Like most countries in Sub-Saharan Africa, Kenya has experienced a telecommunications revolution, and particularly a mobile revolution. It has seen an increase in mobile subscriber numbers, and has innovated in ways that have impacted the region and the world. As expected, the ICT sector is an engine for economic growth.

5.1 The Mobile Miracle...

One of Kenya‘s greatest successes has been the unprecedented uptake and usage of mobile services. Kenya was a slow starter with only 114,000 subscribers seven years after mobile was first introduced, well below the subscription rates of the country’s Sub Saharan peers. Following market reform and liberalization, there were 22 million subscribers in September 2010 for a penetration rate of 60 subscriptions per 100 people (Figure 5).

The mobile market comprises four licensees, including a dominant player in the market in the form of Safaricom (76 percent market share), a publicly listed company with shares also owned by the government and strategic investor Vodafone of the United Kingdom. The remainder of the market is divided between private operators Airtel (14%), Essar (7%) and the mobile arm of the incumbent, Orange (4%).

Kenya’s mobile sector is characterized by innovation, particularly mobile money. Safaricom’s M-Pesa*  For more on M-Pesa see: Mas, Ignacio, and Dan Radcliff. 2010. “Mobile Payments Go Viral: M-PESA in Kenya.” In Yes Africa Can: Success Stories from a Dynamic Continent. Washington D.C.: World Bank. http://www.microfinancegateway.org/p/site/m/template.rc/1.9.43376/. led the way and today all of the mobile operators have a mobile money service. Over 80% of Safaricom’s subscribers or 13.5 million people have registered for the M-Pesa service.*  Safaricom. “Half-Year Results Presentation.” 10 November 2010. http://www.safaricom.co.ke/index.php?id=323 Mobile money is not the only non-voice application people are using on their mobiles with other activities including sending SMS, accessing the Internet and watching TV (Figure 6).*  Bowen, Hannah. 2010. Information at the Grassroots: Analyzing the Media Use and Communication Habits of Kenyans to Support Effective Development. http://www.audiencescapes.org/africa-research-survey-quantitative-analysis-ghana-kenya.

Despite mobile success, there is still room for progress. Population coverage of 2G networks is still far from universal (86% in 2010) and 3G coverage is limited to urban areas. The remaining challenge remains access for residents of rural and remote areas without affordable network coverage.

5.2 …Meets the Broadband Revolution?

The mobile miracle has become a typical success story of most developing countries, with the advent of pre-paid coupled with mobile technology driving the uptake of mobile voice services. What is unique about Kenya is that over the last two years, its broadband market has undergone a revolution. This was spurred by key developments including the landing of three undersea fibre optic cables (see Section 6.2). This favourably positions the country from an infrastructural perspective particularly international Internet capacity. The undersea cables (that at least four licensees have built, or that are in the process of being built), are complemented by Kenya’s regional and national fibre backbone projects (see Section 6) to drive connectivity in rural areas.

Despite the landing of the cables, there is significant scope for retail broadband to take off. Internet and broadband services are provided by mobile operators and by Internet Service Providers (ISPs) including the more popular Kenya Data Network (KDN), Jamii Telkom, UUNET, AccessKenya, Wananchi Online, Communications Solutions and AfricaOnline. While there is competition in the Internet and broadband markets, these are the least accessible ICT services in Kenya, as is the case in most African countries. There were only 37,356 fixed Internet subscriptions at September 2010 using WiMAX, DSL and fibre optic technologies. One challenge is the lack of fixed telephone lines and coaxial cable television networks to provide the basis for developing fixed broadband access. The total number of fixed lines (both copper and fixed wireless) stood at 369,971 in September 2010. Telkom Kenya, of which France Telecom is the strategic investor, is the primary provider of fixed lines. Though some competition has been injected through the licensing of Tier 2 (local loop, and regional) Network Facilities Providers the impact has been limited and in fact the number of fixed lines has been declining. The number of copper-based fixed lines stood at just 228,391 in September 2010 of which 12,216 were connected to a DSL subscription meaning that only a little over 5% of fixed lines were connected to broadband. Fixed wireless lines are based on CDMA 2000 1x technology including broadband EV-DO in the case of Telekom Kenya.

Consistent with the trends displayed as part of the 2G ‘mobile miracle,’ mobile broadband is far more prevalent than fixed with some 780,000 subscribers by the end of 2010.*  GSMA. “African Region Mobile Broadband Landscape.” November 2010. http://www.gsmamobilebroadband.com/resources/global_coverage_maps/list.aspx. Until recently Safaricom was the only mobile operator offering 3G services. It was granted a license in 2007 and launched service in 2008. Its HSDPA network uses the 2100 MHz frequency and provides download speeds up to 7.2 Mbps comparing favourably with fixed broadband solutions. Airtel and Orange were granted 3G licenses in 2010.

It is likely that broadband usage and uptake in a Kenyan context, like in many developing countries with high mobile penetration, will be primarily wireless. Overall Internet access (narrowband and broadband) from mobile phones already far outstrips fixed Internet subscriptions, and this is unlikely to change going forward in light of fixed line penetration.

5.3 Affordability

With reference to the broadband market, while wholesale bandwidth charges have decreased, there is a perception that retail prices have not dropped as much. According to the Kenya ICT Board the price of a monthly international E1 link dropped from US$7,500 in 2007 to US$ 1,290 by the end of 2009, a reduction of over 80%.*  Kenya Information and Communications Technologies Board. 2009. Progress Report 2007-2009. http://www.ict.go.ke/oldsite/images/pdfs/kictb%20progress%20report%202008-2009.pdf During the same time period retail prices have dropped by the same magnitude. For example Telkom Kenya’s 256 Kbps DSL package dropped from KES16’008 to KES 2’999. There is some truth however to the recent rigidity in retail pricing. After initial reductions, they have mostly remained fixed at the same price with some operators arguing that their long term contracts with satellite providers which only expire post 2011 keep their costs high. Instead of lowering prices, operators are increasing speed or adding other features. For example, while the price of the Telkom Kenya 256 Kbps ADSL offering has not changed since 2009, it now includes 30 minutes of free on-net talk time per month. Another contributing factor to the perception of broadband price rigidity is the rapid drop in prices on mobile networks, particularly following a recent reduction in wholesale termination rates. According to the CCK, the average price of a pre-paid on-net call dropped 33.4% from June-September 2010.

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

One notable aspect of Kenyan retail pricing is the variety of choices and entry-level speeds (Table 5-2). While an entry-level ADSL package begins with an advertised download speed of 256 kbps, most other technologies have a higher starting speed. The least expensive monthly price is fixed 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 to make access more affordable most mobile operators offer prepaid data packages in small denominations. For example Orange offers 150 MB of use for US$2 (KES 150) per month while Safaricom offers as little as 5 MB for KES 5 (US$0.07) per day. While these may not allow intensive on-line use, they at least provide an option for the budget conscious consumer to check their e-mail.