CCK policies should support firms that put money in new technology [Nation (Kenya)]
(Nation (Kenya) Via Acquire Media NewsEdge) In a matter of days, the National Treasury will be receiving a huge Sh2.4 billion ($27 million) cheque for selling air to mobile telephone company, Safaricom Ltd.
This is the price the telecommunications sector regulator — Communications Commission of Kenya (CCK) — has set for renewal of the 15-year mobile licence first issued to both Safaricom and Airtel in July 1999.
Initially, each of the companies forked out Sh4.8 billion ($55 million) for the licences.
In those initial days when mobile telephone was just beginning to catch up, government minted billions from selling air.
Fifteen years later, the licences are now due for renewal.
But did CCK calculate the new price?
Apparently, CCK just looked at the price it charged to the third operator mobile operator (yu) in 2003 and decided to make it the applicable price.
Clearly, mobile telephone licences have been a source of easy money for the government.
Mark you, CCK also collects more millions of shillings annually from these companies every year for a multiplicity of broadband spectrum fees.
A small part of this money sits on the balance sheet of CCK as surpluses with the rest remitted to the National Treasury as appropriations-in-aid.
In addition, the operators also paid Sh10 million for 3G licences.
The manner in which CCK has calculated the renewal fee for the two pioneers is now the subject of raging controversy.
Away from the limelight, Airtel Ltd has been lobbying intensely to have the formula for determining the fee changed.
In a recent letter to CCK, Airtel's managing director Shivan Bharvagan argued that the fee should be based on ability to pay.
He has proposed a variable fee pegged on a percentage of the turnover of the operators.
In other words, Airtel wants to pay less than fellow pioneer licensee, Safaricom. Airtel, according to its managing director, is not in a position to afford the renewal fees.
Which begs the following question: Should the government listen to Airtel's plea?
First, I must say that I find the formula applied by CCK arbitrary. Fees charged by regulators should be based on deliberate policy.
After all, this thing is not just about collecting money for the government.
We often forget that one of the reasons our public finances are stunted is because institutions which collect fees and royalties such as CCK on behalf of the government cherish the myth that enriching the government is the same thing as enriching the economy.
The priority in telecommunication today is more investment in quality services, wider coverage. Lower consumer prices is also a priority.
In the name of privatisation and opening up the sector to mobile telephony, this economy lost hundreds and thousands of jobs.
Regulation must promote growth because this is how we are going to recover the jobs to create space for the mobile telephone industry.
I also don't accept the arguments by Airtel.
We must not forget that the two pioneer mobile telephone companies were issued with licences more or less at the same time.
If we now turn around 15 years later and say that renewal fees must be pegged on turnover, it will amount to punishing success and rewarding laggards.
When relaxing regulation incentives for companies with low turnover at the expense of companies which are investing heavily in new equipment and wider network coverage, it's like sending the signal that the country is not interested in more growth.
What CCK must do in renewing the licences is to make sure that it gives these companies stringent roll out obligations for the renewal period.
Regulation should deliberately support operators who are prepared to put money in new technology to migrate consumers to faster data speeds and better speech quality.
In future, we should put all frequencies on auction so that these scarce resources are not hoarded by jokers.
I read somewhere that in Greece and Switzerland frequencies held by incumbent mobile companies were put on auction with existing operators given the opportunity to take them up.
If we can come up with ways and systems of insulating auctions from political manipulation, it's the way to go in future.
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