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The Dominance Debate Should Be About The Consumer’s Welfare, Not Operators

September 5, 2018 Leave a comment

Communication TowerDuring the last Safaricom AGM, the dominance debate came up and all contributors to the discussion at the meeting seemed to agree on one  thing: That the regulator is punishing Safaricom for being successful and that it was not their fault that their competitors have refused to invest and innovate. The recent calls by their competitors to the regulator to have them declared dominant and abusing their dominance are based on a market study report released last year by a consultant. This report found Safaricom to be dominant in both the mobile communication and mobile money markets. The report went further to suggest remedies that include infrastructure sharing, retail tariff controls and the splitting of the company into several independently run companies for mobile money and mobile communications.

In July this year, the parliamentary committee on ICT’s met sector players on the issue of dominance and what came out was other operators still strongly feel that they cannot be able to compete with Safaricom on equal footing. On the other hand the committee members felt that the operators are not doing enough to pry off Safaricom’s grip on the sector. Recent reports also indicate that the regulator is also under pressure to declare Safaricom dominant and in abuse of its dominance. By going ahead and doing so, the operator will not have a free hand in the determination and introduction of new products and services in the market without the regulators direct approval. Another recommendation that is being pushed is the sharing of both active and passive infrastructure by Safaricom with its direct competitors.

A point to note on the above is in all this discussion, no one is looking at the possible effects the implementation of these recommendations will have on the most important person in this debate; the consumer. The focus is mostly on the operators commercial welfare. Also, should the regulator decide to go ahead and implement the recommendations, what laws or framework will be applied? Are the laws also relevant to the current technological and market realities?

The Kenya Communication Act of 1998 and its subsequent amendments (Kenya Information and Communication amendment act of 2013) specify that the regulator shall from time to time develop and publish, in the Kenya Gazette, guidelines to be followed when determining whether a licensee in a dominant market position in a specific communications market. The Act also specifies that for the regulator to determine if a player is dominant, it shall prepare a dominant market power report to determine whether a licensee is dominant in a service or geographic communications markets. This is the report that was released in February this year. Based on the reports findings, the Act specifies that the regulator can declare a licensee dominant by considering the gazetted criteria, One of the critical criteria is if the operator possesses Significant Market Power (SMP).

Upon declaring an operator as dominant, the regulator will also need to show that the dominance is being abused to edge out competition from the market or to generate more profits or even offer inferior quality of service with no consequences. The criteria that can be used to check if there is abuse of dominance are as below. It’s worth noting that Safaricom meets none of the criteria below for abuse of dominance.

  1. Refusal to deal with competitors on the essential facilities doctrine: essential facility is facility supplied on a monopoly basis but is required by competitors but they cannot be reasonable duplicated by competitors for either economic or technical reasons. With new approaches or alternatives to essential facilities sharing such as VNOs and national roaming, and the fact that all mobile networks now have  a packet switched core as opposed to circuit switched, this doctrine cannot be used as a measure of dominance abuse because already Safaricom is sharing and leasing out unbundled services.
  2. Cross subsidization: This is where the dominant firm uses revenues from a market in which it is dominant to cross-subsidize the price of a service or product it provides in other markets. For example, there would be suspicion of cross-subsidization if Safaricom, when recently entering the home internet market (which Zuku was the de-facto player), offered much lower pricing than them by subsidizing home internet user pricing with revenues from their voice business. Entry prices for most markets Safaricom ventures into are often higher than competitors.
  3. Predatory pricing: This is where the dominant operator charges prices below a normal cost standard. At the moment, Safaricom prices are not the cheapest in the market so this also does not apply too. This debate would have made more sense if Safaricom was dominant through the offering of prices well below their competitors price points.
  4. Bundling of services: This is where the operator sells a product at a fairer price on condition that you also buy other services from them. For example, a user who simply wants airtime should be able to buy only airtime and not be forced to buy airtime and data though an offer despite them not having an immediate or future need for the data. If anything, its Safaricom’s competitors who are bundling services leading to wasteful accumulation of unnecessary services such as hundreds of unused SMS’s and talk time minutes that accumulate as subscribers purchase bundled data for internet access.

