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Washington, D.C: infoDev / World Bank. Available at http://www.infodev.org/publications iii Table of Contents List of Figures, Tables and Boxes …………………………………………………………... v Glossary of Terms …………………………………………………………... vi Acknowledgments …………………………………………………………... vii Executive Summary …………………………………………………………... 1 1. Why Broadband Matters …………………………………………………………... 2 2. The Kenyan Context …………………………………………………………... 4 2.1 Country Background …………………………………………………………... 4 2.2 Human Development …………………………………………………………... 4 2.3 Socio-Economic Climate …………………………………………………………... 4 2.4 Regional Role—Kenya as a Hub …………………………………………………………... 5 3. Strategy, Policy and …………………………………………………………... 7 Regulation 3.1 Vision 2030 …………………………………………………………... 7 3.2 Policy and Regulatory Framework …………………………………………………………... 7 3.2.1 Modern ICT Policy Framework …………………………………………………………... 8 3.2.2 Policy Framework Beyond …………………………………………………………... 11 Networks 4. Institutional Arrangements …………………………………………………………... 13 `4.1 Defining Roles …………………………………………………………... 13 4.2 Line Ministries and Departments – …………………………………………………………... 13 Breaking the Silo 4.3 Too Many Actors? …………………………………………………………... 14 4.4 The People Factor …………………………………………………………... 15 5. ICT Market Snapshot …………………………………………………………... 16 5.1 The Mobile Miracle… …………………………………………………………... 16 5.2 … Meets the Broadband Revolution? …………………………………………………………... 16 5.3 Affordability …………………………………………………………... 18 6. Strategies and Approaches to Support Kenya’s Long-Term …………………………………………………………... 20 Vision 6.1 Supply Side: Kenyan Approach to …………………………………………………………... 20 Building Network Capacity 6.1.1 Wholesale: How Kenya Did It …………………………………………………………... 20 6.1.2 Moving Inland: How Kenya is …………………………………………………………... 23 Doing It 6.1.3 Kenyan Internet Exchange …………………………………………………………... 27 6.2 Stimulating Demand: Services, …………………………………………………………... 27 Applications and Content 6.2.1 Education …………………………………………………………... 29 6.2.2 Equipment …………………………………………………………... 30 6.2.3 BPO Sector …………………………………………………………... 31 6.2.4 Funding Local Demand …………………………………………………………... 34 7. Lessons Learned …………………………………………………………... 37 7.1 Potential Stumbling Blocks …………………………………………………………... 37 7.2 Kenya‘s Strengths …………………………………………………………... 37 8. Conclusions …………………………………………………………... 39 9. References …………………………………………………………... 40 iv List of Figures, Tables and Boxes Figures Figure 1: Map of Kenya ……………………………... 4 Figure 2: Annual average growth by sector, 2000-2009 ……………………………... 5 Figure 3: Kenya‘s vision 2030 ……………………………... 8 Figure 4: ICT Sector institutional framework ……………………………... 14 Figure 5: Regional rates: Kenya takes the lead, mobile subscriptions per 16 ……………………………... 100 people Figure 6: Uses of mobile phone in Kenya, 2009 ……………………………... 17 Figure 7: Decline in mobile tariffs (KES) ……………………………... 18 Figure 8: Kenya‘s international Internet bandwidth (Mbps) ……………………………... 20 Figure 9: African fiber optic submarine cables ……………………………... 20 Figure 10: TEAMS original ownership structure ……………………………... 22 Figure 11: Kenya ICT Trust Fund Structure, collaboration through ……………………………... 30 PPPs Figure 12: How PesaPal works ……………………………... 32 Tables Table 1: Broadband subscriptions in Kenya, 2010 ……………………………... 19 Table 2: Monthly retail broadband prices, February 2011 ……………………………... 19 Table 3: The cables have landed: Fiber optic cables in Kenya ……………………………... 21 Table 4: Internet subscriptions by operator, September 2010 ……………………………... 23 Table 5: How computers are used in Africa ……………………………... 28 Table 6: Categories of Pasha Centres ……………………………... 35 Boxes Box 1:Kenyan Licensing Regime ……………………………... 9 Box 2: Electric Company & Infrastructure Sharing ……………………………... 24 Box 3: East African Backhaul System (EABs) ……………………………... 26 Box 4: BPO Bandwidth Capacity Support ……………………………... 31 Box 5: Judiciary Telepresence Project ……………………………... 32 Box 6: Mobile Money Meets E-Commerce ……………………………... 33 v Glossary of Terms ADSL Asymmetric Digital Subscriber Line ASP Application Service Provider BPO Business Process Outsourcing CCK Communications Commission of Kenya COMESA Common Market for Eastern and Southern Africa CSP Content Service Provider DSL Digital Subscriber Line EABs East African Backhaul System EAC East African Community EASSy Eastern Africa Submarine Cable System FONN Fibre Optic National Network GDP Gross Domestic Product HDI Human Development Index KENET Kenya Education Network KICTB Kenya Information and Communications Technology Board KIE Kenya Institute for Education KIXP Kenya Internet Exchange Point KNADS Kenya National Archives and Documentation Service KTCIP Kenya Transparency Communication Infrastructure Programme LLU Local Loop Unbundling LTE Long Term Evolution LION Lower Indian Ocean Network (undersea cable) MOIC Ministry of Information and Communications MTP Multimedia Technology Park NEPAD New African Partnership for Development NFP Network Facilities Provider NOFBI National Optic Fibre Backbone Infrastructure PPP Private Public Partnership QoS Quality of Service TEAMS The East African Marine System TESPOK Telecommunications Service Providers Association of Kenya USF Universal Service Fund vi Acknowledgments This report was drafted by Mandla Msimang, Managing Director, Pygma Consulting (South Africa) with significant contributions by Michael Minges, who directed the case studies for the Broadband Strategies Toolkit. The project was carried out under the supervision of Tim Kelly (infoDev) and Carlo Rossotto (TWICT), with the Telecommunications Management Group Inc. (USA) providing overall project coordination. Philippe Dongier, Sector Manager (TWICT) and Valerie D‘Costa, Program Manager (infoDev), provide overall management guidance for the development of the toolkit. Samhir Vasdev edited the report and prepared it for publication. This case study is one of an initial series of seven that will contribute to the Broadband Strategies Toolkit, an online resource for policy-makers and regulators, especially in developing countries (see www.broadband- strategies.org).. The case studies are generously funded by the Korean Trust Fund (KTF) on Information and Communications for Development (IC4D). The KTF is a partnership between the government of the Republic of Korea and the World Bank Group whose purpose is to advance the ICT4D agenda to contribute to growth and reduce poverty in developing countries. . vii Executive Summary This report considers the case of broadband in With an estimated fixed and mobile broadband Kenya and the manner in which the country has penetration rate of 2 subscriptions per 100 people tackled its capacity challenges. Kenya has a in 2010, Kenya still has significant progress to natural geographic advantage, being strategically make with respect to broadband uptake. positioned on the East Coast of Africa. Its Stimulating demand and usage by Kenyan citizens government-led ―build it and they will come‖ and the public and private sector remains a approach to broadband development has challenge. Kenya has, largely through the leveraged that advantage, and has played a major government, taken an innovative and pro-active role in dramatically increasing fibre optic approach to putting the user at the centre and backbone capacity. Many of Kenya‘s milestones addressing the other elements of the broadband have been realized in less than five years – three ecosystem, such as education, literacy, applications cables had landed by the end of 2010 changing the and content. This has been done through good face of the broadband market. The country has regulation, the promotion of polices relating to gone from relying on satellite for international ICT in education, the subsidization of relevant capacity, to having access to almost four terabits content and application projects, and facilitating over fibre from the three cables combined. creative Public Private Partnerships (PPPs). Although the landing of the cables is merely a first This report finds that much of Kenya‘s success is step, it has already resulted in an 80 percent due to four important factors: decrease in wholesale bandwidth costs. Lower prices and greater availability are expected to  A clear national vision articulated in increase access to the Internet as well as to Vision 2030; promote the continued spread of sophisticated mobile applications and services and consequently  Strong leadership and direction; improve opportunities for the creation of and access to information and knowledge. Affordable  A credible regulatory, policy and broadband is expected to increase Kenya‘s institutional framework; and competitiveness, particularly in the Business Process Outsourcing (BPO) sector, and to  Leveraging the strength of the public and encourage entrepreneurship and innovation. private sectors through PPPs. What the Kenyan case demonstrates is that the The initiatives discussed in the report possess promotion of broadband capacity is multifaceted elements of these traits across all aspects of the and takes place on a number of different levels. broadband ecosystem. This report analyses the approach that has been The Kenyan experience is inspiring, yet it has not taken to addressing network capacity challenges been perfect. There have been a few hiccups in (supply side), as well as human capacity considerations affecting usage and uptake terms of the pace of implementation, and overlaps (demand side) by considering: in the policy and institutional framework. These are discussed in this report to provide a proper  the wholesale market for broadband context for the Kenyan broadband story and to connectivity (domestic and international enable countries to learn from Kenya‘s backbone connectivity); experiences.  the retail market for broadband access (i.e. ―last mile connectivity‖); and  the development of services, applications and content. 1 1. Why Broadband Matters The economic and social impact of broadband is Developing country policy makers in the ICT well researched and documented. An increase in sector have spent the last 15 to 20 years broadband penetration has a greater impact on encouraging the competitive supply of networks economic development than a concomitant and services through market reform processes. increase in access to other telecommunications The same policy makers are now faced with the services. The World Bank estimates that in low challenge of moving beyond networks and the and middle-income countries such as Kenya every need to start developing strategies to increase 10-percentage point increase in broadband demand. They are furthermore faced with the penetration accelerates economic growth by glaring reality of the cross cutting impact of ICTs 1.38 percentage points.1 and the need to recognize that ICT access is not just a Ministry of Information and The economic impact of broadband2 is wide – it Communications issue – government agencies positively impacts innovation, job creation and responsible for the ICT sector now need to work employment, as well as the software and more closely with other public sector stakeholders manufacturing industries. It promotes access to to create content (e.g. online application forms, e- information – thus promoting transparency and government solutions, online payment good governance, critical in a country like Kenya mechanisms, etc.) to drive demand in order to with a historic reputation for corruption, with make broadband access meaningful. The policy related political and social benefits. In recognition response to broadband is thus changing. of the critical role of broadband, and in light of the Ministry of Information and Communications‘ The Government of Kenya recognized this objective of moving Kenya towards a Knowledge relatively early and in 2006 had included a holistic Based Economy by 2012,3 policy makers, regulators approach to ICT in its national Vision 2030, its and industry players alike are seeking ways to National ICT Policy and its approach to increase broadband coverage and increase usage. regulation. Although there is no separate In light of the high costs associated with Broadband Policy, making the Kenyan approach deploying broadband networks, and the fact that seem fragmented at a glance, there is a holistic broadband is part of an ecosystem which includes ICT framework with strong dependencies on demand side factors such as applications and access to high-speed connectivity in Kenya. The content, and in which users are central, tackling national framework recognizes that broadband is the broadband divide is not quite the same as an ecosystem and as such considers strategies, tackling the digital divide which has been primarily policies and regulations that address both supply conquered through mobile phones with light and demand side considerations. The ICT touch regulation. framework is set against the backdrop of the MOIC Strategic Plan and includes the regulatory incentives provided by the Communications 1 Qiang, Christine Zhen-Wei, and Carlo Rossotto. 2009. Commission of Kenya (CCK) relating to ―Economic Impacts of Broadband.‖ In Information and infrastructure sharing and spectrum licensing, as Communications for Development 2009: Extending Reach and Increasing Impact. World Bank Publications. well as supply side interventions made by agencies 2 The term broadband is defined differently in different such as the Kenya ICT Board which are discussed countries, primarily with reference to speed. As such, the in section 6.2. The Kenyan framework recognizes term must be understood within a country context and the that there are two types of broadband capacity – particular aspects of the broadband value chain should be network capacity, i.e. the development of high-speed recognized. Broadband in Kenya is defined ―as speeds greater data communications networks, and human capacity than or equal to 256 Kbps in one or both directions.