Telecommunication Regulatory Reforms Driven By Ngn A Case Study Of Kenya

Telecommunication Regulatory Reforms Driven by Next Generation Networks: A Case Study of Kenya

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Telecommunication Regulatory Reforms Driven by Next Generation Networks:

A Case Study of Kenya

Abstract

Next Generation Networks (NGN) enable

the delivery of multiple services

independent of and over different access and

core networks. This trend of separation of

infrastructure and services is challenging

existing regulatory models.

To take advantage of the opportunities that

NGN offer governments are supporting the

development of dynamic and responsive

regulatory frameworks, to enable

incumbents and new entrants to offer new

and innovative services.

This paper is provides the regulatory

responses to NGN in Kenya using the

metrics of regulation and licensing,

competition, technology neutrality, resource

allocation, interconnection, public

participation, universal access and

infrastructure sharing.

1.1. Introduction

There is growing recognition of the social

and economic benefits of information and

communication technologies (ICT). Many

developing nations are faced with the

challenge of changing their focus from

traditional economic drivers such as

agriculture to become knowledge-based

information economies. In facing this

challenge the, availability and accessibility

to ICT infrastructure is essential. National

competitiveness is a key factor in the

promotion of Next Generation Networks

(NGN). Consequently, governments are

increasingly supporting initiatives in

technology, product and service innovation

in a bid to becoming leaders in cutting edge

technology.

Changes in business models and the

regulatory framework in the recent past have

largely been influenced changes in

technology. These changes are driven by

the burgeoning consumer demand for a

ubiquitous networked society delivering

efficient and convenient services. The

telecommunication industry is characterised

by convergence in technologies, allowing

for the delivery of multiple services and

applications accessible from any location.

Convergence has led to the growth of NGN

which enables the provision of a full range


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of services independent of and over different

access and core networks. It is expected that

this characteristic of NGN will enable future

networks to become more pervasive,

flexible, and transparent and offer a more

consistent user-experience.

There are various definitions for NGN.

NGN definitions vary among parties

depending on their interests and

organizational objectives. Technically,

NGN are defined as packet-based,

broadband, quality of service (QoS)-enabled

networks, in which service-related functions

are independent of the underlying transport-

related technologies1. These characteristics

enable unfettered access for users to

networks and to competing service providers

and/or services of their choice. NGN support

generalized mobility that allows consistent

and ubiquitous provision of services to

users2.

1 ITU‐T’s Definition of NGN. Available at : http://www.itu.int/ITU‐T/ngn/definition.html [Accessed August 2009]

Figure 1: NGN architecture

Source: GSM Association (2007)

This paper is a study of regulatory

interventions that encourage innovation,

investment and transition to NGN in Kenya.

1.1. Introduction

The Republic of Kenya is situated in East

Africa, astride the equatorial latitude.

Kenya’s population is growing at about

2.9% percent per annum and currently totals

about 36 million, 80 percent of whom reside

in the rural areas. A widely dispersed rural

and young population, in addition to the

recognition of the correlation of ICT and

economic development influence the

adaptation of communication technologies.

The Kenyan government’s ‘Vision 2030’

development strategy which aims at steering

the country to middle-income level has

elected ICT as one of the main drivers to

this economic growth and is central towards

achieving industrialization. The Kenyan

government has targeted the Business

Process Outsourcing (BPO) as the new but


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promising sector for the country and

especially for its young people. Regulatory

reform is expected to ultimately lead to the

achievement the ‘Vision 2030’ which aspires

for a country firmly interconnected through

ICT providing business services via the

Internet to companies and organizations in

the developed world.

Apart from the national strategy outlined in

the Vision 2030, the government has

enacted the Kenya Communications

(Amendment) Act, 2009. Though not

studied in this paper, the act is evidence of

political support for the creation of a

forward-looking and enabling environment

for the development of NGNs and provides

for a coherent approach to regulating the

converged ICT sector

1.2. Regulatory Reform

Telecommunication sector reform in Kenya

has been driven by liberalization and

convergence of technologies resulting in the

review of the regulatory framework through

introduction of additional licence categories

and technology neutrality, respectively.