Innovation and Operations

There is this notion that the mobile sector is vendor driven, that the telecom equipment vendors often dictate the pace of innovation in the market. This is partly true and therefore also means that competitors in the sector have access to similar technology because the vendors in the sector supply all operators. Nokia, Huawei, Cisco, Ericsson all supply to the operators the same products. The difference however comes in on how these products are monetized. The dominance report recommends that Safaricom, upon being declared dominant should not sell services that are not replicable by the competition. This is to say, they cannot come up with a product that their competition, using their resources and infrastructure cannot come up with easily. The Kenyan ICT talent pool is very large and any operator worth their license can afford to hire the best brains in the country. The fact that all operators have equal access to technology and talent means that its not hard to replicate competitors products. But why then isn’t this happening? The answer lies in company culture. Safaricom cannot be punished for cultivating a culture of innovation as their competitors sit and wait for the regulator to give them a piece of the innovation pie. All operators have the necessary ingredients to succeed.

One business model that has been adopted by Safaricom’s competitors is outsourcing of functions. Ideally, firms are supposed to outsource their non-core functions so as to enable them focus on their core function. If its a hospital for example, it can outsource its transportation, cleaning, etc but isn’t expected to outsource core functions like diagnostics and patient care. However, many firms that adopt the outsourcing path end up over outsourcing even core functions. The reason is purely to make the financial statements look better because most of the costs will be classified as variable and not fixed costs. When a firm outsources both core and non-core functions to third parties, it loses control over quality of service and also fails to clearly see any inefficiencies in the operations.  The result is outsourcing will make the books look good but affect customer experience through inefficient service delivery.

What are the alternatives?

With telecommunication services now permeating all sectors of our lives, it has become a critical catalyst for socioeconomic development. drastic actions such as declaration of dominance and splitting up Safaricom will have far reaching effects on the Kenyan economy all in the name of giving it’s competitors an equal footing. So far, several regulatory actions aimed at leveling the playing field have not yielded much. First it was Mobile Number Portability (MNP) which according to analysts didn’t work well because subscribers were afraid to change operators due to M-pesa. For MNP to work, many felt that Mobile Money Interoperability (MMI) had to be in place. The regulator managed to bring all operators on the table and effect mobile money interoperability. So far since implementation, there has been no effect on the market dynamics. There are also a raft of measures put in place by the regulator to create a level playing field. Many of these measures have actually helped Safaricom’s competitors make slight gains in their market share. I believe these gains could have been more if these operators improved their operational efficiencies first.  Splitting Safaricom when the competitors operations are inefficient as they are will only do more harm to the sector as the supposed benefits will not be realized at that level of efficiency. The regulator in addition to playing its current role, should also demand accountability from operators on actions it takes to enable them gain market share but the operators fail to take up these opportunities. A good example is there was a very big push to effect mobile money interoperability, but when it was done, there was very little in terms of marketing this development bu those who were asking for it. At the very least there should have been a major marketing campaign that coupled MNP and MMI.

Another approach would be to offer tax breaks to Safaricom’s competitors on investment in network and services. This would lower their CAPEX on network roll out and services. Tax breaks can also be applied as a motivating factor when these operators reach certain predetermined targets. For example, if an operators revenues or market share hits a target, the government gives them a tax break. This will push them to be innovative in revenue generation and market share gaining activities.

The consumer

All the discussion around dominance has been mostly about operators gaining market share. There seems to be very little concern on the most important stakeholder: the consumer. At the end of the day the consumer should be able to make the decision on which provider to subscribe to based on the value they get. There is a general assumption that the consumer is always price driven. That all his decisions are based on price. This assumption is what has led to the many price wars we have witnessed in the market which have yielded little in terms of market share gains. Consumers buy convenience and experiences. operators who want to be successful must start looking at the consumer experience and convenience when they are on their network.