‖2 In addition, there are several layers in the broadband value chain enabling the use of the services through the (wholesale, retail, applications and content) each of which development of relevant content and applications must be treated differently. to promote the use of these networks. Building 3 Ministry of Information and Communications Towards a capacity in both areas is what will make Knowledge Based Economy: Strategic Plan 2008 – 2012. http://www.information.go.ke/index.php?option=com_cont broadband matter. ent&task=view&id=239&Itemid=370 2 2. The Kenyan Context 2.1 Country Background the working population, accounts for 50 percent Located in East Africa, Kenya is bordered by of all exports and 25 percent of the GDP. In light Ethiopia, Somalia, Sudan, Tanzania and Uganda. of the fact that the Kenyan economy is highly Kenya‘s coastline, along the Indian Ocean, covers dependent on agriculture, periodic drought has a over 536 km and its port, like the undersea cables significant impact on the economy and has that land along the coast, serves its land-locked threatened GDP growth. Traditionally tourism, neighbours. Kenya is divided into eight provinces tea and coffee have been the largest foreign and 47 semi-autonomous counties each having it exchange earners, but horticultural products and own semi-autonomous government headed by an industrial exports such as refined petroleum are elected governor. At present the country‘s also becoming important.6 population is approximately forty million, with 68 percent of Kenyans living in rural areas, and about 13 million people living in urban areas.4 Nairobi is 2.2 Human Development the capital city, and the largest city in East Africa, Inequality in Kenya is high with the distribution of with a population of over three million.5 income, measured by Gini coefficient, estimated at According to the Constitution, Kenya‘s national 39 percent in rural areas and 49 percent in urban language is Kiswahili, and English and Kiswahili areas.7 Kenya ranks 128 out of 169 countries in are the official languages, with most Kenyans the United Nations Development programme being bilingual. (UNDP) Human Development Index (HDI), an alternative to conventional measures of national development. The HDI looks beyond economic growth and provides a composite measure of three basic dimensions of human development namely health, education and income; it represents a push for a broader definition of well-being.8 According to the UNDP, over the past 30 years Kenya's HDI has remained higher than the Sub Saharan African average and has risen by 0.5 percent annually. Kenya‘s HDI in 1980 was 0.404 and has risen to 0.470 in 2010; this can be compared to the HDI of the region which increased from 0.293 in 1980 to 0.389 over the same period. 9 Kenya‘s position as 128 out of 169 makes it a developing country with low human development. Figure 1: Map of Kenya (Source: CIA World Factbook) Kenya is one of the most industrialised countries in the East African region, yet industry represents 6 http://www.fco.gov.uk/en/travel-and-living-abroad/travel- only 10 percent of its Gross Domestic Product advice-by-country/country-profile/sub-saharan- (GDP). The largest sector of the economy is the africa/kenya/?profile=economy agricultural sector which employs 80 percent of 7Waema, Timothy, Catherine Adeya, and Margaret Nyambura Ndung‘u. 2010. Kenya ICT Sector Performance Review 2009/2010. Cape Town, South Africa: Research ICT Africa. 4 Kenya 2009 Population and Housing Census Highlights. Kenya http://www.researchictafrica.net/publications.php . National Bureau of Statistics 8 International Human Development Indicators, http://www.knbs.or.ke/Census%20Results/KNBS%20Broc http://hdrstats.undp.org/en/countries/profiles/KEN.html hure.pdf 9 International Human Development Indicators, 5 http://www.unicef.org/kenya/overview_4616.html http://hdrstats.undp.org/en/countries/profiles/KEN.html 3 Figure 2: Annual average growth by sector, 2000-2009 (Source: Kenya National Bureau of Statistics and World Bank staff estimates) increasingly urbanized (32.2 percent11), highly 2.3 Socio-Economic Climate educated (at least 61.5 percent literacy rate)12 and According to a report from the World Bank, over bilingual professional workers who are fluent in the last decade, the Kenyan economy has grown at English.13 This positions Kenya well to use an average of 3.7 percent.10 In this time, the broadband to support its own internal market, as Kenyan ICT sector has grown at a rate of 20 well as to participate globally. percent per annum and has outperformed all other segments of the economy. The World Bank estimates that without ICT, economic growth 2.4 Regional Role – Kenya as a Hub would have been only 2.3 percent, and income per An investor-friendly country, Kenya is generally capita would have stagnated. perceived as East and Central Africa's hub for financial, communication and transportation In 2010, largely due to tourism, services; and rivals South Africa as an investment telecommunications, transport, and construction sector growth and recovery in the agriculture 11 Kenya 2009 Population and Housing Census Highlights. Kenya sector, an estimated 4.5 percent GDP growth was National Bureau of Statistics achieved. A GDP growth of 5.3 percent is http://www.knbs.or.ke/Census%20Results/KNBS%20Broc hure.pdf forecast for 2011. These improvements in the 12 Kenya National Adult Literacy Survey, 2007 as discussed in economy are supported by a large pool of ―The Development of Education: Kenya National Report‖, the Department of Education, November 2008, http://www.ibe.unesco.org/National_Reports/ICE_2008/ke 10World Bank. 2010. Kenya at the Tipping Point? Kenya Economic nya_NR08.pdf Update. Nairobi, Kenya: World Bank. 13 English and Swahili are the official languages of Kenya; http://go.worldbank.org/S743MCDPM0. English is the language of instruction at all levels of school. 4 hub in Sub Saharan Africa. Political stability is key The country is well positioned as a member of the for Kenya to maintain its influential position in Common Market for Eastern and Southern Africa the region and following political instability in (COMESA), which has 19 member states with a 2007, Kenya enacted a new Constitution in 2010 combined population of 430 million (2008).14 and has emerged in less than five years with a Kenya is also a member of the East African strengthened political, economic and social Community (EAC), which includes Kenya system. The return to political stability was Burundi, Rwanda, Uganda and the United enabled by the swearing in of a Grand Coalition Republic of Tanzania. The EAC adopted a Government in April 2008 which was established common market protocol in mid-2010 creating a under the ―National Accord and Reconciliation single 130 million-person market with a combined Agreement.‖ The National Accord provides for a GDP estimated at $72 billion (KES 5.98 trillion).15 power sharing arrangement between the Kenya is the largest player in the EAC President‘s Party of National Unity (PNU) and the contributing 40 percent to the regional block‘s Prime Minister‘s Orange Democratic Party GDP. (ODM). 14COMESA Website. See: http://www.comesa.int/ 15Ibid, Study on the Establishment of an East African Common Market: Final Report, and http://www.eac.int/advisory-opinions/cat_view/68-eac- common-market.html 5 3. Strategy, Policy and Regulation One of Kenya‘s strengths lies in the central role further reflected in the approach taken by the that ICT in general and high-speed Permanent Secretary of the MOIC to implement communications infrastructure in particular, plays the Strategic Plan, which is to ensure that the ICT in its national strategy, Vision 2030. A key sector is not considered in isolation and that it has characteristic of the Kenyan broadband space is an impact on national development. the pervasive role of the government which is supported by the strategic, policy and regulatory The MOIC Strategic Plan takes the objectives framework. However, criticisms have been articulated in Vision 2030, interprets them from levelled against the heavy institutional framework an ICT sector perspective and puts timeframes that has been created to support this vision, and resources to them. It defines projects particularly in the ICT sector. While the intended to increase ICT sector developments; framework has facilitated the growth of the ICT discusses strategic initiatives and proposes projects sector in general, the impact on consumers of such as the National Optical Fibre Backbone Internet and broadband has yet to be fully felt. Infrastructure (NOFBI), the East African Marine System (TEAMS), and the Kenya Transparency Communication Infrastructure Programme 3.1 Vision 2030 (KTCIP) which includes Digital Villages and The Kenyan government‘s recognition of the Bandwidth subsidies as sub-projects. The strategic role played by ICTs in the economy is an establishment of ICT/Business Process important aspect of the implementation of Vision Outsourcing (BPO) Parks and Multimedia 2030, the country‘s ‗development blueprint‖.16 Technology Parks (MTP) forms part of the MOIC Vision 2030‘s key goal is that Kenya will be one of Strategy and these projects are specifically linked the top three investment destinations in Africa by to promoting broadband infrastructure rollout and 2030. This will be achieved by addressing three encouraging capacity uptake. The Strategy pillars – Economic, Social and Political (Figure 3). recognises that the ICT sector requires input from ICT is explicitly dealt with under the Economic other sectors of the economy and suggests that Pillar, which is geared at attaining prosperity for all despite the aggressive targets set at a national Kenyans through an economic development level, budgetary and financial constraints, non-ICT programme aimed at achieving an average GDP infrastructure such as electricity and roads, are key growth rate of 10% per annum over the next 25 challenges to meeting ICT sector objectives. years. Importantly, one of the factors that has been 3.2 Policy and Regulatory Framework identified to enable the Kenyan economy to The government has liberalized the ICT sector to achieve its Vision 2030 targets is the Business achieve universal service and access objectives, Process Outsourcing (BPO) industry, one of 20 firstly through competition—all ICT markets are flagship projects of the Vision, which includes call theoretically open to competition— and reliance centres, back office operations and software on the market to deliver services; and where development. Even where it is not explicitly necessary through government intervention. stated, ICTs cut across all three pillars in light of Governments participation in the sector includes e-governance applications and the vision towards a retaining equity interest in a number of ventures at knowledge based economy, as is reflected in the various levels of the ICT value chain – as a Ministry of Information and Communications‘ shareholder in Safaricom (mobile, broadband), (MOIC) Strategic Plan (2008 – 2012).17 It is Telkom Kenya (fixed, mobile, broadband) and recently TEAMS (undersea cable) and NOFBI (terrestrial backbone network). Recent indications 16Vision 2030, http://www.communication.go.ke/documents/Vision_2030 are the government will participate in the rollout _Popular_Version.pdf http://www.information.go.ke/index.php?option=com_cont 17Ministry of Information and Communications Towards a ent&task=view&id=239&Itemid=370 Knowledge Based Economy: Strategic Plan 2008 – 2012. 6 Figure 3: Kenya's Vision 2030 (Source: Kenya Investment Authority) of a national LTE last mile network.18 Balancing  2006 ICT Strategy: Collaboration and public sector participation in the ICT sector with Outsourcing for Economic Growth20 market reform can be a challenge; the manner in which seeks to simultaneously target the which Kenya has addressed this is discussed in development of the ICT sector and to use Section 6.1. ICTs for creating employment, poverty reduction, enabling economic recovery 3.2.1 Modern ICT Policy Framework and achieving national developmental The national policy framework that supports goals. It is aligned with Vision 2030 and broadband network deployment and access has a key focus on the BPO sector. includes:  2006 National ICT Policy19 which deals with convergence, ICT in health and education, e-commerce, e-governance, privacy and cybercrimes, and recognises the evolution of the ICT market; 18 Interview with Permanent Secretary on 16 January 2011, and Osiakwan, E. ―Kenya to launch an open access LTE network to help drive down prices and extend coverage.‖ http://www.afrispa.org/index.php?option=com_content&ta sk=view&id=96&Itemid=2 viewed on 28 February 2011 19 See Communications Commission of Kenya website, 20 http://www.cck.go.ke/regulations/downloads/national_ict_ http://www.ictvillage.com/Downloads/2006_Kenya_ICT_S policy.pdf trategy.pdf 7 Box 1: Kenyan Licensing Regime Like its regional counterparts in Rwanda, Uganda and Tanzania the CCK has adopted a technology neutral unified licensing framework (ULF). Network operators and service providers are licensed under a market structure consisting of the following broad market segments:- Network Facilities Provider (NFP) - Licensees under this category can own and operate any form of communications infrastructure (based on satellite, terrestrial, mobile or fixed). The NFP category is further divided into National NFP and International NFP. Investors who wish to land a submarine cable in Kenya require a Submarine Cable Land license while those interested in building system for the provision of international voice/data services are required to get a license for international Systems and Services. An International NFP (Incl. submarine cables and international gateway facilities) costs KHS 15 million as an initial fee, and the higher of 0.5% of Annual Gross Turnover or KES 5 million (US$ 60,170) per annum. The spectrum fee payable is based on bandwidth and coverage. National NFP are described based on the use of spectrum. National NFPs are further identified as Tier 1 (exclusive use of spectrum countrywide), Tier 2 (exclusive use of spectrum regionally) and Tier 3 (exclusive utilization of spectrum by Administrative District). The initial license fee for Tier 1 and Tier 2 NFP licenses is KES 15 million; the fee for Tier 3 NFP licenses is KES 200,000. (US$ 2400) In addition a spectrum fee is payable based on bandwidth and coverage. Applications Service Provider (ASP) - Licensees under this category are permitted to provide services to end users using the network services of a facilities provider (NFP). The initial license fee is KES 100,000, and an annual fee of the higher of KES 100,000 (US$1200) and 0.5 percent of Annual Gross Turnover is payable. Content Services Provider (CSP) - Licensees under this category can provide content services material, information services and data processing services. The initial license fee is KES 100,000 (US$1200) and an annual fee of the higher of KES 100,000(US$1200) and 0.5 percent of Annual Gross Turnover is payable. Source: CCK Website, http://www.cck.go.ke/licensing/telecoms/telecom_marke_structure.pdf  1998 Kenya Communications Act, as Kenya into an area that still requires more amended in 2009 to become the Kenya definition - electronic commerce and Information and Communications transactions. The 2009 Amendment Act Act.21 The 1998 Act separated the roles provides a high level framework for, of policy formulation, service provision amongst others, the recognition of and regulation and as such restructured electronic signatures and records and Telkom Kenya, splitting out the regulator introduces content regulation. (Communications Commission of Kenya), and creating a policy advisory A gap in the Kenyan legal framework is the body (National Communications absence of a specific law that address electronic Secretariat) and an Appeals Tribunal. It transactions. While a framework is provided by dealt with the progression from a market the Communications Act which recognizes monopoly to a liberalised ICT sector. The advanced e-mail, electronic signatures and 2009 Amendment Act was aimed at electronic records as equal to written signatures aligning the 1998 legislative framework and physical records respectively, consumers, with the 2006 ICT Policy. It did this by particularly first time users of the Internet, require enabling a technology neutral and comfort to provide documents electronically and converged approach to the market to spend money online. A legal framework that is structure, licensing and regulation in sufficiently detailed, practical and implementable general. It also delved for the first time in and instils trust would play a key role in encouraging the use of the Internet by consumers and businesses for daily transactions. The CCK‘s 21See Communications Commission of Kenya website, http://www.cck.go.ke/regulations/downloads/Kenya- regulations which seek to expand on the Information-Communications-Act-Final.pdf provisions of the Communications Act, only 8 provide a broad framework and are still fairly high spectrum, will be arrived at ―based on the level. For example while they define the economic value of the spectrum in a institutional framework they have not yet licensed manner that promotes its efficient use Certification Service Providers to authenticate and sector growth.