[AfrICANN-discuss] Africa’s competition laboratory Kenya is the one to watch - Kenya’s Copyright Board Takes Piracy War to Cyber Cafes

[Anne-Rachel Inné]

Africa's competition laboratory Kenya is the one to watch No regulation
regime is perfect but the three East African countries – Kenya, Tanzania and
Uganda – are leading the way in terms of breaking down many of the old
barriers to competition. Of these, Kenya is interesting because it was the
pioneer and many of the things that are happening there will in time be seen
elsewhere in some form. Russell Southwood explains what's happening in
Africa's competition laboratory.

Outside of the large Sub-Saharan markets like Nigeria and South Africa,
Kenya stands out because it has both the population level and a density of
private sector activity to be different. In other words, it's big enough to
be relevant for the ten or more countries of a similar scale.

In addition, since Moi left the stage, the economy has been moving at a fast
clip to catch up: last year economic growth was 7%. With the dead hand of
inertia removed, Kenyans have felt more confidence in setting up new
businesses.

The pointers it provides are as follows:

-  Even with a liberalised regime, it is incredibly hard for small
independent companies to challenge the incumbent in the fixed line sector.
Kenya was slow to introduce an interconnection regime designed for
competition between many players and its two independent fixed wireless
operators have suffered as a result. Fixed wireless is, as the mobile
companies are discovering, far from fixed.

- Between them, Kenya's fixed wireless operators Flashcom and Popote
Wireless do not have much more than 10,000 subscribers and in the case of
Popote, it's making 80% of its revenues from data. Both use CDMA and are
focused on the capital Nairobi, with Flashcom having a larger number of base
stations . Subscribers can actually use their phones more or less anywhere
in the city. Neither have yet started a wider geographic roll-out. Despite
this lack of current success in the voice market, Popote's Eric Muthi
believes that there is still considerable growth potential. Meanwhile there
are others waiting to offer more retail voice competition: in one case,
simply as a voice service and in others as part of a wider offer.

- Meanwhile incumbent Telkom Kenya has adopted the strategy of India's
Reliance and has used its CDMA fixed wireless product as a proxy mobile
service. It is said to have 400,000 subscribers based on its cheap KS5.50 a
minute national rate. Subscribers have had what for all intents and purposes
has actually been a mobile service and Telkom Kenya has wriggled this way
and that to suggest otherwise.

- With the France Telecom take-over of Telkom Kenya, the country's two
operators, Safaricom and Celtel, will have some serious competition for the
first time and may have to begin to address their quality of service
shortfalls. Competition should also mean prices will begin to fall for as
one person told us:"Competition in this market is really only on price."
Telkom Kenya's strategy has been very savvy in that it starts operating with
an existing base of subscribers before having to invest in paying for its
mobile licence. Rumour has it that France Telecom will simply rip out the
CDMA network and put in GSM. As a new entrant, it will have a clear CAPEX
advantage. Econet is supposed to have cleared the hurdles it had and will be
investing soon but on past evidence, don't hold your breath.

- Even without a fibre connection, the country's bandwidth requirement has
grown rapidly as the economy has expanded. It is now approaching the 1 gbps
mark and this is all being paid for at satellite prices. The broader message
in this is that an expanding economy will drive use both at a corporate and
retail level. And rapid growth will come from economies that are coming out
of war or unfavourable political circumstances where there's a "one-off"
bounce that might turn into above-average growth in the mid-term. As Bill
Clinton's electoral team used to say, it's the economy, stupid. Messages on
satellite bandwidth costs are mixed. Most operators buying in volume say
that prices are coming down but a small number of those we spoke to said
because of he shortage of C-Band prices were going up. (Interestingly Altech
has been in talks to buy Sameer ICT, which includes KDN.)

- The market is readying itself for the arrival of much cheaper bandwidth.
Seacom and TEAMS are both seen as credible projects. EASSy is perceived as
still being in the game but its credibility has been undermined in the eyes
of operators by the confusions over the rival NEPAD project. TEAMS has
almost all its financing in place and says it has a ship booked to start.
Depending on their investment, operators have been offered 1 mps for between
US$2-300 a month. This is only to Fujirah but an onward solution is said to
be not too far away and will cost about the same amount to the United
States. The price will be higher than the headline figures suggest but
nevertheless will be low enough to be market changing. The recent public
disagreement between UUNet and PS Bitango Ndemo illustrates that not all
operators have understood this changing world. It will no longer be about
making money from selling over-priced bandwidth. The game moves to retail
services and applications.

- A "triple play" combination of voice, Internet and TV will probably be
offered by at least two operators next year. France Telecom is likely to
roll out its LiveBox product as the Kenyan market has considerable
potential. Jamii Telecom is rolling out a PONS network and wants to be
offering "triple-play" over its new STM64 fibre metro network. Industry
estimates of potential retail broadband subscribers vary between
300,000-500,000. Expect bundled offers at almost European levels and
download speeds starting at 512 kbps. The existing Government if re-elected
wants to provide subsidised bandwidth to universities and colleges.

- In the meantime, the retail independent retail ISP as it used to exist has
all but disappeared and those remain are not in the best of health. Where
have all the retail subscribers gone? Well, some have stayed with ISPs like
Africa Online under its new owners but many more have either defected to the
fixed wireless operators, or are using Telkom Kenya's phone-in number or at
the top-end of the market are using the data services of the two mobile
operators. Only the state of Telkom Kenya's copper and its distracted
management focus mean that it has failed to harvest what might have been an
extensive market. Incumbents need to know that if the don't have a "low
–price, high-volume" strategy for DSL then the mobile operators will take
this business away from them.