The focus of this debate should be the improvement of consumer welfare. All actions by the regulator should take into consideration the consumer, consumer welfare is the regulators biggest mandate. The best approach would be for the regulator to look at how best citizens will be served telecom services. The recommendation for Safaricom to share its infrastructure with competition can be shelved in favor of the Universal Service Fund. The USF can be used to lower the cost of rolling out services by operators in under served areas. This approach has worked very well in Latin America.

According to an analysis by the Institute of Economic Affairs (IEA), should the regulator implement the dominance report  recommendations, consumer prices for services would actually rise and not fall. This will hurt the consumer despite the fact that the leveling of the playing field for all operators is supposed to lead to lower prices. The declaration will serve the operators but not the consumer. So in the interest of the consumer, I believe other approaches listed above can be implemented, splitting Safaricom is not one of them.

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My Thoughts on the Proposed Retail Tariff Controls in Kenya

February 28, 2018 1 comment

telecoms-13The Communication Authority of Kenya is mulling on introducing retail tariff controls in the Kenyan mobile telephony sector. As you would imagine, this has elicited mixed reactions depending on who you ask. This move it is said is part of a raft of recommendations by the recently released report that studied the Kenyan telecommunication competitive landscape. The introduction, according to the regulator is aimed at correcting market failures that are as a result of one operator being dominant over the rest. The proposed retail price controls aim at limiting Safaricom’s freehand in determination of loyalty schemes and promotions, prohibition of on-net discounts, mobile money fees charged to unregistered and cross-platform money transfers. Tariff  control is a regulatory mechanism that can be employed to correct market failures in a market. The main motivation for price control is to protect consumers’ rights and interests in circumstances where market forces alone have been unable to do so.

The competitive landscape report implies that Safaricom’s price differentiation between on-net and off-net calls leads to tariff-mediated network effects. By this I mean that subscribers on a network find it cheaper to call others who are on the same network than calling people on a different network, the effect of this the emergence of the ‘club’ effect where subscribers decide which network to join based on which network the people they call mostly are on. If most of my family and friends subscribe to a network X, I am more likely to subscribe to network X because by being on network X and not on network Y, my overall calling costs will be lower due to cheaper on-net pricing. This it is argued is abuse of its dominance. But this is only true if the interconnection rates are high between Y and X meaning it will cost me more if I chose network Y where none of my relatives and friends subscribe to. As we speak, interconnection rates are already regulated by CA. This fact alone means that the regulator found and enforced an interconnection rate that was cost based and reflected the market realities. The Safaricom on-net call rates are above the regulator-set interconnection rates  and are similar to the rates its competition provides its customers to call into the Safaricom network, in short, Safaricom’s subscribers pay the same rate as competitors subscribers when both call another Safaricom subscriber. CA would be justified in imposing tariff controls if indeed Safaricom’s subscribers paid less to call their counterpart than when competition subscriber calls. The fact that the report found that each operator was dominant on its own network also means that the club effect can easily be replicated by competition through aggressive marketing and innovation.

Individually tailored tariffs

Another proposal by the regulator is the prohibition of individually tailored loyalty schemes and promotions. The CA 2010 Tariff regulations specify that all promotions or loyalty schemes must be approved by the regulator prior to commencement. Any promotion, offer or scheme currently in operation has the direct approval of the regulator, the details of each promotion or loyalty scheme structure were available to CA before approval and these include individually tailored schemes and promotions. When an operators behaviour due to regulation causes it to become successful, it cannot be punished for successes it encountered while operating within the laid down regulatory framework. If there is any discriminatory behaviour, then CA failed in detecting and stopping this even with the existence of regulations. When that happens, it is clear that regulation is not the solution to the perceived market failures and the only remedy is let competitive forces determine customer choice.

What would happen if call tariffs are regulated?