‖ 26 To date although electronic signatures.22 the law provides for auctions as one of the methods of licensing, beauty contests The legal and policy framework is complemented have been used for initial licenses, and a by recent 2010 regulations issued by CCK, all of ‗first come first served‘ approach for which, while they do not explicitly deal with requests for additional spectrum, such as broadband, create an enabling environment and 3G spectrum. A dispute is underway affect the impact of the regulatory environment regarding the pricing of 3G spectrum – on the promotion of broadband, namely: Airtel and Orange were granted 3G licenses in 2010 for 60 percent less than  Universal Service and Access the fee paid by Safaricom in 2007. The fee Regulations23 which address both access reduction was motivated by a desire by to public voice and to Internet. Many the government and regulator to increase African countries are still undergoing broadband penetration. processes to amend the definitions of universal service and access to include At present in Kenya 3 licensees have 1900 Internet and advanced services. The MHz spectrum, 3 licensees have been regulations provide for the provision of assigned 3G spectrum in the 2100 MHz subsidies, loans and grants for both basic band and 18 licensees have been assigned and advanced ICTs as well as building broadband spectrum in the 3.3 GHz – 3.5 human capacity and encouraging GHz bands27; innovation – key areas if Kenya is to encourage Internet uptake. Operators  Licensing and Quality of Service must pay a levy not exceeding one Regulations28 provide a framework for percent of gross revenues to the newly granting, registering, transferring, and established USF for projects and otherwise managing licenses, as well as programmes which may include Internet quality of service monitoring and and broadband projects for both public reporting. The CCK measures the quality and private access. A report on Universal of each of the mobile networks, however Service indicates a target for 2005 – 2010 no specific QoS requirements have been of 1 internet point of presence per stipulated and thus measured for district24; but no formal tracking or broadband to assess speeds, network evaluation of this is available. quality or other parameters;  Frequency Spectrum Regulations25  Facilities Leasing and Interconnection which deal with spectrum licensing and Regulations29 and Fair Competition pricing, and provide for spectrum sharing where CCK mandates it (not yet mandated). Importantly they provide that pricing, including that for broadband 26 See CCK website, http://www.cck.go.ke/regulations/sector_regulations.html 22 The process is now underway, see: CCK Plans Tough Rules to 27See CCK website, Check Electronic Signatures, Okuttah, M. November 8, 2010. http://www.cck.go.ke/licensing/downloads/List_of_access_ http://allafrica.com/stories/201011090245.html frequencies_assigned_to_operators.pdf 23 See CCK Website, 28See CCK website, http://www.cck.go.ke/regulations/downloads/xUniversal_A http://www.cck.go.ke/regulations/downloads/xLicensing_a ccess_and_Servicesx_Regulationsx_2010.pdf nd_Quality_of_Servicex_Regulationsx_2010.pdf 24http://www.cck.go.ke/services/universal_access/download 29 See CCK Website, s/FinalUAreport.pdf http://www.cck.go.ke/regulations/downloads/xInternnectio 25 See CCK website, n_and_Provision_of_Fixed_Linksx_Access_and_Facilitiesx_ http://www.cck.go.ke/regulations/sector_regulations.html Regulationsx_2010.pdf 9 Regulations30 which indicate the 3.2.2 Policy Framework Beyond Networks regulators‘ encouragement of co-location Government‘s role in promoting broadband agreements which are to be commercially network rollout is a fundamental pillar in Kenya‘s negotiated, however CCK has the right to broadband achievements to date. The bandwidth intervene in case of a dispute. The now available is impressive, however, the regulations also provide for the provision challenge remains how to make it meaningful of Reference Interconnection and Access from a user perspective. Some aspects of the Offers by dominant operators to facilitate regulatory framework will need to be amended to fair competition and the entry of new address this. This includes consideration of the players. The Fair Competition legal and regulatory framework dealing with Regulations provide a framework for content and applications. In addition to the above, market reviews and determinations of there is legislation that specifically affects the dominance, and confirm the CCK‘s online sector including the following: mandate over ICT competition matters. They provide that licensees must give  Constitution (2010)31 – Under the new equal access and non-preferential Constitution, every person has the right treatment to all customers on a first to privacy, which includes the right not to come, first served basis. This applies to all be searched (i.e. their person, home or network facilities, i.e. any element that property); not to have their possessions forms part of an electronic seized; information relating to their family communications network including ducts, or private affairs unnecessarily required or cables, antennae and masts – critical revealed; or the privacy of their elements of a terrestrial backbone communications infringed. Citizens network. furthermore have the right of access to information held by the State; the The regulations also define dominance, provision to the public of timely and and aspect of the regulations that proved accurate information is promoted for the controversial and was contested by some public sector. operators in the market, and provide for the CCK to undertake market reviews as  Public Archives and Documentation necessary, none have been conducted in Service Act which was passed in 1966 the broadband markets. and revised in 1990, and which created the Kenya National Archives and CCK regulations on Dispute Resolution, Tariffs, Documentation Service (KNADS) Type Approval, Numbering and Consumer provides a framework for the Protection also form part of the framework. The preservation of public records and Consumer Protection Regulations are important in archives. The Government Printer and an Internet context due to requirements stipulated government ministries, agencies and in the regulations to protect children and for departments must provide KNADS licensees to provide clear and accurate copies of any published or generally information on the pricing and capability of their circulated document or report produced services to consumers – an area, like the by their respective offices. As noted by monitoring of QoS, that becomes increasingly Global Information Society Watch, the important in a broadband context with regard to Act does not, however, expressly speeds, prices and capacity. recognize the rights of citizens to access these public archives, nor does it require the information to be made available in 30See CCK Website, 31 http://www.cck.go.ke/regulations/downloads/xFair_Compe http://www.kenyalaw.org/klr/fileadmin/pdfdownloads/Con tition_and_Equality_of_Treatementx_Regulationsx_2010.pdf stitution_of_Kenya__2010.pdf 10 electronic format, which are important education network thus reducing costs aspects of e-law. and increasing access.  Copyright Act (2001)32, which provides  Freedom of Information Bill, which intellectual property and copyright deals with the general right of access to protection and restricts access to information, which is defined as ―any information. It is focussed on the documentary material regardless of its traditional broadcasting sector and more physical form,‖ that is held by public recent concepts such as ―open source‖, authorities and private bodies performing and ―online content‖ are not sufficiently a public function. The Bill addresses the covered in the Act which is problematic proactive dissemination of information from a broadband content and through the publishing and updating of applications perspective. Strengthening information by public authorities, and the such provisions will have a practical right for persons to correct their personal impact and facilitate the sharing of data held in government records, as well resources in schools, hospitals and clinics, as introducing the principle of maximum amongst others. In the education sector disclosure.33 It also provides for the as an example, digitised textbooks and appointment of an Information educational software, can be shared Commissioner to ensure compliance with electronically by all schools on an the legislation. 32 33 http://www.kenyalaw.org/Downloads/Acts/Copyright%20 http://www.tikenya.org/documents/The_Freedom_of_Infor Act.pdf mation_Bill.pdf (2007) 11 4. Institutional Arrangements and levelling the playing fields across the Kenyan 4.1 Defining Roles economy. Kenya‘s ICT sector and market reform process is supported by the sector ministry, the national ICT regulatory authority and the relevant Parliamentary 4.2 Line Ministries and Departments – Portfolio Committee on Communications. From Breaking the Silo an implementation perspective, Kenya‘s market The promotion of broadband presents both oriented approach sees licensed operators opportunities and challenges in light of the cross responsible for implementing the aspirations set cutting impact of broadband on the economy, and out in national policy. This is done by private the role that government as a whole (and not just operators and also through a number of the Ministry responsible for ICT) must play to innovative joint ventures and Public Private meet the country‘s ICT targets and objectives. partnership models. Further to the institutions Kenya has learned that the promotion of that have become the norm in liberalised markets broadband requires a level of coordination across (i.e. policy maker, regulator, operators), Kenya line Ministries that appears to be unprecedented in has a fairly unique framework which demonstrates recent history; hence a common concern is raised its commitment to increasing universal service and about the ―silo effect.‖ Public administration, access of ICTs, and also the strategic importance health, education, agriculture and trade and of ICTs and specifically broadband and Internet industry departments are key institutional access in the economy. stakeholders in the development of broadband in Kenya. Their role is to ensure the promotion of Kenya‘s institutional framework as it relates to broadband for their own internal efficiency, as promoting broadband uptake and impact, is well as to deliver content and services to their closely tied to a relatively new organisation called respective constituencies. Kenya‘s experience the Kenya Information and Communication demonstrates that once the cables have landed the Technology Board (KICTB). It plays an important effective use of broadband by line ministries role in terms of the promotion of the BPO requires that they: industry, and also with respect to the facilitation and subsidization of projects that drive demand,  Recognize the value of broadband such as the creation of ―Pasha Digital Villages‖ and the rollout of the ―Wezesha‖34 programme to  Are themselves comfortable with using subsidize laptops for university students. In technology in general, and broadband in addition, the establishment of the Government specific Information Technology Services (GITS) in 2000, a Directorate of E-Governance (created in 2004),  Trust technology and a National Communications Secretariat (NCS) (created in 2006) points to the strategic import of  Have the capacity to evaluate broadband ICT to the government and its recognition that it projects and initiatives is important that it creates content for users to access. Each of these institutions has a critical role  Coordinate their policy intervention and to play in promoting and facilitating broadband projects access, mainly on the demand side. The above does not seem to be the case for all These ICT sector specific institutions are further government departments which is leading to supported by a Monopolies and Prices delays in the achievement of some of the Vision Commission which deals with competition issues 2030 targets, particularly as they relate to digitisation of government content and e- 34The program provides a voucher of KES 10‘000 (US$120) government. Looking outside of the MOIC, in towards the purchase of a laptop. The subsidies for the first Kenya a policy exists for ICT in Education, phase will cover the purchase of around 16‘000 laptops. See: however, no formal ICT policy seems to exist for http://www.ict.go.ke/index.php/sport/wezesha/about 12 Minister Assistant Assistant Minister Minister 1. Kenya 1.Communication Broadcasting Commission of Kenya Corporation 2. Kenya Broadcasting 2. Postal Corporation Corporation of Kenya Permanent Secretary 3. Multi Media University of Kenya 3. Telkom Kenya 