Information Technology Landscape in Kenya

TELECOMMUNICATION INFRASTRUCTURE AND REGULATION

Overview

In general the telecommunications sector suffers from under-investment and political interference. It is unreliable and there has been very little attempt to modernize it. However, the telecommunications infrastructure has grown rapidly in size and quality since 1977. The exchange capacity has grown from 88,000 lines in 1977 to 310,000 in 2001. Payphones have increased 588 in 1981 to approximately 10,000 currently. Majority of the people in Kenya still use payphones. The cellular phone subscribers has grown tremendously from 3,000 in 1997 to 540,000 in 2001.

Telecommunication Indicators

Introduction

In Kenya, the telecommunications sector is under the Ministry of Information, Transport and Communications (MOITC). The Kenya communications Act, 1998 came into full effect on July 1^st 1999. The Act promotes the establishment of the National Communications Secretariat (NCS) within the Ministry which serves as the policy adviser to the government on matters pertaining to the telecommunications sector. The Communications Commission of Kenya (CCK) serves as the regulator for the sector, the Appeals Tribunal (with powers of the High Court) serves as the independent arbitrator, and Telkom Kenya Limited and other licensed network operators serve as public telecommunications operators.

Historic Evolution 

The submarine cables linking Zanzibar, Mombasa, and Dar es Salaam laid by the Eastern & South African Telegraph Company in 1888, were Kenya's earliest telecommunications connections to the outside world.  Within the country, the construction of a telegraph net work began with a 200-mile coastal line linking the port city of Mombasa with Lamu. Further linkages to other parts of the country began in 1896 in conjunction with the building of the railway system, forming a dual "backbone" for Kenya's telecommunications infrastructure. The telegraph line reached Nairobi in 1898 and Kampala and Entebbe in Uganda in 1900. Telephone service soon followed. In 1908, the public telephone network began service in Nairobi and Mombasa. In the same year, eighteen telephone subscribers were connected. The development of Kenya's network has been gradual. There were 73,932 direct exchange lines in use in the public telephone lines by 1980.

Communications Commission of Kenya (CCK)

The Communications Commission of Kenya (CCK) is the regulatory authority for the sector. CCK is responsible for developing and coordinating the policies and strategies with respect to development and operation of telecommunications services in Kenya. CCK's target is to bring the telephone line density to 20 lines / 100 people in urban areas and 1 line per 100 in rural areas by the year 2015. These targets refer to the installation of over 375,000 lines in the rural areas and 2 million lines in the urban areas. At an estimated cost of between 800 and 1,250 US dollars per line, the total investment is estimated to cost between US $ 2 billion and US $ 3 billion, an huge investment requirement, which has called for new initiatives to attract capital into the sector. It is in this context that a step-by-step liberalisation of the sector is being undertaken with a view to attracting capital from the private sector.

Telkom Kenya

Telkom Kenya, formerly known as the Kenya Posts and Telecommunications Corporation (KPTC), is currently the sole provider of basic telecommunications services. President Moi stated in early December 2000 that the 49% stake in Telkom Kenya will be sold only if foreign investors made bids the government deemed as reasonable. The South Africa-based  Mount Kenya Consortium was the highest bidder, offering US$240 million for the 49% stake. Telkom Kenya was valued at US$1.633 per line, which is in comparison to the international norms. Mount Kenya Consortium stated in their business plan that it would double the number number of telephone lines in the network in 24 months. It will also invest Ksh 8 billion (US$100 million) in the company over the initial 12-month period supported by KPN, a privatized Dutch telecoms company. KPN is also Mount Kenya Consortium's operating partner.

The sale was approved by the cabinet in January 23rd 2001. The government then made the following agreements with Mount Kenya Consortium that:

· A foreign managing director must be recruited. The members of the board will be appointed by the government.

· The company's management will be controlled by the strategic equity partner.

·The rights and obligations of both the Kenyan government and the strategic  investor as stated on the shareholders agreement must be produced.

Telkom Kenya has recently installed a new toll switch board in Nairobi to ease the connection of new telephone operators. The facility consists of 5,460 channels, which will enhance both the international and local telephone calls. This facility is part of the company strategy to offer connectivity infrastructure to the second largest mobile telephone operator, Kencell Communications and others. These channels will also make telephone calls cheaper and quicker. Telkom Kenya is obligated by law to provide these channels to any telecom company licensed by the Communications Commission of Kenya. Currently, other telecommunication infrastructure expansions projects are being carried out in Mombasa, Eldoret, Nakuru, Kisumu and Nyeri. 

Local Calls

A local call is a call that originates from an exchange and it terminates within 60 kilometers radius from a designated reference charge point for that exchange. The same reference charge point can be shared by several exchanges. 1 unit is equivalent to 3 minutes. There is no discount or economy rates for local calls.

Long Distance Calls

Cellular Phones

Currently the cellular phones market is expected to operate in a duopoly environment. The two telecommunications companies providing cellular services are: Safaricom Company and Kencell Communications. There are more subscribers to cellular phones as compared to telephone lines. There is a tremendous growth in the use of cellular phones since 1997.

Growth in Cellular Subscribers

Payphones

Public payphones play a major role in supporting the objectives of economic efficiency. This is very common in developing countries because a majority of the people do not have access to a telephone at home or at work. Payphones are valuable to poor households and in rural communities. Payphones are also important to small business who cannot afford a telephone line. Currently there are 9,604 payphones. One major disadvantage is the long queues.

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