- Apple may say that it has no plans to roll-out in emerging markets like
China but the market has a life of its own. Apparently a shipment of iPhones
has already reached East Africa and we saw one in the hands of someone we
visited. He hadn't yet got it working but he was working on it. Another
early adopter told us that he was surprised to discover that it worked on
his Celtel account immediately and just as well when he visited Someone in
Uganda who used one to e-mail to confirm our meeting clearly had better
luck. It will be interesting to see whether this grey market in the latest
desirable phone will survive Apple's attempts to exclude untied users
through software fixes. European competition law is already being upheld in
Germany where T-Mobile must sell the device independent of a network package
and even a hefty price tag does not appear to be a sufficient disincentive
to stop sales.

It would be unfair to say that all was rosy in the garden that is Kenya but
in terms of competitive markets, it has got a great deal right and others
might learn from what is happening there.


Kenya's Copyright Board Takes Piracy War to Cyber Cafes
 Cyber café operators within Nairobi are torn between legalising their
Microsoft software operating system, shifting to Open Source Code or closing
shop all together following the crack down on illegal software.

Most cyber cafes in Kenya use Microsoft software but with no valid licences.
Jet Cyber and Dagit Cyber Café in Nairobi are the latest companies to be
raided on the suspicion of copyright infringement.

The raids on the cyber cafes come after the expiry of the October 30th
deadline set by the Kenya Copyright Board.

During the raid, 50 computers containing unlicensed versions of Microsoft
Windows Office 2003 edition were confiscated. Also impounded were Windows
200 and Microsoft 2003 counterfeit installer CD. The computers were valued
at Sh1.5 million while the cost of Windows Os and Office are estimated at
Sh1.4 million.

Edward Segei, a State counsel seconded to the Copyright body, said the
owners of the raided Internet Cafes will face charges of copyright
infringement.

These latest moves have thrown a number of cyber café operators into a tight
spot. While some of the operators have got genuine Office operating system
and Microsoft Windows, others shifted their operation to the Open source
Code system.

Irene Wambui, a unit manager at Wang' Point Telecenter attributed use of
pirated software to ignorance. "We bought the entire business plus the
computers from the previous owner without knowing that the software was not
genuine" said Wambui. Wang' Point Telecenter recently decided to buy genuine
software.

"The shift however came at a cost. While the value of our previous machines
were Sh10, 000 we had to spend Sh60, 000 for each of our 17 machines," said
Wambui.

Another cyber owner operating along Kimathi street who wished to remain
anonymous until he installed the Open source software, contemplated between
closing the business altogether. "At first when Microsoft officers visited
us, they convinced us on the importance of operating on genuine software
which we didn't object to, but the manner they are doing it cannot let us
sustain our businesses," he said.

His dilemma started when Microsoft sent him a letter stating that they would
want him to legalise his operating system. However , he says that his
business is operating on Windows 2000, but then Microsoft asked them to
upgrade to Windows XP. "After testing the Windows XP, we found that it was
not suitable for us but they insisted that we must go that way," he claimed.

He welcomed legalising software on Windows 2000, to which Microsoft says
they did not want to license what they don't support.

So, he embraced Open Source. "At first I was hesitant but with what am
experiencing, I wish I had gone Open Source long time ago. It did not cost
me anything. I closed for two days and installed all the machines with the
Open Source software" he says.

He adds that if he was to go the Microsoft way he could be forced to
increase his charges from 50 cents to Sh5 per minute of surfing "to recover
his costs." A Kenyan Open Source Code group Skunkworks led by Ken Kasani are
now championing more cyber café to go to Open Source.

According to Mr Kasani, the software will manage all aspects of cyber café
billing such as Internet time, printing, items, accounts, discounts, the
programme will be across platform , it will be possible to run it on both
Linux and Windows computers connected on the same cyber works.

The package is being developed using FOSS development tools and platform
and, therefore, will be released worldwide to other developers who wish to
collaborate.

Sunkworks are selling software at three points to serve businesses.

On pricing, FOSS will be available be free of charge, where the only charges
are for installation and improvements .

Mr Kasani also says the use of FOSS enhances the PC speed. Using Open
Source, one would not need to install an antivirus gadget, making it
cheaper.

On the other hand, Microsoft Initiative is stemmed from the fact that
software piracy and counterfeiting in Kenya has up to recent years been
widespread yet discreet.

Abednego Hlatshwayo, Microsoft Anti-Piracy Manager for East and Southern
Africa says, locally, a significant number of PCs running on
counterfeit/pirated software are found in cyber cafés spread out in urban
centres and, increasingly, in rural areas, a situation whose ripple effect
heavily contributes to poor quality software.

This increases information risks, leads to massive unemployment, and loss of
revenue to government.

"Our Windows Genuine Advantage (WGA) programme provides a platform for
consumers to validate their Microsoft Windows software as well as provide
notifications to consumers using non-genuine Microsoft Windows XP. Customers
using genuine software have access to Microsoft download centre for latest
features, updates, and support.

"Many customers do not know whether they are running a genuine copy of
Windows software, and the WGA notifications feature is a simple and
effective way to help them know the status of their software," says Mr
Hlatshwayo.
(Source: Business Daily)
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