4. Kenya Film Censorship Board 4. Kenya College of 5. Kenya Film Communication Commission Technology 6. National Communications 5. Communication Commission of Kenya 2007 Proposed Secretariat 7. Postal Corporation 6. Kenya Film (2008 – 2012) of Kenya 8. GILGI Censorship Board Telecommunication Industries 7. National 9. Communication Communications Appeals Tribunal Secretariat 10. Kenya ICT Board 11. Kenya Year Book 8. GILGI Editorial Board Telecommunications 12. Brand Kenya Industries Board 13. Information Commission 9. Appeals Tribunal 14. The East African Marine System (TEAMS) 15. Fibre Optic National Network (FONN) Figure 4: ICT Sector Institutional Framework (Source: Adapted from MOIC Strategy, 2008- 2012) other sectors. As such, the extent to which they policy formulation and its implementation are are coordinated with the National ICT Policy is comprehensively addressed, on another it has unclear, and monitoring and evaluation of such been criticized for causing duplication in functions policies is done by line ministries, with sharing of for example between the National information across ministries reliant on the Communications Secretariat and the better known relationships between particular government KICTB which are both responsible for advising officials, as opposed to mechanisms built into the the government on policy issues;35 and the KICTB institutional framework. This has the potential to and the Brand Kenya Board which both promote increase costs and duplicate efforts – for example the ‗ICT image and reputation‘ of the country. In when the Department of Health promotes addition, the role of the KICTB (funded primarily projects aimed at connecting rural clinics without through donor funding) and the newly established collaborating with the Department of Education Universal Service Fund (funded through levies on which may be addressing the rural schools divide operators) may overlap with respect to the simultaneously. Similarly, where Local promotion and subsidization of projects which Government Departments may initiate seek to increase accessibility, availability and infrastructure projects, without having regard to affordability of ICTs and in particular broadband. projects underway that may be led or funded by Projects such as the telecentres and community other ministries. access points projects that are promoted by the 4.3 Too Many Actors? 35Waema, Timothy, Catherine Adeya, and Margaret Nyambura Ndung‘u. 2010. Kenya ICT Sector Performance Review While on one hand the institutional framework 2009/2010. Cape Town, South Africa: Research ICT Africa. can be seen as a strength in that all aspects of http://www.researchictafrica.net/publications.php . 13 USF and provide communities with a server, people implementing it. In Kenya, a strong computers, printers, and free Internet connectivity Permanent Secretary and dedicated and for at least one year, may overlap with the charismatic leaders of key ICT sector institutions KICTB‘s Digital Villages programme discussed are an important part of the country‘s success. In later in this report. The presence of a strong addition, the entrepreneurial nature of Kenyans MOIC Permanent Secretary who has a good has played a role. The conceptualisation and understanding of the sector and how best to use implementation of TEAMS and NOFBI required the institutions effectively is central to minimising strong leadership to push national objectives, conflict and reducing overlap. particularly in the face of regional challenges and the need to negotiate implementation with regional political and private sector players. The 4.4 The People Factor Kenyan case, like that in countries like Rwanda, Many countries have excellent ‗paper policies‘ but South Korea and Malaysia, shows the importance are thin on implementation. A significant of a ―champion‖ to meet targets. contributor to the success or otherwise of a broadband strategy is the commitment of the 14 5. ICT Market Snapshot Like most countries in Sub-Saharan Africa, Kenya the mobile operators have a mobile money has experienced a telecommunications revolution, service. Over 80% of Safaricom‘s subscribers or and particularly a mobile revolution. It has seen an 13.5 million people have registered for the M-Pesa increase in mobile subscriber numbers, and has service.37 Mobile money is not the only non-voice innovated in ways that have impacted the region application people are using on their mobiles with and the world. As expected, the ICT sector is an other activities including sending SMS, accessing engine for economic growth. the Internet and watching TV (Figure 6).38 Despite mobile success, there is still room for 5.1 The Mobile Miracle... progress. Population coverage of 2G networks is One of Kenya‗s greatest successes has been the still far from universal (86% in 2010) and 3G unprecedented uptake and usage of mobile coverage is limited to urban areas. The remaining services. Kenya was a slow starter with only challenge remains access for residents of rural and 114,000 subscribers seven years after mobile was remote areas without affordable network first introduced, well below the subscription rates coverage. of the country‘s Sub Saharan peers. Following market reform and liberalization, there were 22 million subscribers in September 2010 for a 5.2 …Meets the Broadband penetration rate of 60 subscriptions per 100 Revolution? people (Figure 5). The mobile miracle has become a typical success story of most developing countries, with the The mobile market comprises four licensees, advent of pre-paid coupled with mobile including a dominant player in the market in the technology driving the uptake of mobile voice form of Safaricom (76 percent market share), a services. What is unique about Kenya is that over publicly listed company with shares also owned by the last two years, its broadband market has the government and strategic investor Vodafone undergone a revolution. This was spurred by key of the United Kingdom. The remainder of the developments including the landing of three market is divided between private operators Airtel undersea fibre optic cables (see Section 6.2). This Figure 5: Regional Rates...Kenya takes the lead, mobile subscriptions per 100 people (Source: CCK and ITU) 80 Kenya 60.4 54.0 60 46.0 32.8 40 21.4 16.0 20 10.7 5.0 0.4 1.9 3.8 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (14%), Essar (7%) and the mobile arm of the incumbent, Orange (4%). Washington D.C.: World Bank. http://www.microfinancegateway.org/p/site/m/template.rc Kenya‘s mobile sector is characterized by /1.9.43376/. innovation, particularly mobile money. 37 Safaricom. ―Half-Year Results Presentation.‖ 10 November Safaricom‘s M-Pesa36 led the way and today all of 2010. http://www.safaricom.co.ke/index.php?id=323 38 Bowen, Hannah. 2010. Information at the Grassroots: Analyzing the Media Use and Communication Habits of 36For more on M-Pesa see: Mas, Ignacio, and Dan Radcliff. Kenyans to Support Effective Development. 2010. ―Mobile Payments Go Viral: M-PESA in Kenya.‖ In http://www.audiencescapes.org/africa-research-survey- Yes Africa Can: Success Stories from a Dynamic Continent. quantitative-analysis-ghana-kenya. 15 favourably positions the country from an has been limited and in fact the number of fixed infrastructural perspective particularly lines has been declining. The number of copper- international Internet capacity. The undersea based fixed lines stood at just 228,391 in cables (that at least four licensees have built, or September 2010 of which 12,216 were connected that are in the process of being built), are to a DSL subscription meaning that only a little complemented by Kenya‘s regional and national over 5% of fixed lines were connected to fibre backbone projects (see Section 6) to drive broadband. Fixed wireless lines are based on connectivity in rural areas. CDMA 2000 1x technology including broadband EV-DO in the case of Telekom Kenya. Despite the landing of the cables, there is significant scope for retail broadband to take off. Consistent with the trends displayed as part of Internet and broadband services are provided by the 2G ‗mobile miracle,‘ mobile broadband is far mobile operators and by Internet Service more prevalent than fixed with some 780,000 Providers (ISPs) including the more popular subscribers by the end of 2010.39 Until recently Kenya Data Network (KDN), Jamii Telkom, Safaricom was the only mobile operator offering UUNET, AccessKenya, Wananchi Online, 3G services. It was granted a license in 2007 and Figure 6: Uses of mobile phones in Kenya, 2009 Communications Solutions and AfricaOnline. launched service in 2008. Its HSDPA network While there is competition in the Internet and uses the 2100 MHz frequency and provides broadband markets, these are the least accessible download speeds up to 7.2 Mbps comparing ICT services in Kenya, as is the case in most favourably with fixed broadband solutions. Airtel African countries. There were only 37,356 fixed and Orange were granted 3G licenses in 2010. Internet subscriptions at September 2010 using WiMAX, DSL and fibre optic technologies. One It is likely that broadband usage and uptake in a challenge is the lack of fixed telephone lines and Kenyan context, like in many developing countries coaxial cable television networks to provide the with high mobile penetration, will be primarily basis for developing fixed broadband access. The wireless. Overall Internet access (narrowband and total number of fixed lines (both copper and fixed broadband) from mobile phones already far wireless) stood at 369,971 in September 2010. outstrips fixed Internet subscriptions, and this is Telkom Kenya, of which France Telecom is the strategic investor, is the primary provider of fixed lines. Though some competition has been injected 39GSMA. ―African Region Mobile Broadband Landscape.‖ through the licensing of Tier 2 (local loop, and November 2010. http://www.gsmamobilebroadband.com/resources/global_c regional) Network Facilities Providers the impact overage_maps/list.aspx. 16 unlikely to change going forward in light of fixed 2011 keep their costs high. Instead of lowering line penetration. prices, operators are increasing speed or adding other features. For example, while the price of the Telkom Kenya 256 Kbps ADSL offering has not 5.3 Affordability changed since 2009, it now includes 30 minutes of With reference to the broadband market, while free on-net talk time per month. Another wholesale bandwidth charges have decreased, contributing factor to the perception of there is a perception that retail prices have not broadband price rigidity is the rapid drop in prices dropped as much. According to the Kenya ICT on mobile networks, particularly following a Board the price of a monthly international E1 link recent reduction in wholesale termination rates. dropped from US$7,500 in 2007 to US$ 1,290 by According to the CCK, the average price of a pre- Figure 7: Changes in mobile tariffs (KES) (Source: Communications Commission of Kenya) To fixed Q3 09/10 Off net Q2 09/10 On net Q3 08/09 0 2 4 6 8 10 12 14 30 20 10 0 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 Avg pre-paid On net Avg pre-paid Off net Avg Charges mobile network Avg Charges fixed network the end of 2009, a reduction of over 80%.40 paid on-net call dropped 33.4% from June- During the same time period retail prices have September 2010. dropped by the same magnitude. For example Telkom Kenya‘s 256 Kbps DSL package dropped One notable aspect of Kenyan retail pricing is the from KES16‘008 to KES 2‘999. There is some variety of choices and entry-level speeds (Table 5- truth however to the recent rigidity in retail 2). While an entry-level ADSL package begins pricing. After initial reductions, they have mostly with an advertised download speed of 256 kbps, remained fixed at the same price with some most other technologies have a higher starting operators arguing that their long term contracts speed. The least expensive monthly price is fixed with satellite providers which only expire post wireless using EVDO technology at around US$11 (KES 900) per month. However even that price is out of reach for many Kenyans. In order 40Kenya Information and Communications Technologies to make access more affordable most mobile Board. 2009. Progress Report 2007-2009. http://www.ict.go.ke/oldsite/images/pdfs/kictb%20progres operators offer prepaid data packages in small s%20report%202008-2009.pdf denominations. For example Orange offers 150 17 MB of use for US$2 (KES 150) per month while intensive on-line use, they at least provide an Safaricom offers as little as 5 MB for KES 5 option for the budget conscious consumer to (US$0.07) per day. While these may not allow check their e-mail. Table 1: Broadband subscriptions in Kenya, 2010 (Source: GSMA and CCK) Technology Subscribers Penetration Mobile broadband 779,886 2.1 Fixed broadband 84,726 0.2 - Terrestrial wireless 15.907 - - DSL 12,216 - - Fiber optic 8.369 - - Others 864 - TOTAL 864,592 2.4 Note: Mobile broadband subscriptions refer to data published in November 2010. Fixed broadband refer to September 2010. There is a discrepancy between the total number of broadband subscribers reported by CCK and the item breakdown. Penetration figures based on 2010 population reported by the IMF Table 2: Monthly retail broadband prices, February 2011 Price Download Monthly Monthly per Operator Technology speed price price Comment Mbps (Mbps) (KES) (US$) (US$) Orange EVDO 3.1 850 $11.16 $4 Data card Telkom Includes 30 minutes per month of free ADSL 0.256 2,999 $39.36 $154 Kenya voice on Orange networks Price adjusted to reflect 1GB per month Safaricom HSDPA 7.2 1,428 $18.74 $3 usage Cable Zuku 1 999 $13.11 $13 Limited availability; hybrid fiber/cable modem Guaranteed speed; speed shown Access WiMAX 0.32 4,640 $60.90 $190 averaged over month since different speeds apply at different times of day Source: Adapted from information on operator websites. Note: Including taxes. All plans are entry level with download speed of at least 256 kbps. Converted to US$ using 2010 annual average exchange rate. All packages for unlimited access unless noted. 18 6. Strategies and Approaches to Support Kenya’s Long-Term Vision The Kenyan government‘s role in the ICT sector position. From no international fiber optic has been all but ―hands off.