Most people assume tariff regulation leads to the lowering of retail rates. This would only be true if CA had a way of accurately measuring the costs involved to provide service to additional customers on their network. At the moment, due to the fact that Safaricom has invested more in network infrastructures geographical and population reach, it costs them less to bring in a new customer and provide service to them than its competitors. The proposal to use Long Run Incremental Costs (LRIC) method would mean that because of the massive economies of scale enjoyed by Safaricom owning a large network and technology convergence, the cost of offering an extra minute of termination on the network is virtually zero in the short-term and LRIC is applied to give a realistic cost over the long term. How long is ‘long term’ will determine the price point.
A regulated tariff price should imitate the prices that would have arisen in a market with effective competition, both because this provides incentives to produce the requested service at the lowest possible cost and because the operators requesting the service have the incentive to optimize their own investment decisions. In this way price controls can contribute to efficient utilization of social resources. The problem however is that LRIC works very well in legacy circuit switched networks where it was easy to link network utilization with the provision of a service (if a switched circuit is in use, it is providing a directly attributable service), in a converged environment, the relationship between network resource utilization and provision of services is not that straightforward and an LRIC model applied to it would fail to efficiently allocate costs. As networks evolve into Next Generation Networks (NGNs), LRIC approach to service cost allocation becomes inefficient and LRIC starts to resemble the Full Allocated Costing (FAC) model. The result? higher prices to the consumer.

Replicable retail tariffs

One of the recommendations by the study is that Safaricom’s Tariff must pass the ‘replicability test’.  In order for a product or service to be considered replicable, it must be commercially and technically capable of being replicated by Safaricom’s competitors. By this we mean that any new tariffs that Safaricom comes up with should take into consideration the capability or state of competitors infrastructure and services especially at the wholesale level. If for example, Safaricom comes up with a tariff that takes advantage of a new innovation they developed, then competition should have similar innovations on their networks or should be allowed by Safaricom to access this new innovation at wholesales prices to enable them offer similar tariffs. In order for competitors to be able to compete with Safaricom in retail markets, it is necessary for them to have access, either via their own networks or through access to Safaricom’s network, to the wholesale components that enable those retail prices to be offered. This as you can imagine will slow down the pace of innovation by Safaricom or change the main focus of innovation from the customer to competition, anytime Safaricom wants to innovate, they will think of ways through which competition will not benefit much from it as opposed to spending their time and knowledge on how the innovation will first benefit the customer.

Tower sharing

The report found that Safaricom is dominant in the tower market owning about 65% of telecommunication towers in Kenya and recommends that it shares it towers with competition. To do this effectively, Safaricom has to let a 3rd party manage the towers on its behalf. Safaricom owns its towers while competition has a mix of owned and outsourced/leased towers. With rapid advancement in technology, there is a saying in the industry that it is always cheaper to build a network tomorrow. Any new entrant or existing operator rolling out new retail services and infrastructure such as towers will do it cheaper today than those who did it in the past. See how easy it was for Finserve Africa (Equitel) to get market reach by the flick of a switch riding on an MVNO license? Older operators didn’t get to enjoy these benefits and had to put in sweat and blood to get where they are.
In the Safaricom 2017 sustainability report, the operator spent close to 10 million litres of fuel and about KES 48,000 per month per tower location on energy costs. The report also shows that fuel and power costs are coming down and that Safaricom has also embraced green energy initiatives to power the active components at the tower stations, it is becoming cheaper by the day to setup and manage tower locations but the increase in the number of towers makes the management of the same a challenge.  Outsourcing of tower management is used by some operators to shift a large element of their fixed costs to the variable costs column of their financial books, in doing so the operators financial health improves. Tower outsourcing has little to do with improved efficiency in actual operations and management of these towers but more to do with improving the books. Due to this, the global trend in the telecom sector is the outsourcing of tower management to independent 3rd parties, something Safaricom should consider for its own benefit and not due to regulatory requirement. Safaricom should then decide to lease its towers to competition on a purely commercial basis.

