<h1 id="h1121" style="margin-top: 8px; font-weight: normal; font-size: 18px; margin-bottom: 5px; color: rgb(0, 0, 51);">Africa's competition laboratory Kenya is the one to watch</h1>
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.<br id="br138">
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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.<br id="br140">
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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.<br id="br142">
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The pointers it provides are as follows:<br id="br144">
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- 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.<br id="br146">
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- 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.<br id="br148">
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- 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.<br id="br150">
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- 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.<br id="br152">
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- 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.)<br id="br154">
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- 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.<br id="br156">
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- 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.<br id="br158">
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- 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.<br id="br160">
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- 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.<br id="br162">
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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.<br><br><br><h4 id="h4258" style="margin: 12px 0px 1px; font-weight: bold; font-size: 14px; color: rgb(0, 0, 51); text-decoration: none;">Kenya's Copyright Board Takes Piracy War to Cyber Cafes
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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.<br id="br471">
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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.<br id="br473">
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The raids on the cyber cafes come after the expiry of the October 30th
deadline set by the Kenya Copyright Board.<br id="br475">
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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.<br id="br477">
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Edward Segei, a State counsel seconded to the Copyright body, said the
owners of the raided Internet Cafes will face charges of copyright
infringement.<br id="br479">
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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.<br id="br481">
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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.<br id="br483">
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"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.<br id="br485">
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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.<br id="br487">
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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.<br id="br489">
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He welcomed legalising software on Windows 2000, to which Microsoft
says they did not want to license what they don't support.<br id="br491">
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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.<br id="br493">
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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.<br id="br495">
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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.<br id="br497">
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The package is being developed using FOSS development tools and
platform and, therefore, will be released worldwide to other developers
who wish to collaborate.<br id="br499">
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Sunkworks are selling software at three points to serve businesses.<br id="br501">
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On pricing, FOSS will be available be free of charge, where the only
charges are for installation and improvements .<br id="br503">
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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.<br id="br505">
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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.<br id="br507">
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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.<br id="br509">
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This increases information risks, leads to massive unemployment, and loss of revenue to government.<br id="br511">
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"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.<br id="br513">
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"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.<br id="br515">
(Source: Business Daily)<br>