‖ It is an example of a connectivity at the beginning of 2009, Kenya had country where focussed and strategic three high-speed undersea cables landing in interventions in the market by government have Mombasa by the end of 2010 (Figure 9 and Table brought about positive benefits for the industry as 3). In addition the LION cable and a terrestrial a whole. However, balancing playing a strong and National Optical Fiber Backbone Infrastructure central leadership role in the ICT sector, with are being laid and set to launch commercially in promoting the principles of a competitive market, 2011. can be difficult as seen in the discussions on PPP projects such as TEAMS and NOFBI and the The addition of new fiber optic capacity has BPO and Multimedia Technology Parks. While dramatically increased the amount of international PPP modelled interventions have received a Internet bandwidth available to Kenya (Figure 8). significant amount of attention, the supply side By mid-2010 Kenya had 20 Gbps of international and demand side interventions made in Kenya bandwidth, an increase of 20 times since just have been carried out using a combination of before the cables landed and astounding 2,000 private, public and PPP financing structures that times since the beginning of the decade. It can are discussed in the following section. draw on an available capacity of 200 Gbps if needed. Satellite accounts for just one percent 25,000 compared to 100 percent at the beginning of 2009. 20,384 This current bandwidth glut firmly places Kenya in a position to participate in the global 20,000 information economy and is the most dramatic illustration of the country‘s proactive broadband 15,000 push. 9,881 10,000 5,000 1,037 ,209 ,885 ,11 ,56 ,58 ,60,140 ,759 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Figure 8: Kenya’s international Internet bandwidth (Mbps) (Source: CCK) 6.1 Supply Side: Kenyan Approach to Building Network Capacity Kenya‘s approach to addressing the network Figure 9: African fiber optic submarine cables (Source: http://manypossibilities.net/african- capacity challenge has been bullish. As discussed undersea-cables/) earlier in this document, the government‘s‘ attitude to broadband network deployment has 6.1.1 Wholesale: How Kenya Did It been to ―build it, and they will come.‖ This is dramatically reflected in international Internet Private Public Partnerships: The benefits of bandwidth capacity. It has taken advantage of its TEAMwork strategic location along the East Coast of Africa The Kenyan government has been keen to gain and used it to strengthen its infrastructure access to undersea fiber optic cables for years 19 Table 3: The cables have landed: Fiber optic construction of the cable from Fujairah to cables in Kenya (Source: Summit Strategies Ltd, Mombasa. supplemented by Pygma Consulting research) Participating Launch Cable Capacity Configuration Business model parties – Date promoters Covers almost 10,000km linking Eastern 8 countries from Owned and operated Africa Sudan to South by a consortium of 16 22 telecom Submarine Africa via African (92%) and 6 3.84 Tbps July 2010 Djibouti, Somalia, international (8%) operators from 20 Cable countries System Kenya, Tanzania, operators and service (EASSy) Madagascar providers. and Mozambique. TEAMS Limited holds 85 Kenya Government The East %, Etisalat (UAE with Etisalat of the Incumbent) holds 15%. United Arab African Links Fujairah, Sept TEAMS Limited is a Emirates. regional Marine 1.28 Tbps UAE to consortium consisting of operators and 2009 Mombasa. System the Government of Private investors (TEAMS) Kenya (20%) and private from Kenya and investors (80%). Uganda. Aga Khan Fund for 13,000 km Economic undersea fibre Development optic network SEACOM is a Mauritian (26.56%) connecting company, owned by Venfin (25%) SEACOM 1.28 Tbps July 2009 South Africa, non-telecoms operator Shanduka (12.5%) Madagascar, private investors. Convergence Mozambique, Partners (12.5%) Tanzania, Kenya, Herakles Telecom India and Europe (23.44%) given their suitability for massively increasing international bandwidth compared to satellite. It realized that the only solution for building a viable The cable project was done under a PPP model BPO sector was being connected to international and managed through a special purpose vehicle fiber optic systems. The government became namely TEAMS. The decision of the government increasingly frustrated with the slow pace of the to take the lead and to invest in a broadband then New African Partnership for Development infrastructure project in a liberalized ICT sector (NEPAD) endorsed EASSy cable project. It requires some analysis. The liberalization of the commissioned the TEAMS project to hasten ICT sector in Kenya is premised on the belief that provision of bandwidth and in the longer term encouraging competition and private sector provide variety when other submarine cables land participation in the delivery of ICTs is key. The to ensure competition and redundancy. The end decision to invest in TEAMS was taken by the result was Kenya‘s decision to promote a national government against the backdrop of a situation project, with benefits for the region, as opposed to that had prevailed for over a decade of only one waiting for the regional (NEPAD) approach to means of getting international bandwidth – bear fruit. As such, the Government of Kenya satellite – which was costly and the absence of any established TEAMS in terms of the Companies prior investment in the delivery of undersea cable Act when the Government and ETISALAT (the capacity to Kenya. incumbent telecom operator in the United Arab Emirates) entered into an MoU for the 20 20% each - GoK (through Min. of Finance); Safaricom Ltd; Telkom Kenya Ltd 10% each - Kenya Data Networks Ltd, Etisalat (UAE) – 15 % Econet/Essar Telecom Ltd TEAMS (Kenya) – 85% 5% - Wananchi Group 3.75% - Jamii Telecom Ltd 1.25% each- Broadband Access/AccessKenya Ltd, Africa Fibrenet (Uganda) Ltd, InHand Ltd, iQuip Ltd, Flashcom Ltd Figure 10: TEAMS Original Ownership Structure (RIA Kenya ICT Sector Performance Review 2009/10) The approach to structuring TEAMS is one that equivalent ownership of TEAMS‘ share of can be replicated for any major ICT infrastructure capacity on the cable system. All TEAMS project. Its ownership is structured in terms of a consortium members are licensed and can sell two-tiered PPP approach. capacity – since they all compete in the market, this will ensure price competition at both retail  In the first tier, the project was initially and wholesale level. Importantly, funded by the Government of Kenya and ETISALAT according to their percentage  All licensees were given an opportunity to ownership (85/15). ETISALAT then participate in the cable project, thus signed a construction and maintenance reducing costs. Amongst the 11 agreement to design and build the cable. participants, there is representation from all of the license categories;  In tier two, a privatization process was undertaken and the Government of  Government‘s shareholding is held Kenya sold part of its 85 percent stake in through the Ministry of Finance and not the project to local and regional investors, the MOIC which would present problems retaining only 20 per cent. The PPP since it is the policy maker for the sector; consortium was called TEAMS Limited.  Concerns of potential collusion in light of An investor‘s ownership of shareholding in so many players cooperating are reduced TEAMS Limited is directly proportionate to the 21 in light of Government‘s participation future. A simple ownership structure and good and 20 percent shareholding; financial backing have been cited as key reasons why the TEAMS submarine cable succeeded.  TEAMS was not given exclusive rights and its implementation was not done at Since the launch of TEAMS, two other undersea the exclusion of other fibre projects, fiber optic cables have landed in Kenya, both hence the landing of EASSy and using different ownership models. SEACOM, SEACOM within 12 months of each launched in July 2010, is a private sector other. consortium whose partners are specifically not operators to reduce conflicts between ownership  TEAMS capacity or access is provided to and use. The EASSy cable, launched in July 2010, all market players on a competitive basis is owned by African operators. The importance of and in a transparent and non- these two additional cables is that it demonstrates discriminatory manner. that the Kenyan government‘s involvement in TEAMS did not discourage investment by private The Government‘s involvement in the cable, and players nor did it distort competition. In fact, it is its ownership of capacity equivalent to the value arguable that Kenya‘s decision to promote of 20 percent of its shareholding gives it a lever. TEAMS hastened the deployment of the other Table 4: Internet subscriptions by operator, September 2010 (Source: CCK) Note Subscriptions refer to both narrowband and broadband. Celtel Kenya now trades as Airtel. Although this option has not been exercised, the two cables. All three cable systems are offered on Permanent Secretary argued that if the an open access basis providing competition which government was not satisfied with prices, it could in turn increases quality and puts downward sell capacity and compete with the other 11 pressure on prices. Along with TEAMS they TEAMS shareholders thus driving down market provide Kenya with a high degree of redundancy prices; and if that failed, the model enables the in case of disruptions to one of the cables. regulator to intervene through price regulation.41 In addition, Government may dilute its 6.1.2 Moving Inland: How Kenya is Doing It shareholding should additional market players Kenya has a number of terrestrial networks which wish to ―join the TEAM.‖ This is critical in that it connect to the three undersea cables that land in ensures that new entrants can also participate in the country. The regulatory framework has enabled the entry of a number of players into this 41 Interview with Permanent Secretary, January 2011 space and has resulted in some large ISPs rolling 22 Box 2: Electricity Company & Infrastructure Sharing Kenya Power and Lighting Company (KPLC) was granted a Network Facility Provider licence (Tier 2, with regional spectrum) by CCK enabling it to construct, install and operate an electronic communications system which may in turn be leased to licensed operators. KPLC has indicated that it has 18 pairs of fibre for leasing and has so far leased three through infrastructure sharing agreements signed with licensed operators Safaricom (20 years), Wananchi Group (5 years) and Jamii Telecoms (5 years). The agreements allow them access to KPLC's fibre optic network that runs on the national electricity grid. KPLC‘s model enables ISPs to connect to them to reduce their time to market, and the need to duplicate costly broadband infrastructure.1 Their infrastructure sharing model provides a supplementary revenue stream for KPLC. The three infrastructure sharing contracts signed to date are worth KES 588 million (USD 7.2 million) in revenue. out national and metropolitan fibre backbones Open Market Entry and wireless broadband access networks. The Market entry is an important aspect of the policy main players in this area are licensed by CCK and regulatory framework in that it determines the under the unified licensing regime which allows availability of opportunities for investment in the Network Facility providers to rollout competitive ICT sector. The CCK, like its counterparts in international, national and regional networks (see Tanzania, Rwanda and Uganda, has implemented Box 1). an open licensing regime which enables market entry into all categories of licenses on an on-going There are now a number of players competing to basis. The CCK issues operating licenses on a provide retail broadband service on a fixed and first-come-first-served basis with an estimated wireless basis. Competitors in this market include turnaround time of 135 days.42 Market entry is two players who provide fixed residential fibre and subject to the operator or service provider (1) copper networks; at least five players in the meeting publicised minimum criteria, including corporate fibre network space; and at least ten the requirement that in general licensees should be licensees providing wireless services. Table 4 registered and located in Kenya and issue at least shows the main ISPs including the number of 20 percent of their shares to Kenyans within 3 both narrowband and broadband subscriptions. years of being licensed, and (2) paying a license fee. Spectrum licensing is subject to availability of Last mile access remains a challenge, however it is the frequency spectrum resource. surmountable using a combination of private and public funding, and regulatory and policy clarity. The CCK started the process of migrating to a The gains that have been made in Kenya with unified licensing regime in 2007 and issued the respect to last mile access have been enabled by a first licenses in 2008. The regime allows operators number of strategic regulatory and policy level to decide which market to play in from a service interventions including: and technology perspective, without the regulator being prescriptive. Since moving to the unified  open market entry, licensing framework, the country has seen in  facilitating competition through increase in mobile internet and mobile operators mandating infrastructure sharing, have become the biggest providers of internet  frequency spectrum licensing, services; at the same time though ISPs who were  facilitating private initiatives with regional previously required to obtain a separate VoIP implications, and license and limited by technology restriction have  investing in a PPP based terrestrial been able to expand their service offerings.43 At network. 42http://www.cck.go.ke/licensing/telecoms/procedures.html 43Waema, Timothy, Catherine Adeya, and Margaret Nyambura Ndung‘u. 2010. Kenya ICT Sector Performance Review 2009/2010. Cape Town, South Africa: Research ICT Africa. http://www.researchictafrica.net/publications.php . 