Safaricom: Competition report shows regulator’s fixation on price controls
4 months ago, 19 Mar 14:17
In my last blog post, I discussed my impressions of a recent public consultation meeting hosted by the Communications Authority of Kenya during which a report assessing the degree of competition in the telecommunications market was presented. The summary of the piece was that the regulator may have intended to ensure the best outcomes from the consultation but these were undermined by the style and structure of the meeting. Despite the fact that there are some lessons for the regulator to learn, several issues of substance in the report are worth highlighting. The background to this long study is that there have been claims from competing firms that the market for telecommunications services in Kenya is dominated by Safaricom. This claim has been sustained by competitors though our survey has not revealed an equally strong assertion from consumers, whose interest should be central to an analysis of market dominance and its adverse effects. TWO IMPRESSIONS To its credit, the Communications Authority made a public declaration to undertake a study and to decide whether further regulatory reforms would be necessary. Based on the substance of the report, one comes out with two impressions that summarise the future of regulatory policy. It seems that there is a strong appeal for price controls and need to direct market outcomes towards greater parity among contesting firms, all without reference to either consumers or the Competition Authority in Kenya. This report brought to the fore the existing tension and absence of agreement between the Communications Authority and the Competition Authority regarding the authority to regulate conduct related to competition. Judging from the terms of reference with which the consulting firm worked, it is not a surprise in my view that the outcome was a declaration that Safaricom is dominant in the most lucrative market segments. And the finding of dominance is material and a regulator should be keener but the ethos of Kenya’s competition law is that dominance “per se” is no regulatory offense but that the material issue is whether that position of empirical dominance has been abused to the detriment of consumers. This is a finding that could only be made with an investigation by the Competition Authority. REGULATORY PROPOSALS Indeed, among the most curious matters that arose is whether the remedies proposed and the findings that informed them reflect the concurrence with the Competition Authority. This is a big issue for the country because the absence of the voice of the Competition Authority reflects another step in the systematic approach by regulatory bodies in Kenya to expand their reach beyond technical regulation and towards emasculating the Competition Authority. As stated earlier, a second point of concern is in relation to the nature of regulatory proposals. The Communications Authority seems to be enamoured of price controls as a major regulatory policy instrument. Even if the findings of insufficient competition in the industry were true, I found the report technically deficient in proposing regulatory tools that do not involve direct market intervention and price ...
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