6.1 Supply Side: Kenyan Approach to Building Network Capacity

Kenya’s approach to addressing the network capacity challenge has been bullish. As discussed earlier in this document, the government’s’ attitude to broadband network deployment has been to “build it, and they will come.” This is dramatically reflected in international Internet bandwidth capacity. It has taken advantage of its strategic location along the East Coast of Africa and used it to strengthen its infrastructure position. From no international fiber optic connectivity at the beginning of 2009, Kenya had three high-speed undersea cables landing in Mombasa by the end of 2010 (Figure 9 and Table 3). In addition the LION cable and a terrestrial National Optical Fiber Backbone Infrastructure are being laid and set to launch commercially in 2011.

The addition of new fiber optic capacity has dramatically increased the amount of international Internet bandwidth available to Kenya (Figure 8). By mid-2010 Kenya had 20 Gbps of international bandwidth, an increase of 20 times since just before the cables landed and astounding 2,000 times since the beginning of the decade. It can draw on an available capacity of 200 Gbps if needed. Satellite accounts for just one percent compared to 100 percent at the beginning of 2009. This current bandwidth glut firmly places Kenya in a position to participate in the global information economy and is the most dramatic illustration of the country’s proactive broadband push.

6.1.1 Wholesale: How Kenya Did It

Private Public Partnerships: The benefits of TEAMwork

The Kenyan government has been keen to gain access to undersea fiber optic cables for years given their suitability for massively increasing international bandwidth compared to satellite. It realized that the only solution for building a viable BPO sector was being connected to international fiber optic systems. The government became increasingly frustrated with the slow pace of the then New African Partnership for Development (NEPAD) endorsed EASSy cable project. It commissioned the TEAMS project to hasten provision of bandwidth and in the longer term provide variety when other submarine cables land to ensure competition and redundancy. The end result was Kenya’s decision to promote a national project, with benefits for the region, as opposed to waiting for the regional (NEPAD) approach to bear fruit. As such, the Government of Kenya established TEAMS in terms of the Companies Act when the Government and ETISALAT (the incumbent telecom operator in the United Arab Emirates) entered into an MoU for the construction of the cable from Fujairah to Mombasa.

The cable project was done under a PPP model and managed through a special purpose vehicle namely TEAMS. The decision of the government to take the lead and to invest in a broadband infrastructure project in a liberalized ICT sector requires some analysis. The liberalization of the ICT sector in Kenya is premised on the belief that encouraging competition and private sector participation in the delivery of ICTs is key. The decision to invest in TEAMS was taken by the government against the backdrop of a situation that had prevailed for over a decade of only one means of getting international bandwidth – satellite – which was costly and the absence of any prior investment in the delivery of undersea cable capacity to Kenya.

The approach to structuring TEAMS is one that can be replicated for any major ICT infrastructure project. Its ownership is structured in terms of a two-tiered PPP approach.

• In the first tier, the project was initially funded by the Government of Kenya and ETISALAT according to their percentage ownership (85/15). ETISALAT then signed a construction and maintenance agreement to design and build the cable.
• In tier two, a privatization process was undertaken and the Government of Kenya sold part of its 85 percent stake in the project to local and regional investors, retaining only 20 per cent. The PPP consortium was called TEAMS Limited.

An investor’s ownership of shareholding in TEAMS Limited is directly proportionate to the equivalent ownership of TEAMS’ share of capacity on the cable system. All TEAMS consortium members are licensed and can sell capacity – since they all compete in the market, this will ensure price competition at both retail and wholesale level. Importantly,

• All licensees were given an opportunity to participate in the cable project, thus reducing costs. Amongst the 11 participants, there is representation from all of the license categories;
• Government’s shareholding is held through the Ministry of Finance and not the MOIC which would present problems since it is the policy maker for the sector;
• Concerns of potential collusion in light of so many players cooperating are reduced in light of Government’s participation and 20 percent shareholding;
• TEAMS was not given exclusive rights and its implementation was not done at the exclusion of other fibre projects, hence the landing of EASSy and SEACOM within 12 months of each other.
• TEAMS capacity or access is provided to all market players on a competitive basis and in a transparent and non-discriminatory manner.

