Robert Ndwiga
26 October 2009
Nairobi — Telecommunications operators in Kenya have opposed plans by the industry regulator to levy a one per cent fee on their gross annual income to set up a universal fund.
The bone of contention is that the Communications Commission of Kenya (CCK) plans to collect the levy under the proposed Universal Service Fund, and thereafter lend the money to the same entities as commercial loans.
The fee will be charged on all telecommunications licensees "with an annual gross turnover of over Ksh10 million ($128,205) at an amount not exceeding one per cent of their revenue with an exemption to the postal services, currently operated by state-run Postal Corporation of Kenya.
If adopted, the pool could potentially rival the Constituency Development Fund in three years, given an estimated Ksh700 million ($9.3 million) the telecom operators would pay to a proposed advisory board managed by the CCK.
Under the UN universal communications requirements, governments are mandated to provide the requisite infrastructure for communications services to all citizens under the Universal Service Charter.
The proposals as published in the Kenya Communications (Tariff) Regulations 2009, have brought about wide ranging measures including giving CCK the power to establish the Universal Service Advisory Council, which shall be mandated to manage the funds, advise on policy guidelines and identify geographical areas, and population groups that may benefit from the fund.
Most of the operators who spoke to The EastAfrican are opposed to the creation of the fund. "We are concerned about the management of the money, particularly the fact that the regulator will then be lending the same funds at an interest to operators to launch telecommunications services," said Safaricom chief executive officer, Michael Joseph.
This, Mr Joseph, says would be tantamount to giving commercial loans to operators without recognising the fact that they have been investing heavily in network roll-out, product diversification and retail infrastructure.
Industry experts question the viability of the fund, which they say, according to the proposed regulation has fundamental loopholes in its setting, including factors like the expertise of its administration and the auditing of the fund's accounts.
"The question is who shall be making these decisions and to whose interest?
There are more questions than answers.
Indeed, the regulations have fundamental flaws that must be addressed by all stake holders if they have to be adopted," said one industry source.
Safaricom for example, the most profitable operator in East and Central Africa, has an annual turnover of Ksh70 billion ($897 million), which would translate to Ksh700 million ($9.3 million) annually assuming the one per cent rule, is effected on its annual turnover.
This does not include other levies by the government which include 16 per cent value added tax and 10 per cent excise duty on airtime.
Other operators, Zain Kenya, Telkom Kenya and Yu have not declared their profitability but could easily bring in another Ksh500 million ($6.4 million) into the kitty, making the kitty attract Ksh1.2 billion ($15.4 million) annually from the mobile phone operators alone.
According to the CCK document, the commission intends to collect the funds from the operators and then lend the same money at an interest to expand services to areas where it deems require more investment on telecoms infrastructure and coverage.
The operators on the other hand say the coverage and service expansion are driven by the demand and supply and the population.
"For example, it does not make business sense to roll out 3G services to the remotest part of Kenya where the population does not have the basic tools of accessing the Internet for commercial reasons, like electricity and laptops, it beats logic," said Rene Meza, Zain Kenya managing director in an interview.
Mr Meza says the issues of universal service should be best left to the operators who will roll out services based on business potential and a return on the investment, unlike where the fund will be used to roll out services that are premature in the selected regions.
At the same time he questions the parameters that will be used to measure the levels of optimal universal access to the services.
"The proposals do not indicate when or how we will have assumed to have covered all areas of the country and the levels the operators will be measured against if the USF has to be properly managed to the benefit of the users and the customers," he said.
The far reaching proposals also provide that the CCK may from time to time publish guidelines on the amount of levy to be charged on the different categories of licensees.
According to the proposed guidelines, the Universal Service Advisory council will be mandated to use the funds from the levy to support national communications development programmes including funding of universal service programmes and projects, identifying, approving, scheduling and financing of private sector and local community investments, conduct research and other relevant studies in information technology.
"The commission may support projects that are not economically feasible without the support of the fund and may support projects to the extent necessary to create adequate economic incentives for investors," reads the proposed regulations in part.
However, as far as the universal service is concerned, the CCK is mandated to facilitate the provision of communication services throughout the country including those in rural and underserved areas in line with the ICT Policy of 2006.
The policy outlines the need for provision of affordable ICT infrastructure in all sectors including learning institutions and creating an enabling environment for Public-Private Partnerships in ICT development.
This includes accessibility -- non-discriminatory in terms of geographical location, religion, race and sex; affordability -- affordable to all citizens in terms of pricing and availability; nationwide coverage or availability of communication services.
Additional reporting by Catherine Riungu
Be the first to Write a Comment!
Copyright © 2009 The East African. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