23 an infrastructure level, in addition to the Network end of 2010, Airtel and Orange had been issued Facility Licenses, investors who wish to land a 2100 MHz 3G spectrum bringing the total submarine cable in Kenya require a Submarine number of 3G licensees in the market to three. Cable Landing license; those interested in building Safaricom was granted a 3G license in November system for the provision of international 2007. voice/data services are required to obtain a license for international Systems and Services (see Box 1). The unified licensing regime leaves it to licensed operators to determine which technologies to Infrastructure sharing deploy. While the corporate market is well served, A common solution that is encouraged as the residential market is still in its infancy. Other regulatory best practice for enabling last mile than 3G, broadband wireless technologies such as connectivity is Local Loop Unbundling (LLU). EV-DO and WiFi are available and can be This helps to boost the ADSL broadband market provided with the necessary licenses relating to since it allows competitors to the frequently provision on network facilities and retail access. monopolized copper line network of the incumbent operator. This has not been Despite the recent award of two additional 3G implemented by CCK and as such there is no licenses, spectrum allocation continues to remain a specific framework governing this area in Kenya challenge particularly given its importance for outside of the generic Facilities Leasing wireless broadband. The expected growth of Regulations (See Section 3.2.1). The fact that wireless data is likely to put severe pressure on broadband is increasingly expected to be delivered existing spectrum availability. One constraint is over wireless networks brings to question the that the government itself has important spectrum importance of focussing on local loop unbundling that could be used for broadband wireless access. where the copper local loop is inconsequential Apart from freeing up the government-owned relative to wireless penetration. Although LLU is spectrum, another solution is to reuse spectrum in not in place, Kenya has promoted infrastructure the transition to digital TV. One problem in sharing and facility leasing on a non- addressing the looming spectrum crisis is that the discriminatory and transparent basis in regulation issue has not received widespread public as well as in its ICT sector Strategic Plan. This attention.45 approach has seen the conclusion of infrastructure sharing agreements between telecoms operators Government-Led PPP and by telecoms and traditionally non-telecoms Following the success of the use of PPPs in companies (i.e. the electricity utility, see Box 2) to deploying the TEAMS network, the government increase revenue streams by selling excess has utilised a PPP model to address the challenges capacity. relating to the national backbone network. The open access National Optical Fibre Backbone Licensing Broadband Access spectrum Infrastructure (NOFBI) terrestrial network The ease of entry, including the cost of acquiring a complements TEAMS, SEACOM and EASSy by license affects market entry and ultimately connecting the districts in the country. It is competition. The CCK played an important role undertaken by a company established in terms of in creating a framework to encourage competition the Companies Act called the Fibre Optic in the mobile market by reducing the license fee National Network. Telkom Kenya has been issued for third-generation (3G) spectrum by 60 percent a management contract to rollout the network, to $10 million in order to increase competition, which contract will be open for competitive which should in turn reduce prices and raise tender when it expires according to the Permanent penetration. It furthermore indicated that aside Secretary. Over 5,000 km of cable has been laid from the normal frequency and service license to date in major cities and districts. fees, CCK would not charge operators for an upgrade to 4G.44 As a result of its actions by the to-cut-3g-licence-fee-no-charge-for-4g- cck.htm#ixzz1DlO2eVqM 45 Mureithi, Muriuki. 2010. Open Spectrum For Development: 44Read more: Kenya Case Study. Association for Progressive http://www.ibtimes.com/articles/28163/20100611/kenya- Communications. http://www.apc.org/en/node/11700. 24 Private initiatives with regional implications 3). Kenya‘s decision to promote TEAMS does not appear to have been dismissive of the need for a Universal Access: Still more to do... regional approach to ICT development. Kenya‘s Providing access to broadband spectrum, private operators such as Jamii Telecoms and encouraging infrastructure sharing and licensing Kenya Data Networks (KDN) are building converged and technology neutral networks and backhaul networks connecting countries in the services have promoted broadband network region. Jamii Telecoms is set to launch its Fibre to deployment. However providing service to rural the Home (FTTH) network to deploy fibre-optic areas remains a challenge. The ICT sector cables to 100,000 homes in Kenya. Kenya Data framework provides a number of options for Networks, East Africa‘s largest data network, has stimulating investment in the last mile in deployed more than 15,000 km of fibre across underserved areas. The newly formed USF can be Kenya, Rwanda and Uganda. KDN has a stake in used to obtain subsidies at either an operator or TEAMS and also works with SEACOM to consumer level based on projects identified by the distribute their services in Kenya. In Kenya, KDN Fund. Similarly, the Kenya ICT Board promotes covers the main towns and has over 500 km of projects aimed at the same objective (see Section metropolitan fibre optic cable in Nairobi, 50 in the 6.2.4). cities of Kisumu and Mombasa and 20 in Nakuru, Eldoret and Thika. The Government of Kenya has also recently endorsed a project to roll out an open access The CCK licensed KDN in January 2003 as a national Long Term Evolution (LTE) network in ―Public Data Network Operator.‖ The changes in 2011 in a bid to ensure universal access to services the regulatory framework enabling a technology and to create a level playing field for operators neutral and converged approach have made it seeking access. According to discussions with the possible for KDN to become a Tier 2 operator Ministry, the government will issue a tender for a with permission to rollout a national network and public-private partnership to build a national access spectrum on a regional basis. This has network to be shared by telecoms providers enabled KDN to provide a broader range of ensuring a transparent, fair and open process. services than originally envisaged in terms of the license. It provides last mile access using WiMAX Unlike the TEAMS project where high project technology as well as wholesale Internet costs and long time lags could be used to justify connectivity to ISPs. government intervention, the LTE project is more difficult to position in a competitive environment, In addition to the initiatives by private operators and its impact on the market will depend on on an individual basis, a consortium approach has where the network is deployed and the been taken to the deployment of a regional identification of underserved areas. The process backhaul network. Over 30 operators in the EAC that the Kenyan government follows will be have initiated and participated n the East African critical in light of the fact that there is competition Backhaul System (EABs) project to rollout in the last mile market, and there is a risk, as with infrastructure to connect to the undersea cables any project where public subsidies may distort that have landed in Tanzania and Kenya (See Box competition if it not managed properly. However, Box 3: East African Backhaul System (EABs) EABS is a joint venture project among operators from Tanzania, Burundi, Rwanda, Uganda and Kenya. The Backhaul system links the five East African Community countries, and is particularly important for the three landlocked EAC countries Burundi, Rwanda and Uganda. The EABs involves about 30 operators in Eastern and Southern Africa and feeds from the cable systems that have landed in Mombasa and Dar es Salaam. The backbone infrastructure has been rolled out in four of the five EAC countries, with Burundi‘s segment still under construction. http://www.intelligencecentre.net/2010/05/28/fixed-broadband-in-africa-is-finally-turning-the-corner/ 25 in light of Kenya‘s previous PPP experience in the improving the end user experience, and lowering costs ICT sector, it is anticipated that the model for ISPs and operators who no longer have to send followed will be sound and transparent. regional traffic via Nairobi. Unlike the Nairobi IXP which was hosted at a neutral location not owned by 6.1.3 Kenyan Internet Exchange any licensee at launch, the Mombasa one is hosted by SEACOM for the next 3 years.48 Most internet traffic generated by users in developing countries tends to be international, resulting in large capital outflows paid to foreign 6.2 Stimulating Demand: Services, Internet providers. Local content providers tend Applications and Content to be hosted offshore to lower the costs of Despite the availability of bandwidth and more infrastructure – thus a local Internet Exchange than ten retail access providers offering a Point (IXP) is important to stimulate local hosting multitude of broadband technologies (WiMAX, of services and encourage local content 3G, fiber and ADSL amongst them), and 2 IXPs, development. It also enhances competitive Kenyan broadband penetration is currently at only opportunities; reduces latency thus improving approximately 2 percent demonstrating room for quality; and uses more local bandwidth thus significant improvement. On one hand, the low increasing affordability of Internet services.46 penetration is partly due to coverage; networks are urban focused and universal service and access Kenya has two IXPs (KIXP) – one located in must be addressed. On the other hand, the low Nairobi (launched initially in 2000) and one in penetration in the face of the availability of large Mombasa (launched in 2010) – operated by the amounts of bandwidth is evidence of the key Telecommunications Service Providers difference between broadband networks and Association of Kenya (TESPOK) which is a non- mobile networks that catered for voice. While 2G profit organisation that represents ISP and other voice networks were successful based on an ―if telecoms operators interests. The first KIXP was you build it, they will come‖ approach, this is not launched in Nairobi before the market was fully the approach for broadband. Once networks are liberalised. Following a dispute in 2000, the KIXP deployed, broadband use and uptake is still was forced to shut down when CCK ruled in dependant on other factors such as digital literacy, favour of Telkom Kenya which lodged a levels of education, relevance of content and complaint arguing that KIXP was not licensed and applications. Affordability is also an issue since violated its exclusive rights to carry international broadband access typically entails higher costs traffic. TESPOK/ KIXP appealed the CCK‘s than mobile in terms of access devices and decision at the Communications Appeal Tribunal sometimes the lack of prepaid options. presenting technical arguments demonstrating that KIXP was locally exchanging domestic Internet Demand stimulation is an important part of traffic and not infringing on Telkom Kenya‘s Kenya‘s broadband framework, and is seen to be a international rights. Following a year of debate, key component of the policy framework in many KIXP Limited was granted a licence by CCK in of the countries that have been successful in November 2001, making Kenya the first country developing broadband connectivity.49 With literacy in the world to create and issue an IXP license.47 rates of over 60 percent, high levels of entrepreneurialism and an innovative IT and Since then, following the arrival of the undersea applications market, Kenya is well positioned to cables and in anticipation of an increase in local and regional Internet traffic, a second IXP has been launched in Mombasa, the landing point for the undersea cables. This development ensures that the region‘s traffic is exchanged locally, thus 48See http://www.businessdailyafrica.com/Company%20Industry/ Internet%20data%20exchange%20point%20launched%20in 46 Jensen, M. Promoting the Use of Internet Exchange %20Coast/-/539550/978498/-/5hru7b/-/index.html Points : A Guide to Policy, Management and Technical Issues. M. Broadband for Africa: Policy for Promoting 49Williams, 47 Ibid. the Development of Backbone Networks. 26 Sending Browsing Word Computer Spread /downloading Others internet processing games sheets e-mail TOTAL (1’792) 69% 56% 50% 37% 28% 5% Nairobi Kenya 82% 69% 60% 52% 40% 8% (290) Lusaka 57% 59% 60% 50% 22% - Zambia (107) Antananarivo Madagascar 44% 27% 59% 63% 39% 16% (133) Lagos Nigeria 78% 67% 43% 18% 19% 6% (204) Hargeisa Somaliland 56% 23% 8% 9% 16% - (140) Kampala 69% 57% 73% 41% 33% 3% Uganda (206) Luanda 67% 21% 55% 47% 25% - Angola (169) Addis Ethiopia 80% 82% 75% 54% 60% - (150) Bujumbura 69% 72% 29% 18% 8% 21% Burundi (190) Kigali Rwanda 71% 69% 67% 22% 36% - (125) Dar Tanzania 73% 61% 17% 43% 14% 1% (1480) Table 5: How computers are used in Africa disadvantage in terms of gaining access to high (Source: Maisha (2008) Consumer Insight Limited ) speed, high quality fixed broadband networks. The growing preference for mobile communications maximize on usage if the right policy framework is and wireless internet connectivity may satisfy in place. This section discusses the Kenyan consumers‘ needs to use basic applications and education and ICT policy framework, an access content in the form of e-mails, browsing, important factor in broadband uptake, and then and file transfers. However, wireless platforms are describes some model initiatives taken and not likely to provide high speed, high quality strategies adopted which position Kenya well to networks for heavy business use or for rolling out increase uptake and usage. triple play services in homes. New value added services, and in particular the Triple play services in Kenya are hampered by the Internet have emerged over the last decade in lack of fixed line infrastructure in the country, parallel with the mobile boom. Amongst the which in turn negatively affects the availability of Internet based services available in Kenya are fixed line broadband. In another Sub Saharan first, Voice over IP and WiFi which are legally provided Kenya‘s Wanainchi Group, has launched a triple and liberally used in Kenya. In developing play service branded as Zuku which offers countries, the existing fixed infrastructure is customers television, Internet broadband and leveraged to deploy broadband and to offer triple telephony on one line using a combination of play services — telephone, Internet and television fibre, cable and Wimax technology. Zuku‘s triple – over IP networks. Notwithstanding the benefits play service is only available in a few of the mobile revolution, one of its drawbacks is neighborhoods in Mombasa and Nairobi and that it has left countries like Kenya at a starts at KES 1‘999 (US$ 24) per month for 27 unlimited broadband (1Mbps) and 43 English The National ICT Policy emphasises the channels, plus free on-net voice calls.50 Zuku has importance of integrating ICTs in the curriculum regional aspirations with a plan to launch in 9 at all levels of education, establishing education countries. networks so that educational resources can be easily accessible and shared, and promoting e- 6.2.1 Education