e)
Stakeholder Impacts of the Review: That the lower termination rates associated
with the pure LRIC model pose no significant financial risks to the operators
while the indirect benefits associated with increased competition such as lower
retail prices would generate significant benefits to consumers;
f)
Wholesale Intervention: That monopoly power enjoyed by all operators in voice
termination combined with the Calling Party Pays (CPP) principle employed in
Kenya provides incentive structures for operators to price their termination
services way above the cost of providing termination services. Therefore, there is
plausible justification to maintain wholesale regulatory interventions through
price caps on mobile and fixed termination rates;
g)
Competitive Landscape at Retail Level: That upon review of the effectiveness of
the wholesale interventions effected in 2007 in spurring competition at the retail
level, the retail voice market is not effectively competitive and large operators are
using the on-net to off-net pricing spread and product differentiation of voice
services to sustain a “club effect” in the market with adverse cascading impacts
on competition and consumer welfare. While retail intervention is considered
intrusive, it is justifiable in cases of market failures such as the case in the retail
voice market in Kenya;
h)
Introduction of Caps on Off-net to On-net Level: That considering the
competition concerns with respect to the retail voice markets raised in 6(g) above,
an introduction of price caps on the off-net to on-net tariff levels for dominant
operators in both the mobile and fixed voice service markets is the appropriate
and proportionate remedy for improving competition in these markets and for
protection of consumer interest. This intervention will be regularly reviewed and
may be withdrawn once there is sufficient evidence of effective competition at the
retail level;
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