Conclusion

Although well meaning, the CA needs to explore non-tariff based remedies to the perceived dominance of Safaricom. Tariff control is a very intrusive approach to handling abuse of dominance whether real or perceived. As markets evolve to become competitive, ex ante regulation should reduce as the regulator forebears regulation in favour of competitive forces. The challenge however is that customer inertia can mask the existence of competition in the market leading to the regulator applying regulatory tools to correct this perceived market failure. Market forces should be let to dictate the market tariffs.
The tariff control ocean floor is littered with shipwrecks of tariff control attempts by various countries that  tried to correct market failures by  employing it. One of these countries is Mexico who in 2012 introduced tariff controls by baring America Movil from charging interconnection fees to its competitors. Movil controls 70% of Mexico mobile market. As of 2015, mobile call charges had dropped by about 17% but investment in the sector dropped 30% during the same period, for a developing country like Kenya, a drop in ICT investments will have far reaching effects across multiple sectors of the economy. Whereas the intended outcome of tariff control is to  protect the consumer from a dominant operators actions, the question that remains is whether tariff control is the only viable market correction tool available.

 

What Whatsapp voice means for MNO’s

April 1, 2015 8 comments

Facebook inc recently introduced the ability to make voice calls directly on its Whatsapp mobile application. This is currently available on Android OS and soon to be made available on iOS.

What this means is that mobile users with the updated app can now call each other by using available data channels such as Wi-Fi or mobile data. Going by a recent tweet by a user who tried to use the service on Safaricom, the user claims that they made a 7 minute call and consumed just about 5MB’s of data. If these claims are true, then it means that by using Whatsapp, a user can call anyone in the world for less than a shilling a minute. This is lower than most mobile tariffs.

Is this a game changer?

Depends on who you ask. First lets look at what happens when you make a Whatsapp call. When a user initiates a call to another user over Whatsapp, both of them incur data charges, in the case of the twitter user I referred to above who consumed 5MBs, the recipient of the call also consumed a similar amount of data for receiving the call. If it so happens that both callers were on Safaricom, then just about 10MB’s were consumed for the 7 minutes call. The cost of 10MBs is close to what it would cost to make a GSM phone call for the same duration of time anyway. Effectively, to now receive a Whatsapp call, it is going to cost the recipient of the call. This is unlike on GSM where receiving calls is free.  When the phone rings with an incoming Whatsapp call, the first thought that crosses a call recipients mind is if he/she has enough data ‘bundles’ on their phone to pick the call. The danger is if there is none or the data bundle runs out mid-call, the recipient will be billed at out of bundle rate of 4 shillings an MB. Assuming our reference user above called someone whose data had run out, Safaricom will have made 5 Shillings from the 5MBs and 28 shillings from the recipient. A total of 33 shillings for a 7 minute call translating to 4.7 shillings a minute which is more than the GSM tariffs.

This effectively changes the cost model of making calls. the cost is now borne by both parties, something that might not go down well with most users. I have not made a Whatsapp call as my phone is a feature phone but I believe if a “disable calls” option does not exist, Whatsapp will soon introduce it due to pressure from users who do not wish to be called via Whatsapp due to the potential costs of receiving a call. That will kill all the buzz.

Will operators block Whatsapp calls?

It is technically possible to block Whatsapp texts and file transfers using layer 7+ deep packet inspection systems such as those from Allot’s NetEnforcer and Blue coat’s Packeteer. I believe an update to detect Whatsapp voice is in the offing soon and this will give operators the ability to block Whatsapp voice. The question however is what will drive them to block it?  MNO’s will have no problem allowing Whatsapp traffic as it wsill mot likely be a boon for them if most of the calls are on-net (They get to bill both parties in the call). If however most calls are off-net (Like those to recipients on other mobile networks locally or international), then MNO’s might block or give lower QoS priority to make the calls of a poor quality to sustain a conversation. They might however run into problems with the regulator should subscribers raise concerns that they think the operators are unfairly discriminating Whatsapp voice traffic. Net neutrality rules (not sure they are enforceable in Kenya yet) require that all data bits on the internet be treated equally, it should not matter if that bit is carrying Whatsapp voice, bible quotes or adult content. This will mean that operators can be punished for throttling Whatsapp voice traffic in favour of their own voice traffic. This therefore presents a catch 22 situation for them. What they need to do is come up with innovative ways to benefit from this development like offering slightly cheaper data tariffs for on-net Whatsapp voice to spur increased Whatsapp usage within the network (and therefore bill both participants).