The Government’s involvement in the cable, and its ownership of capacity equivalent to the value of 20 percent of its shareholding gives it a lever. Although this option has not been exercised, the Permanent Secretary argued that if the government was not satisfied with prices, it could sell capacity and compete with the other 11 TEAMS shareholders thus driving down market prices; and if that failed, the model enables the regulator to intervene through price regulation.*  Interview with Permanent Secretary, January 2011 In addition, Government may dilute its shareholding should additional market players wish to “join the TEAM.” This is critical in that it ensures that new entrants can also participate in future. A simple ownership structure and good financial backing have been cited as key reasons why the TEAMS submarine cable succeeded.

6.1.2 Moving Inland: How Kenya is Doing It

Last mile access remains a challenge, however it is surmountable using a combination of private and public funding, and regulatory and policy clarity. The gains that have been made in Kenya with respect to last mile access have been enabled by a number of strategic regulatory and policy level interventions including:

• open market entry,

• facilitating competition through mandating infrastructure sharing,

• frequency spectrum licensing,

• facilitating private initiatives with regional implications, and

• investing in a PPP based terrestrial network.

Open Market Entry

The CCK started the process of migrating to a unified licensing regime in 2007 and issued the first licenses in 2008. The regime allows operators to decide which market to play in from a service and technology perspective, without the regulator being prescriptive. Since moving to the unified licensing framework, the country has seen in increase in mobile internet and mobile operators have become the biggest providers of internet services; at the same time though ISPs who were previously required to obtain a separate VoIP license and limited by technology restriction have been able to expand their service offerings.*  Waema, 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 . At an infrastructure level, in addition to the Network Facility Licenses, investors who wish to land a submarine cable in Kenya require a Submarine Cable Landing license; those interested in building system for the provision of international voice/data services are required to obtain a license for international Systems and Services (see Box 1).

Infrastructure sharing

Licensing Broadband Access spectrum

The ease of entry, including the cost of acquiring a license affects market entry and ultimately competition. The CCK played an important role in creating a framework to encourage competition in the mobile market by reducing the license fee for third-generation (3G) spectrum by 60 percent to $10 million in order to increase competition, which should in turn reduce prices and raise penetration. It furthermore indicated that aside from the normal frequency and service license fees, CCK would not charge operators for an upgrade to 4G.*  Read more: http://www.ibtimes.com/articles/28163/20100611/kenya-to-cut-3g-licence-fee-no-charge-for-4g-cck.htm#ixzz1DlO2eVqM As a result of its actions by the end of 2010, Airtel and Orange had been issued 2100 MHz 3G spectrum bringing the total number of 3G licensees in the market to three. Safaricom was granted a 3G license in November 2007.

The unified licensing regime leaves it to licensed operators to determine which technologies to deploy. While the corporate market is well served, the residential market is still in its infancy. Other than 3G, broadband wireless technologies such as EV-DO and WiFi are available and can be provided with the necessary licenses relating to provision on network facilities and retail access.

Despite the recent award of two additional 3G licenses, spectrum allocation continues to remain a challenge particularly given its importance for wireless broadband. The expected growth of wireless data is likely to put severe pressure on existing spectrum availability. One constraint is that the government itself has important spectrum that could be used for broadband wireless access. Apart from freeing up the government-owned spectrum, another solution is to reuse spectrum in the transition to digital TV. One problem in addressing the looming spectrum crisis is that the issue has not received widespread public attention.*  Mureithi, Muriuki. 2010. Open Spectrum For Development: Kenya Case Study. Association for Progressive Communications. http://www.apc.org/en/node/11700.

Government-Led PPP

Following the success of the use of PPPs in deploying the TEAMS network, the government has utilised a PPP model to address the challenges relating to the national backbone network. The open access National Optical Fibre Backbone Infrastructure (NOFBI) terrestrial network complements TEAMS, SEACOM and EASSy by connecting the districts in the country. It is undertaken by a company established in terms of the Companies Act called the Fibre Optic National Network. Telkom Kenya has been issued a management contract to rollout the network, which contract will be open for competitive tender when it expires according to the Permanent Secretary. Over 5,000 km of cable has been laid to date in major cities and districts.

