to consumers in sections 23 and 47 the Act states; “the Commission is required to ensure that communications services are provided throughout Kenya and that the interests of all users of these services are protected with respect to prices charged for and the quality and variety of those services among other responsibilities”

But overall, the interests of the consumer (which includes businesses, civil society, NGOs as well as private citizens) are paramount in market liberalization. Should worse quality and higher tariffs result, then such liberalization only succeeds in establishing market price failures and consumers ought to “enforce” self-regulation.

Effective market competition should translate to a variety of consumer options; better products, and improved customer care services, and most of all, lower prices all of which were repeatedly promised to convinced on the need to liberalize.

In normal market situations, when suppliers increase prices go down as a result of competition for customers among suppliers. Also, when demand increases prices go down because suppliers enjoy better economies of scale, or reduced bulk purchase price per unit which translates to cost savings then passed on to consumers.

Markets defying "demand and supply" principle among whose characteristics include few suppliers, sustained higher prices, poor quality of service and after-sales services, and bloated profits. Usually, overblown Corporate Social Responsibility public relations "mosquito nets", "traditional dances" and "national pride" funfair to cover up their continued consumers rip-offs.

Unofficial but structural barriers to new entrants include very high “all-inclusive” license auction fees, territorial protectionisms, dominant players disputes (“dominant player” shyly describing a private monopoly) while others include protracted legal battles, misleading advertising, or sheer terminological and intrigue games.

Collateral liberalization casualties this far includes small Internet Service Providers who now find they are competing on internet services provisioning with the Safaricom and Celtel – the GSM duo and Telkom – their former supplier. Both GSM telcos have licenses permitting them to own national infrastructure, run voice and data services, as well as Internet gateways. ISPs, on the other hand are not permitted to construct their infrastructure.

These unpleasant revelations emphasise the importance of consumer protection and the need to take on all telecomm providers to task over their activities not just on the quality of services and tariffs, but among others, on radiation, environment (such the disposal of batteries and old handsets), worth, value, and impact of their CSR programmes.

It would be quite strange if embraced consumer protection now considering their concerted past opposition to consumer protection and the lacklustre official support to this subject, up till Tuesday last week.

The Communications Commission of Kenya announced in January (Smart Company Magazine, The Daily Nation ) they would henceforth fully support organised consumer protection–the first official victory for consumer advocates. But the onslaught on these private monopolistic telcos should not stop there. Consumers should explore every policy and legal avenue to achieve lowering of tariffs and the best quality services possible.

Rather than succumb to widespread tariffs apathy consumers abyss, or continue hoping for future lowered tariffs if and when Econet, vTel, wTel, xTel, yTel or zTel ever become operational, the ICT Consumers Association of Kenya has been developing comprehensive strategies that utilise opportunities presented by the ICT policy the intention of translating aspirations into reality to benefit telecommunication users immediately.

The National ICT Policy recognizes inadequate infrastructure hinders widespread, quality, and affordable ICT uptake and the government states its commitment to facilitate infrastructure development. The policy states, "that government will encourage the sharing of the capacity of public and private utility providers (e.g. power, water, railway, etc) that have rights of way to develop the national information infrastructure"

License-free ISM frequency bands, i.e. 2.4 GHz and 5.7 GHz, are now open for public wireless data communication and the provision of broadband Internet. The use of these bands is based on the criteria of least congestion, non-protection and non-exclusiveness. Migration/allocation process is being coordinated to avoid conflict with the existing users. It would be interesting to find out if this band is not already encroached upon by private telcos.

Considering above policy declarations and that fibre optic cables cost about 75 shillings per metre and is locally available then consumers are free to construct their own networks, operate or lease them to ISPs or their choice, and at their own terms and reclaim, if at least not to reinforce, "the customer is always right" principle.

Tired of waiting for big businesses to find "business cases" in taking affordable broadband to remote areas, Canadians and Americans started campaigns dubbed "fibre to the people" in 2000, and today, Canadians are delivering Gigabytes to the home.

When government water programs failed many years ago, rural communities in Kenya started self-help water projects build dams, laid their pipes, and today they run successful irrigation and domestic water schemes. Digging trenches for much lighter fibre optic cables that could also be passed on overhead electric poles should be a lot easier that it was for water pipes.

Equipped with the enabling policy framework and the proposed Information and Communications legislation innovative consumers are strategizing construction of own wireless "mesh" networks to link to the upcoming national internet fibre backbone for quality, true broadband internet and WiMAX VOIP voice calls at most affordable prices.

In their city glasshouses, providers may continue assessing viability of taking services to rural and residential areas and if or when they finally do, it may be too late because customer-owned networks returning profits will have undivided customer loyalty from their community services providers.

Rendering credence to the saying "the world is a global village", it has just been revealed that US mobile phone users need as much, if not more, help in fighting off networks owners control.

Calling for "Network Neutrality" in the mobile phone communication networks, Professor Tim Wu of Columbia University School of Law this month published a detailed paper outlining the dirty tricks GSM companies use to kill innovation as they ensure they retain profits by controlling the services mobile users can access.

He examines the practices of the wireless industry with an eye toward understanding their influence on innovation and consumer welfare. The US wireless industry, over the last decade, has succeeded in bringing wireless telephony at competitive prices to the American public. Yet at the same time, we also find the wireless carriers aggressively controlling product design and innovation in the equipment and application markets, to the detriment of consumers.

Titled "Wireless Net Neutrality:CELLULAR CARTERFONE AND CONSUMER CHOICE IN MOBILE BROADBAND" the publication is available at http://www.newamerica.net/publications/policy/wireless_net_neutrality

ICT Consumers Association of Kenya – ICAK towards "enlightened consumer enjoying high quality and best priced ICT Services".