Worth noting is that it costs the operator more to transfer a bit on 3G than it does on 4G. Operators who roll out 4G stand to benefit from Whatsapp voice as they can offer data at a lower cost to them and this benefit can be passed down to subscribers. The fact that voLTE is all the rage now, Whatsapp voice can supplement voLTE and can even be a cheaper way for operators to offer their voice services on their LTE networks without further investment in voLTE specific network equipment.

In short any operator who wants to benefit from Whatsapp voice has to go LTE.

Why the push to digital TV?

November 12, 2012 5 comments

There has been a lot of attention in the local media on the push by the government to have Kenya migrate its TV signals from analog to digital.  The governments push has left many wondering what its stake in all this is.

In 2006 Kenya participated in the The Regional Radiocommunications Conference-2006 (RRC-06) which was hosted by the International Telecommunications Union (ITU). In this conference, it was agreed that all nations need to migrate to digital TV by 2015. Kenya set an ambitious cut-over date of 2012 as the date by which all TV broadcast in Kenya will have been migrated to digital. The Communications Commission of Kenya (CCK) has formed a digital migration secretariat to co-ordinate this migration. This secretariat is the one stop center for all matters related to this migration.

Many a bystander will ask, other than the government ratifying the RCC-06 agreement, what is the government’s stake in asking its citizens and broadcasters to change the way in which they receive their TV signals. With majority of TV services being run by private entities, shouldn’t the decision to change from analog to digital be done by these entities in the same manner in which a mobile operator decides to roll out 3G or 4G based on a business case and not by regulatory conditionality?

CCK recently expressed fears that over 40% of TV sets in Kenya are black and white and this could signal a stumbling block because owners of black and white TV sets tend to be those who are economically disadvantaged and cannot easily afford a digital set-top box.  With the deadline to switch over fast approaching, TV stations stand to lose 40% of their viewers if these viewers do not manage to upgrade to digital TV. This is a big threat to their market base and I would have expected a flurry of activity from TV operators seeking the indulgence of the government to subsidize the set-top boxes to consumers or better offer them for free as was the case in USA when they did their migration  in 2009.  If the American TV viewer who is by all means better off than the Kenyan counterpart got help from the government, one wonders what will happen to the Kenya viewer if he is not helped by the government to acquire a set-top box. The high cost of set-top boxes and poor planning of the migration project has made the government postpone the migration deadline to 2013 from the earlier mid 2012 deadline.

However, far from that, the main reason why the government (and many other governments) stand to benefit from this migration is revenues. The government is the biggest beneficiary in the digital TV migration because it will draw revenues from:

  1. The license fees from signal distribution companies: In Digital TV, all TV stations are to give their signal to a central signal distributor who will then transmit this signal on their behalf. The signal distributor pays a license fee to the government which is an additional revenue source. There is also the revenue that was to be gained from tax on the set-top boxes, there has been a push to zero-rate the boxes so as to make then more affordable to users. Even with zero rating, the importation process is poised to benefit the economy in one way or the other.
  2. With the migration of analog TV signals away from the 800Mhz band, the band will be available for auction to telecommunication operators for use in operating 4G-LTE networks.

4G-LTE networks and your TV

The 4G-LTE network can use either the 800Mhz or the 1900Mhz band for transmission, the 1800Mhz band is not preferred because it is less efficient to use than the 800Mhz band. The fact that 1800Mhz is higher frequency means that physical barriers such as building walls might impede its transmission and make it less effective for high-speed data transmission. Transmitters and detectors of higher frequency communication (4G phones in this case) tend to cost more compared to lower frequency transmitters and detectors.

The most desirable characteristic of lower frequencies is that they can travel longer distances without losing their ability to carry information. This means that a 4G-LTE network at 800Mhz will require fewer base stations than the same network at 1800Mhz. This therefore makes building and operating a 800Mhz network cheaper than one on 1900Mhz range.

