4.
BASIS FOR SETTING BINDING RULES
Interconnection is central to the provision of a wide range of services to consumers and is
critical towards facilitating the development of modern, universally accessible, reliable
and affordable communications services in Kenya. In line with economic efficiency
principles and international best practice, interconnection rates should, of necessity, be
based on the economic costs of providing such interconnection services. Cost based
interconnection rates were determined in Kenya in 2007 and have now been updated in
view of the market and technological developments highlighted herein above.
In addition, an in-depth analysis of the competitive landscape in the retail mobile and
fixed voice markets reveals instances of market failures where the on-net to off-net price
spread is perpetuating a “club effect” which arises when consumers tend to have a
preference for a network with a large pool of subscribers in order to benefit from the
possibility to call and be called at a lesser calling rate by the largest possible number of
subscribers. Further, the Short Messaging Service (SMS) market reveals huge disparities
between the SMS termination rates currently prevailing in the market and the incremental
costs of providing such interconnection thereby impacting negatively on the ability of
licensees to charge lower SMS retail rates.
Moreover, it is important to develop an equitable access framework for co-location,
infrastructure sharing and broadband services in order to curb anti-competitive practices
in the provision of such essential facilities and services.
For the foregoing reasons, and guided by its mandate as provided under the Act, the
Commission considers it in the public interest to intervene in instances of market failures
in both wholesale and retail voice markets as well as provide a framework for
infrastructure sharing/co-location and broadband interconnection.
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