learning. They can also be integrated in the A 2008 study which compared Nairobi to 15 other curriculum in order to equip Kenyans to capital cities in Africa, found that Kenyans had the participate in a knowledge based economy. highest rate of using computers for browsing the Computer Studies is offered as part of the official Internet (Table 5). In addition, 74 percent of Kenya Certificate of Secondary School residents in Nairobi have used a computer at least Examination (KCSE) curriculum defined by the once, followed by Lagos, Nigeria and Kampala, Kenya Institute of Education (KIE). In this Uganda at 69 and 68 percent, respectively. Kenya‘s curriculum, students are expected to learn and high urban computer usage can be attributed to develop practical ICT skills with the main focus high literacy rates and the concerted efforts by the being general IT awareness and software government and other stakeholders in promoting development. In the final year of study, candidates use of ICTs through various programmes and are expected to develop a complete software projects discussed in this section. The main project using a recommended set of tools and challenges with respect to accessibility of ICTs in programming languages.54 The CCK has initiated education are with respect to schools in remote a number of universal access projects including areas and urban slums.51 the digitisation of the secondary school curriculum. The CCK has collaborated with the Kenya‘s 8-4-4 (primary – secondary - tertiary) Kenya Institute for Education (KIE) and provided educational policy introduced universal free but KES 15 million (US$ 180,500) of funding to non-compulsory primary school education in support the acquisition of software and hardware, 2003. From a policy perspective, in addition to and provide capacity building, to digitise 11 the 2006 National ICT Policy which promotes e- subjects for the Form 1 KCSE curriculum. The learning, there is the 2006 National ICT Strategy digitised subjects were piloted in 20 schools of for Education and Training,52 which addresses which 16 are the beneficiaries of the CCK‘s connectivity and infrastructure, digital equipment school-based ICT centre initiative.55 and content, harnessing emerging technologies, integration of ICT in education, training and research and development.53 The Ministry of Education (chaired by the Permanent Secretary and supported by the ICT unit) leads in terms of the ICT and Education strategy. ICT can be used to address the challenges related to the high costs of purchasing and distributing text books and other learning and teaching materials, and poor math and science performance – broadband will be important to ensure sufficient capacity and speeds to download voluminous information, and open source software can increase access to information at a low or no cost. 50 Zuke Website, http://www.zuku.co.ke/coverage/ 51 ICT in Education Options Paper (Ministry of Education & USAID), July 2005 54Use of ICT in Enhancing Teaching and Curriculum 52National ICT Strategy for Education and Training, Ministry Delivery in Marginalised Secondary Schools in Kenya of Education. 2006. http://www.strathmore.edu/hp/ http://www.csdms.in/gesci/pdf/KENYA.pdf 55 53 Farell, G. ICT in Education in Kenya, Survey of ICT and http://www.cck.go.ke/services/universal_access/projects/di Education in Africa, Kenya Country Report, 2007. gitisation_of_secondary_school_curriculum.html 28 Figure 11: Kenya ICT Trust Fund Structure, Collaboration through PPPs (Source: Kenya ICT Trust Fund) Another important institution in the ICT for At a tertiary and regional level, three East African Education (ICT4E) space is the Kenya ICT Trust higher education regulatory authorities have Fund, founded in 2004, which facilitates PPPs to signed an agreement harmonizing their approach mobilize resources to bring a portal for to ICTs making the possibilities of distance information sharing and the development on a learning, e-education and use of virtual universities national computer assembly centre.56 Its more accessible. This will enhance the EAC, implementation arm is the Network Initiative of increase the mobility of EAC residents, and Computers in Education (NICE) which is promote the use of regional and international responsible for core activities aimed at promoting standards. ICTs in the learning institutions (primary, secondary and tertiary institutions). Kenya ICT 6.2.2 Equipment Trust Fund draws its membership from the Access devices, which are traditionally laptops and government, private sector, and regulatory bodies. computers, and increasingly smartphones and Kenya ICT Trust Fund in 2010 successfully tablets, must be affordable for broadband uptake disbursed over 3000 donated software licenses, to increase. In Kenya, laptops and PCs are issued at least 200 teacher training certificates in competitively priced and readily available on the collaboration with Microsoft, and refurbished 250 market. In 2003, in line with measures taken in computers donated by the Kenya Ports Authority Tanzania and Uganda, the Department of Finance for distribution in the coastal region of Kenya.57 zero-rated tax on all computers and other ICT equipment imported into the country in a move that has seen the sector accelerate its growth. The 56Ibid. decision is part of a strategy to drastically reduce 57See Kenya ICT Fund website: the cost of computers in the country and http://www.kenyaictfund.or.ke/initiatives.html complement other projects such as the 29 Technology Parks. The Ministry of Finance in software; and Kenya took bold moves in the 2009/10 financial year and committed to58:  exempt all handsets from VAT.  invest KES 1.3 billion (US$ 100 million) These comprehensive incentives should stimulate for mobile computer labs for high schools the supply of computers, reduce costs and in all constituencies; increase PC penetration to stimulate broadband use. However, a related factor that is not included  support Digital Villages in partnership in the favourable tax regime is the 10 percent with the World Bank to create business excise duty on mobile airtime. It is argued by hubs and entrepreneurial opportunities in operators that the 10 percent airtime tax coupled rural areas with the 16 percent value added tax (VAT) adds to the cost of services for end users and negatively  launch a one million laptop/PC campaign impacts the affordability and accessibility of in conjunction with broadband providers services. by undertaking to underwrite part of the interest on funds that are borrowed to 6.2.3 Promoting Applications, Content and buy personal computers and laptops; Services  allow ISPs to offset against their taxable BPO sector income the costs incurred in acquiring the right to use undersea cables over a 20 year period;  increase the depreciation on telecoms equipment, including cables from 12.5 percent to 20 percent; and  provide tax deductions of 5 percent on Box 4: BPO Bandwidth Capacity Support The Kenya ICT Board supports the Local BPO industry by providing bandwidth capacity support funding. The purpose of this capacity support is to reduce the cost of bandwidth making local operators competitive on a global scale. The BPO ―Bandwidth Capacity Purchase Scheme‖ is aligned with Kenya‘s Vision 2030 and was conceived as a transitional and non-discriminatory support with a sunset clause so as to be compatible with Kenya‘s existing commitments under the WTO. The period of validity was initially between 1st July 2007 to 31st December 2008, pending the landing of the undersea cables which were expected to significantly reduce retail rates. This period has however been extended and the subsidies are still available pending an evaluation of retail reductions. . BPO operators are licensed by the CCK and eligibility for the support is open to all operational BPO operators in Kenya. The subsidy is provided by means of a reimbursement of monies paid for bandwidth as indicated on the ISPs invoices to the BPO operator. Source: Kenya ICT Board, http://www.ict.go.ke/oldsite/index.php?option=com_content&task=view&id=178 582009/10 Budget Vote Speech, Deputy Prime Minister and Minister of Finance, June 2009. http://www.statehousekenya.go.ke/economy/budget2009- 2010.pdf 30 Box 5: Judiciary Telepresence Project ―The Judiciary ICT Committee‖ which is chaired by the Judge of Appeal. This Committee oversaw the formulation of the ICT Policy and Strategic Plan 2011-2013 which eventually led to the establishment of the ―Telepresence‖ and other ICT based projects. Through a PPP initiative between a broadband provider, an equipment vendor and the Ministries of ICT and Justice, the judiciary in Kenya has ushered in the digital era by commissioning a telecommunication link that connects courts in Nairobi with those in Mombasa. Using ―Telepresence‖ it is anticipated that Kenya will ease court processes and help in curbing cases of corruption. The private sector offered the technical support for this project which will enable sitting judges to preside over cases remotely, a move that will effectively cut down on travel costs incurred by judicial personnel. Apart from video conferencing there are other applications that will be instituted in the judicial Telepresence scheme. A system for recording, preserving and retrieval of court proceedings will be put in place. In relation to this, there will be imaging and automation of court records. In order to manage the telecommunication link for distant court stations, a Wide Area Network is in place while Local Area Networks will be used within individual court stations. Other applications include a web portal for judicial information, an Integrated Financial Management Information System (IFMIS), and an Integrated Personnel and Payroll Database (IPPD). Source: Safaricom http://www.safaricom.co.ke/safaricombusiness/2010Oct/post2.html Kenya‘s BPO strategy is central to Vision 2030 industry. As with other aspects of the country‘s and is highlighted as one of the means to make broadband strategy, Kenya‘s policy framework Kenya a middle-income country within a period of (Kenya ICT Strategy 2006) provides strategic 20 years; in part through creating 7,500 direct jobs direction on how to realize the BPO vision. In in the BPO sector and 2,500 indirect jobs by terms of institutions, a self-regulatory regime is 201259. Kenya compares itself to Mauritius—one provided for – the ―Kenya BPO and Contact of Africa‘s BPO successes—in the ICT sector Centre Society60‖ has been formed to set Strategic Plan and hopes that increased standards and provide for self-regulation. The bandwidth, cheap labour, clear accents and its Kenya ICT Board is responsible, as part of its role location could help it tap this multi-billion dollar of marketing the sector, for promoting the Figure 12: How PesaPal works country abroad as a BPO destination. The Kenya 59Vision2030, ICT Board furthermore provides bandwidth http://www.communication.go.ke/documents/Vision_2030 _Popular_Version.pdf 60 http://www.kenyabposociety.or.ke/ 31 subsidies to the BPO sector through a grant from created from a baseline of 500 in 2007.62 the World Bank (See Box 4), in anticipation of price decreases until the impact of the newly Online government services landed cables is felt. The Kenyan government is taking steps to digitise content and provide services online. Although Other measures taken in countries like India and there is still significant work to be done in this Philippines that have thriving BPO sectors include area, the Kenyan e-government portal government-supported corporate locations such (http://www.e-government.go.ke) enables citizens as business and technology parks and export to apply for public service jobs, track the status of processing zones; laws supporting intellectual ID and passport applications, obtain exam results, property; attractive labour laws; and reasonable submit tax returns and report corruption. In rates for skilled and unskilled workers. Similarly, addition there is a business licensing e-registry. Kenya has identified Export Processing Zones Providing e-government services has proven to be (EPZ) which will be used to locate technology challenging in light of the ‗silo effect‘ discussed parks such as Kitengela (See Section 6.2.4, Public earlier and the need for line ministries to take Private Partnerships). It is also in the process of responsibility for developing and digitising amending and updating its IP legislation. relevant content for users. Following the various funding and policy initiatives relating to the BPO sector, Kenya The fact that ICT Units are not necessarily senior currently has 25 licensed BPO operators, although in the organisational structure of a ministry means not all of them are operational.61 According to the that the projects may not be prioritised or given KICTB, by 2009 about 3,550 BPO jobs had been the strategic importance that they deserve. Kenya Box 6: Mobile Money Meets E-Commerce In a recent innovation launched in early 2011, registered customers of mobile phone money transfer service, M-Pesa, can withdraw cash in any currency from Visa branded automated teller machines (ATMs) anywhere in the world. They can also make purchases in accepted merchant outlets or shop online moving it from a money transfer service to a mobile commerce innovation, still for the unbanked. This innovation will move M-Pesa from a service conducted primarily over 2G networks, to one whose relevance will increase over broadband networks in light of the ability to use it to shop online and across borders. PesaPal1 is a payment platform that enables Kenyans to buy and sell on the Internet using M-Pesa, Zap and Credit Cards and has targeted e-commerce, school payment, and e-ticketing as value propositions. It is an online based service that uses the popular mobile money accounts that were launched in Kenya, or credit cards to:  Get receipts immediately for payments,  Get email and SMS notifications.  Load money once and use it for multiple payments using PesaPal Credit,  Make payments (such as school fees) in instalments,  Request and receive payments from other members,  Receive protection from fraudulent sales  Buy tickets for events in Kenya online  Buy products and services from vetted merchants. 62Kenya Information and Communications Technologies Board. 2009. Progress Report 2007-2009. 