The use of the 800Mhz band in analog TV transmission therefore means that mobile operators are only left with 1800Mhz  to roll out 4G-LTE. Much of the pressure to migrate TV from analog to digital is therefore informed by the fact that the government can auction the 800Mhz band to mobile operators for millions of shillings and empower them to roll our cheaper-to-run 4G-LTE networks. The by-product of this migration to TV viewers is that they get a clearer TV signal with many value additions on the digital signal such as the ability to  get descriptions of programs on TV, auto schedule TV programs of their interest, and also pay-per-view services.

How 3G Traffic To Wi-Fi Offloading Can Help Operators

August 14, 2012 8 comments

A recent research article by Khynghan et. al, in a paper titled “Mobile Data Offloading: How Much Can WiFi Deliver?” estimates that about 65% of mobile data can be offloaded onto Wi-Fi networks. By this they mean that much of the data generated by users browsing the Internet via mobile devices can be rerouted from the mobile 3G network onto Wi-Fi networks.

With the explosive growth of data consumption by mobile devices in Kenya, network operators have several strategies aimed at meeting the unprecedented growth. These strategies include 3G and 4G network expansion to carter for this growth, adoption of new technologies such as 4G-LTE and use of new network architectures that maximize network resources. Unfortunately, with declining or flat revenues and margins from unit data consumption, nearly all these strategies are expensive and eating into the already declining margins.

Wi-Fi Offloading

Wi-Fi offloading is becoming an attractive alternative path for operators to cope with the increased traffic from Smart devices. In the US, smart devices account for only 3% of all mobile devices but contribute about 40% of all mobile data traffic. With majority of these devices having  Wi-Fi capability, offloading their traffic onto Wi-Fi network from 3G presents a very viable alternative.

Wi-Fi offers the following advantages that makes it a very likely alternative to the more expensive roll-out of 3G and 4G especially in densely populated areas:

  1. It is much cheaper to roll-out Wi-Fi hotspots around a city compared to a 3G or 4G network
  2. Wi-Fi networks are very scalable, it can take months to expand a 3G network but few days to expand a Wi-Fi network
  3. A Wi-Fi network, if well designed can offer much higher throughput speeds than existing mobile networks
  4. A smart device connected to a Wi-Fi network is more efficient on battery conservation than one connected to a mobile network.

Are users really Mobile ?

There is a general misconception that mobile devices are used by users in motion, a lot of attention has therefore been paid to ‘seamless’ station to station hand-off of a mobile voice and data connection. In a paper by University of Malaga, University of Limerick and Nokia Siemens Networks the authors show that less than 3% of calls in the world are actually handed off from one base station to another. This shows that majority of “mobile” users are stationary when making calls or browsing the web. This percentage is bound to be lower in a country like Kenya meaning that deployment of Wi-Fi networks that lack hand off capabilities possessed by 3G networks will not impact user experience and operators will not compromise quality of service.

Mobile operators can spur the usage of Wi-Fi networks by first educating users on the fact that majority of mobile devices give higher priority to a Wi-Fi network than a 3G network, i.e. if your phone is connected to both Wi-Fi and 3G, it will by default send data over the Wi-Fi network and revert to 3G when there is no Wi-Fi coverage. The operators can also send over the air (OTA) Wi-Fi configurations and settings to enable mobile devices automatically connect to the providers Wi-Fi network when it detects a good signal. The operators can also spur usage of Wi-Fi by mobile users by offering better data tariffs for users on Wi-Fi than those on 3G/4G.

Statistics from the research by  Khynghan et. al. show that 3G to Wi-Fi traffic offloading tests done in New York City showed that over 65% of 3G mobile data was offloaded onto Wi-Fi networks by smart devices leading to faster browsing speeds and a 55% battery saving as devices no longer need  signaling power. (be it legacy ss7 or SIGTRAN).

In these days of shrinking revenues and skyrocketing costs,  Kenyan mobile operators should give Wi-Fi a thought if they are to meet their customers expectation of quality service and give their shareholders return on their investments.

 

 

 

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How the Green Mobile Revolution Can Help Rural Africa

October 10, 2011 Leave a comment

The mobile communications revolution sweeping across Africa has come with its own problems. The major one of these problems is the negative environmental impact it’s had due to the use of non environmentally friendly power sources to power this revolution. The carbon foot print of a typical caller in Africa is much wider than a similar caller in more developed regions of the world.