The telecommunication sector in Kenya now

driven by market forces was previously

driven by external pressures. These include

structural adjustment program (SAP)

instituted by the International Monetary

Fund (IMF) and the World Bank which

required the government’s adoption of a

policy framework paper titled, "Economic

Reforms 1996-1998”. Liberalization and

restructuring of the telecommunications

sector was a major component of the

reforms that included the separation of

postal and telecommunications services;

selling a 30% stake in the incumbent

operator to a strategic investor and through

public flotation; joint ventures for cellular

phone; and liberalization of pay-phones and

Very Small Aperture Terminal (VSAT)

services.

A consequence of the reforms was the

publishing of the Telecommunications and

Postal Sector Policy Guidelines in 1997

(revised in December 2001) that provided a

roadmap for restructuring and liberalization

of the sector. The policy provided for

orderly expansion and modernization of the

telecommunications infrastructure up to the

year 2015 through the inclusion of specific

targets for telephone penetration and

privatization

The sector policy paved way to the

enactment of the Kenya Communications

Act of 1998 (KCA, 1998) which repealed the

Kenya Posts and Telecommunications Act


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providing for the corporatization Kenya Post

and Telecommunications Corporation

(KPTC), which served both as an operator

and regulator (ITU, 2001). The KCA, 1998,

split of KPTC into three entities the Postal

Corporation of Kenya (PCK), Telkom

Kenya Limited (TKL) and the

Communications Commission of Kenya

(CCK) performing the regulatory functions

of the telecommunications, radio

communications and postal sector. Further,

the act provided for the formation of the

National Communications Secretariat (NCS)

charged with policy formulation and the

Appeals Tribunal for communication dispute

resolution.

The mandate of the CCK as provided by the

KCA, 1998 is to license and regulate

telecommunications, postal and radio

communications services in the Republic of

Kenya. The regulator’s functions include:

Issuance of licenses for all

telecommunications and postal services;

Price regulation; Establishment of

interconnection principles; Type approval of

equipment; Development of numbering

plans; consumer protection and Management

of the radio frequency spectrum.

Guided by the market structure contained in

the policy guidelines, 2001 and deriving its

mandate from the KCA, 1998, the regulator

licensed players in various market segments.

The policy guidelines granted TKL a five-

year exclusivity period (legal monopoly)

from 1999 to 2004 in the provision of the

international internet gateway, international

voice and data networks and services,

national voice and data networks and

services, local voice and data networks and

services in Nairobi province. The

Government’s intention in granting of the

legal monopoly was to give adequate time

for the company to recouping the investment

on the network and reengineering the

organization without the ‘risk’ of

competition.

In fulfilling the regulatory agenda of

determining the level and terms of entry in

different market segments and adopting

processes for the award of licenses to

service providers, the new market structure

was reviewed in 2002. The new structure

outlined the liberalization framework in

various market segments, the licensing

requirements and procedures with a view to

hastening investment, promoting penetration

of service and enhancing fair competition.

However the rapid pace of technological

development that resulted in the blurring of

distinction between various licensing


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categories demanded that the regulator

adopted a progressive approach of

restructuring of the market (CCK, 2005c).

Kenya like India, redefined the kind of

licences required by different players with

the intention to migrate existing licensees to

a Unified Licensing Framework (ULF) by

1st July 2008.

The ULF permits any form of

communications infrastructure to be used to

provide any type of communications service.

The framework also provides the regulator

an opportunity to progressively structure the

market by redefining the kind of licences

required by different players, providing

equal licensing opportunities to all players

under a first-come-first-serviced basis,

facilitating direct interconnectivity between

network operators and limiting

anticompetitive practices arising from

vertical integration and cross-subsidization.

There are three broad licence categories in

the ULF: Network Facilities Provider (NFP),

Applications Service Provider (ASP) and

Contents Services Provider (CSP).

This licence categorization differs from that

of India where licences are classified on the

basis of regulatory authorization required.

The main objective of the ULF is to harness

emerging technological opportunities,

increase competition and develop the sector.

The ULF has heightened activity in the

internet sector. Operators and service

providers are claiming their stake in niche

markets by taking advantage of the

opportunities that the framework present by

positioning themselves to distribute

bandwidth within and across the country’s

boundaries through the building of in-

country and cross-border fibre networks.

This move by operators to increase coverage

and enlarge their customer base has lead to

an initiative to harmonize regulatory

frameworks in East African countries

through the East Africa Regulatory Post and

Telecommunications Organization

(EARPTO).