61CCK Register of Licensees under Unified Licensing http://www.ict.go.ke/oldsite/images/pdfs/kictb%20progres Framework s%20report%202008-2009.pdf http://www.cck.go.ke/licensing/telecoms/register.html 32 has seen that line ministry projects that are done this are the Kenya ICT Board (KICTB) and the in collaboration with the MOIC, such as the newly established Universal Service Fund Judiciary Telepresence Project (see Box 5) and the managed by the CCK and focused on under Technology Park project which is partnered with serviced areas. The USF is funded from a levy the Trade Ministry are likely to achieve success. imposed on licensed operators, while the KICTB receives funding for projects mainly from donors, Encouraging local innovation including a Revolving Fund for Digital Villages. Kenya is earning a reputation as an innovation hub, and a centre for the development of relevant In 2007, as part of the World Bank‘s Regional African applications and content. Initially Communications Infrastructure Project, Kenya developed on narrowband mobile and SMS agreed to rollout Digital Villages in rural areas to platforms, many of Kenya‘s innovations have had promote Internet connectivity to enable citizens regional and global impact. Innovations include: to access government and commercially generated information available on the web.63 The KICTB  Ushahidi, an open source application used started with a pilot programme in 2009 called the in conjunction with Google Maps, use ―Pilot Pasha Centres‖ (Pasha means ―to inform‖ crowd sourcing for social activism and have in Swahili). The pilot programme was important since been replicated in Haiti. to ensure the development of a model that was relevant within the Kenyan rural context and was  M-Pesa which has generated considerable sustainable. Although a single model was initially publicity leading to similarly styled mobile envisaged, the pilot resulted in three categories of money solutions to spread across the Pasha Centres being developed. The categories continent. Interestingly, although M-Pesa acknowledge the evolving definition of broadband is a 2G mobile solution, it is finding and the types of applications supported by relevance online through its recent different speeds. Accordingly, human resource partnership with Visa, and can be used as capacity and training will vary depending on the a tool to generate demand. category of the Pasha Centre that is deployed. Five digital villages located in Nkubu, Garissa,  KenyaImagine, a local website originally Kangundo, Malindi and Mukuru were established founded to address the gap in quality of in the pilot phase.64 The Kenya ICT Board in 2009 online content from Kenyan news and and 2010 had conducted nationwide training of magazines, has turned into an online 1000 people in business management, content hub, with involvement of local entrepreneurship, marketing, basic accounting and Kenyans as well as the Kenyan Diaspora. technical management (a ―starter-kit‖) to prepare potential Pasha Centre managers to run their In addition, to these innovations which have taken centres, and from January 2011 will disburse at place in a narrowband context, applications like least one loan for a Pasha Centre per county. PesaPal, a locally developed payment platform that KICTB‘s target is to have 210 Pasha Centres, one is a sort of hybrid of PayPal and M-Pesa, will find in each constituency, by 2012. greater relevance as broadband take up increases. PesaPal enables Kenyans to buy and sell on the While Pasha Centres are a significant project Internet using mobile money or a credit card and aiming to increase digital inclusion, other projects has targeted applications such as school fee are underway involving other consumer groups payment, e-ticketing and e-commerce (See Box 6). such as academia. The Kenya Education Network (KENET) and the KICTB have worked together 6.2.4 Funding Local Demand to disburse 200 MB of bandwidth to 64 tertiary Loans, grants and subsides While it is still early and the impact cannot be 63 Drury, Peter. 2011. Kenya’s Pasha Centres: Development Ground evaluated, Kenya has put in place several funding for Digital Villages. mechanisms to support local development of http://www.cisco.com/web/about/ac79/emgmkt/index.ht content and applications, and to stimulate the ml. 64 http://www.ict.go.ke/index.php/sport/pasha/pasha- BPO sector. The institutions that mainly support updates/299 33 institutions across Kenya using private and donor many are able to obtain laptops relatively easily, funding.65 the low cost of hardware and the competitive nature of the market being two contributing Table 6: Categories of Pasha Centres factors. The cost of the laptop or PC is far less of (M=Mandatory) (Source: Cisco IBSG, 2010) Mandatory Functions Basic Standard Advanced Number of PCs M>3 M>7 M>15 M (512 kbps Internet Access M (256 Kbps) uncontended for all M (minimum 1Mbps) PCs) Collaboration software M Videoconferencing M software Web 2.0 access – webcam and M M microphone M eSkills Training Services M M M Group training facilities M M M Pasha Portal accessible Government M M M information Management M M M Information a concern that the cost of connectivity itself. The KICTB recognizes the need for locally Public-private partnerships developed and relevant national content and has Most of the demand side initiatives in Kenya have issued grants for digital content and software been either led by donors or established through applications as part of the Tandaa Digital Content PPPs. Kenya has managed to successfully Strategy. The KICTB has amongst its priorities: structure PPPs to stimulate demand. The biggest issuing Kenyan firms and software application success stories do two important things – they developers grants to support local content and leverage the strengths of the private and public software applications; providing subsidies for sectors, and they break the ―silo effect‖ by laptops for university students (―Wezesha‖), encouraging collaboration across government although uptake has been low and through departments and line ministries. This is interviews with university students it appears that exemplified in the approach to the establishment of technology parks. 65KICTB Interim Update (11 June 2010) at http://www.ict.go.ke/index.php/theboard/board- The Government has committed to establishing reports/update-on-11th-june-2010- Multimedia Technology Parks and promoting home-grown industries developing ICT products 34 through fostering a partnership between the land and plan, will then be able to build out the MOIC, the Ministry of Trade and Industry and business premises and either use it for their own private investors. The Minister of Trade and operations or lease it out to other appropriate Industry has identified Export Processing Zones businesses. (EPZs) which will also house the Technology Parks, thus linking the ICT sector to broader PPPs are furthermore used in Kenya to establish economic projects. The government through the data recovery centres, to provide storage and MOIC will, in terms of the PPP, provide land (500 recovery for all government databases, and for the hectares in Kitengela which is about 25 kilometers establishment of Incubation Centres and Satellite outside of Nairobi) and the plans for the layout. Assembly Centres where local PCs will be Private sector players interested in the concept, assembled. Additionally skilled graduates will be employed at Incubation Centres and Satellite Assembly Centres , thus increasing the impact of broadband on job creation. 35 7. Lessons Learned from 4 percent then to 20 percent in 2010 and 40 7.1 Potential Stumbling Blocks percent by 2020.66 Despite Kenya‘s success it is important to acknowledge some of the unique aspects of the Kenyan regime, which if not noted and properly 7.2 Kenya’s Strengths managed may make the implementation of similar Kenya‘s accomplishments arise first from the strategies in other countries a challenge. Two manner in which it has tackled the challenge of aspects of the Kenyan case that make it different lack of backbone network infrastructure and now from most best practice case studies are that the creation of strategies and programmes to Kenya does not have a broadband policy, nor increase uptake is vital. The manner in which does it have a simple institutional framework – Kenya has approached these two elements of the these two issues are discussed in turn. broadband ecosystem can serve as a model for other developing countries. The lessons it has Kenya does not have a single broadband strategy. learned and challenges it has faced are also The strategy is instead integrated into a number of instructive. Developing countries can learn key policies and plans found in a number of sectors, lessons from the Kenyan broadband experience such as education and health. Vision 2030, including: supported by the ICT Strategic Plan 2008 – 12, is what ties all of these strategies together and in so  Necessity of a clear vision, in Kenya‘s doing, recognizes the role of ICT as an enabler of case Vision 2030, which includes ICTs all other policies, and broadband or high-speed and specifically a focus on the BPO access is a key component of the ICT sector. In sector as one of its key pillars provides the absence of a single policy, strong leadership is guidance to all ministries, departments the main factor that ties the various aspects of the and agencies, as well as the private sector; policy together and makes the Kenyan approach work.  Importance of government leadership and a project “champion� – It is Kenya has created a multidimensional institutional repeatedly mentioned that the story of the framework. The Kenya ICT Board is a success landing of the cables in Kenya is not story in itself in terms of its ability to design and complete without the perspective of the develop programs and secure funding for Permanent Secretary. Clear and implementing them. A strong, central body is thus unequivocal leadership in support of essential, as is determined leadership. However, stated national policy objectives is critical the risk lies in the fact that the Kenya ICT Board in ensuring that projects move from has overlapping mandates with the Kenya ICT theory to practice; Trust Fund (education) and the USF (CCK) creating the potential for conflict and duplication.  Central role of good regulation, Likewise the National Communications Secretariat including flexible and technology neutral and the MOIC have similar roles. licensing, the facilitation of infrastructure sharing, the encouragement of facilities In addition to ICT specific and Kenya specific based and service based competition, the challenges, there are challenges which are shared regulation of wholesale prices to stimulate with many developing countries. Challenges competition, and the facilitation of arising both from the ICT sector as well as innovation; adjacent sectors such as electricity and education remain. These challenges may stall the further impact of broadband in the country – Kenya has 66 See: Kenya to Miss Rural Electricity Target for 2010, missed its 2010 target to provide electricity Reuters. See: overage in 20 percent of the country. The national http://www.reuters.com/article/2009/10/22/kenya- target was to raise the coverage rate gradually electricity-idUSLM45319020091022 36  Benefits of Public Private Partnerships programmes and properly structured at all levels of the broadband projects is critical, while respecting the ecosystem – to build high cost backbone market reform process. Although the networks, to develop applications, government of Kenya has demonstrated services and content, and to support this in the cases of TEAMS and NOFBI, initiatives to improve literacy and ICT in this remains to be seen with regards to education. These must be well designed demand stimulation. For example, while so that they promote broadband without the new Constitution declares the citizen‘s distorting the market; right to public information, actual access is limited by various factors, including the  Actions speak louder than words – availability of content and the nature of implementation of legislation, the platforms on which this information is deployed. 37 8. Conclusions Kenya‘s ―Build It and they Will Come‖ approach downloaded on mobile phones. The user to broadband has led to broadband achievements experience would be enhanced through being partially realized in less than five years since broadband networks, however, this does not mean the ICT Policy was adopted. The Kenyan that in the absence of broadband Kenya will government has taken an active role in breaking remain behind. It is mainly businesses and the the satellite dependency for international capacity BPO sector that will be the beneficiaries, in the and thus overcoming the first hurdle, with the short term, of the broadband revolution that is highest upfront costs, in the broadband taking place in Kenya – the same is likely to be ecosystem. The delivery of international true for all of the countries in the region. As with bandwidth over high-speed networks has been the evolution of 2G, broadband for the mass successfully accomplished with the landing of market, accompanied by low cost services and three cables to date. Stimulating demand remains a importantly devices, will be introduced over time challenge. Kenya has proactively put in place a as operators, vendors and equipment sound regulatory and policy framework, backed by manufacturers broaden their consumer markets. clear strategies to try to improve this going forward. The strategy of improving Kenya‘s positioning in terms of broadband access is deliberate, and is However, broadband is not a panacea. Using aligned with the objectives of Vision 2030. The innovative means, 2G mobile networks, service glut of capacity enabled by infrastructure and applications are being used to achieve many investments which have been both government of the same functionalities that broadband enables led and privately driven, places Kenya in a in Kenya including access to banking, mobile strategic position in the region and in the money and now e-commerce, SMS based e- continent and promises, if all other elements of government services, and even e-education the ecosystem are supportive, to improve socio- through applications such as textbooks economic development. The cables have been laid and now the people need to come. 38 9. References Bowen, Hannah. 2010. 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It acts as a neutral convener of dialogue—and as a coordinator of joint action among bilateral and multilateral donors—supporting global sharing of information on ICT for development (ICT4D), and helping to reduce duplication of efforts and investments. infoDev also forms partnerships with public and private sector organizations who are innovators in the field of ICT4D. infoDev is housed in the Financial and Private Sector Development (FPD) Vice Presidency of the World Bank Group. For additional information about this study or more general information on infoDev, please visit www.infodev.org/publications. 41