However, all is not gloom as this environmental impact this revolution is having can be turned around to benefit rural Africa as per my recent article published in the Developing Telecoms journal. Read the article by clicking here

Mobile Number Portability: Has it flopped?

April 11, 2011 4 comments

 

Ten days since the official start of Mobile Number Portability in Kenya, the industry is eerily silent on its progress so far. We expected an avalanche of subscribers porting their numbers to rival networks. I’m not sure it happened and if it will happen in future.
Whereas the local media is seeking information on how many people have ported across networks so far, they keep on getting tossed round from operators to CCK to the porting company and back again without concrete answers on how many people have successfully ported across. However, sources claim that less than 1,000 people have applied for porting.

The problem lies in information. People are not well informed on how to port across and what this porting business is all about. The concept of MNP is simply not well understood by consumers.

I happen to ask people I consider fairly educated on what MNP is and the answers I got from them surprised me due to their inaccuracy. They all had some basic grasp of what it entails and that was it. Some thought they would maintain their previous SIM cards when they port, some said they fear porting because they will lose their SIM contacts, some said MNP will cost them 200/- for cross network calls etc. However, the shocker was when I talked to some people from my village who had no clue whatsoever about MNP. They even declared me a liar for claiming that they can have a 0722 number on Airtel or YU or a 0733 number on Safaricom or Orange.

In addition to the above, I have noted that there is an increased search for information on MNP on the web that hits my blog. This increased search includes such terms as below which I extracted from my blog search stats:

can i shift from safaricom to airtel without changing sim card
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line portability-safaricom
mnp process airtel
network architecture of mnp in india
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This just goes to show that the public is not well informed about the MNP concept and they lack information to enable them take advantage of MNP. The fact that people who can surf the web and do a search are asking about MNP process means that there are millions of subscribers who have not even heard of MNP.

My thinking is it’s the poor population with no Internet and newspaper access who are price sensitive and would port their lines to the cheapest network. I therefore expected the mobile operators to target these people through local vernacular radio stations, posters and road shows and not newspaper and TV adverts as is the case now. The increase in number of searches on the web on MNP means that even people who have access to Internet, newspapers ( and therefore fairly well informed) are not well informed about MNP. It’s no surprise that my village mates have never heard of MNP. Infact if you noticed, CCK started the MNP adverts on TV and the print media two days before MNP kickoff.
Airtel seems to be the only operator keen on educating the consumer on what MNP is all about and the benefits it offers.

News coming out of India where MNP was recently introduced shows that MNP has failed to live up the hype that preceded its launch. Out of a subscriber base of over 791 Million, only 1.7 Million had applied for porting in the first 15 days. That represents a 0.2 % uptake of MNP in India. The slow uptake and problems faced by subscribers who have ported made it flop.
The few customers who have ported in Kenya are complaining of inability to call or be called by subscribers on the network they migrated from, this is indicative of sabotage by operators just as I had predicted in a previous post here.

I also believe that price is no longer the main motivator for porting, the cross network and on network charges are nearly the same on the various providers networks and the 200/- porting fee is actually worth about 200 minutes (3.3 Hours!) worth of airtime. The operators should now focus on VAS as the motivating factor to move across networks as opposed to price.

The final issue is the porting process is too complex for the average Kenyan. Operators should have come up with a simpler way of porting and shift the operational aspect of porting to the recipient network because right now the porting process is split between the end-user and recipient network. Also the porting period of 48hrs is too long for a subscriber base such as ours, The period should be reduced to the globally accepted 2 Hrs (In Australia, it takes 3 minutes to port across networks, its even shorter in New Zealand).

So once again, a noble concept has failed due to failure to sufficiently educate the consumer before hand and making business decisions on the false belief that consumers are raring to port across networks because it successfully happened elsewhere before. The Kenyan mobile consumer is a peculiar one indeed!

Categories: Mobile Telephony