The ULF has encouraged service providers

to diversify service offerings, Wananchi

Group, a local ISP has launched cable-based

triple play services offering a combination

of television, broadband and telephony

services brand named Zuku. Wananchi

Group aims at increasing the availability and

reducing the costs of connecting to the

internet as well as pushing up customer

numbers.


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The new environment has also encouraged

the Government on the basis of the national

vision to use ICT for economic

transformation to support the deployment

national and international fibre optic

networks to complement investment efforts

by private sector. These networks

implemented through public private

partnerships (PPP) include Fibre Optic

National Network (FONN) and The East

African Marine Systems (TEAMS).

Figure 2: Fibre Optic National Network

The government’s intention is to ensure

diversity in the provision of affordable,

reliable and high capacity international

connectivity based on the open access

principle. The availability of cheaper

international broadband access through these

fibre projects is expected to create new

business ecosystem and subsequently socio-

economic growth. The national ICT policy,

2006 identifies the promotion of (PPP) as a

strategy for the development of

telecommunications infrastructure. PPP are

an attractive model in countries, such as

Kenya, that are building up a technology

sector from a low base. Countries are

viewing the availability of broadband

networks as significant national

infrastructure and are setting specific goals

through enactment of appropriate policies

and regulation, as well as committing

significant public funds towards the

development of these networks.

Figure 3: The East African Marine System

1.3. Conclusion

Many countries including Kenya are

viewing the availability of networks with

broadband capabilities as significant

national infrastructure and are setting

specific goals through enactment of

appropriate policies and regulation, as well


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as committing significant public funds

towards the development of these networks

Political support and the establishment of a

flexible and responsive regulatory

framework are critical to encourage

investment in NGN infrastructure.

References

1. CCK (2008b) CCK Annual Report

2007/2008 Available at :

http://www.cck.go.ke/resc/publicatio

ns/annual_reports/CCK_Annual_Rep

ort07-08.pdf [Accessed March 2010]

2. CCK (2008c) Unified Licensing

Framework [online] Available at:

http://www.cck.go.ke/licensing/telec

oms/telecom_marke_structure.pdf

[Accessed March 2010]

3. CCK (2005a) Proposed Guidelines

for the Implementation and

Provision of Voice over Internet

Protocol (VoIP) services. [online]

Available at:

http://www.cck.go.ke/links/consultat

ions/closed_consultations/VOIP_ser

vices.pdf [Accessed March 2010]

4. CCK (2005b) Guidelines on the use

of Wireless Local Area Networks

(WLANS) On Non Protected Basis.

[online] Available at:


ions/closed_consultations/WLAN_se

rvices.pdf [Accessed March 2010]

5. CCK (2005c) Public Consultation on

Intention to Merge Licence. [online]

Available at:


ions/closed_consultations/Merge_lic

ense.pdf [Accessed March 2010]

6. CCK (2004a) Regulations Governing

Number Portability. [online]

Available at:


ions/closed_consultations/Number_p

ortability2.pdf [Accessed March

2010]

7. CCK (2004b) Ruling on Internet

Service Providers dispute on services

offered by Telkom Kenya Limited.


http://www.cck.go.ke/regulations/do

wnloads/Ruling_on_Internet_Service

_Providers_dispute_on_services_off

ered_by_Telkom_Kenya_Limited.pd

f [Accessed March 2010]

8. CCK (2010) Closed Consultations



ions/closed_consultations.html


9. CIA (2009) The World Factbook



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https://www.cia.gov/library/publicati

ons/the-world-factbook/index.html


10. Government of Kenya (2009) Kenya

Communications (Amendment) Act,

2009. [online] Available at:

http://www.communication.go.ke/me

dia.asp?id=775. Accessed August

2009]

11. Government of the Republic of

Kenya (2007) Vision 2030 Abridged

English Version [online] Available

at: http://www.planning.go.ke/

[Accessed August 2009]

12. GSM Association (2007) Economic

study on IP interworking [online]

Available at:

http://www.gsmworld.com/document

s/ip_intercon_sum.pdf [Accessed

March 2010]

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Telecommunication Regulatory Reforms Driven By Ngn A Case Study Of Kenya