Private initiatives with regional implications

Kenya’s decision to promote TEAMS does not appear to have been dismissive of the need for a regional approach to ICT development. Kenya’s private operators such as Jamii Telecoms and Kenya Data Networks (KDN) are building backhaul networks connecting countries in the region. Jamii Telecoms is set to launch its Fibre to the Home (FTTH) network to deploy fibre-optic cables to 100,000 homes in Kenya. Kenya Data Networks, East Africa’s largest data network, has deployed more than 15,000 km of fibre across Kenya, Rwanda and Uganda. KDN has a stake in TEAMS and also works with SEACOM to distribute their services in Kenya. In Kenya, KDN covers the main towns and has over 500 km of metropolitan fibre optic cable in Nairobi, 50 in the cities of Kisumu and Mombasa and 20 in Nakuru, Eldoret and Thika.

The CCK licensed KDN in January 2003 as a “Public Data Network Operator.” The changes in the regulatory framework enabling a technology neutral and converged approach have made it possible for KDN to become a Tier 2 operator with permission to rollout a national network and access spectrum on a regional basis. This has enabled KDN to provide a broader range of services than originally envisaged in terms of the license. It provides last mile access using WiMAX technology as well as wholesale Internet connectivity to ISPs.

Universal Access: Still more to do...

Providing access to broadband spectrum, encouraging infrastructure sharing and licensing converged and technology neutral networks and services have promoted broadband network deployment. However providing service to rural areas remains a challenge. The ICT sector framework provides a number of options for stimulating investment in the last mile in underserved areas. The newly formed USF can be used to obtain subsidies at either an operator or consumer level based on projects identified by the Fund. Similarly, the Kenya ICT Board promotes projects aimed at the same objective (see Section 6.2.4).

The Government of Kenya has also recently endorsed a project to roll out an open access national Long Term Evolution (LTE) network in 2011 in a bid to ensure universal access to services and to create a level playing field for operators seeking access. According to discussions with the Ministry, the government will issue a tender for a public-private partnership to build a national network to be shared by telecoms providers ensuring a transparent, fair and open process.

Unlike the TEAMS project where high project costs and long time lags could be used to justify government intervention, the LTE project is more difficult to position in a competitive environment, and its impact on the market will depend on where the network is deployed and the identification of underserved areas. The process that the Kenyan government follows will be critical in light of the fact that there is competition in the last mile market, and there is a risk, as with any project where public subsidies may distort competition if it not managed properly. However, in light of Kenya’s previous PPP experience in the ICT sector, it is anticipated that the model followed will be sound and transparent.

6.1.3 Kenyan Internet Exchange

Most internet traffic generated by users in developing countries tends to be international, resulting in large capital outflows paid to foreign Internet providers. Local content providers tend to be hosted offshore to lower the costs of infrastructure – thus a local Internet Exchange Point (IXP) is important to stimulate local hosting of services and encourage local content development. It also enhances competitive opportunities; reduces latency thus improving quality; and uses more local bandwidth thus increasing affordability of Internet services.* Jensen, M. Promoting the Use of Internet Exchange Points : A Guide to Policy, Management and Technical Issues.

Kenya has two IXPs (KIXP) – one located in Nairobi (launched initially in 2000) and one in Mombasa (launched in 2010) – operated by the Telecommunications Service Providers Association of Kenya (TESPOK) which is a non-profit organisation that represents ISP and other telecoms operators interests. The first KIXP was launched in Nairobi before the market was fully liberalised. Following a dispute in 2000, the KIXP was forced to shut down when CCK ruled in favour of Telkom Kenya which lodged a complaint arguing that KIXP was not licensed and violated its exclusive rights to carry international traffic. TESPOK/ KIXP appealed the CCK’s decision at the Communications Appeal Tribunal presenting technical arguments demonstrating that KIXP was locally exchanging domestic Internet traffic and not infringing on Telkom Kenya’s international rights. Following a year of debate, KIXP Limited was granted a licence by CCK in November 2001, making Kenya the first country in the world to create and issue an IXP license.*  Ibid.

Since then, following the arrival of the undersea 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 improving the end user experience, and lowering costs for ISPs and operators who no longer have to send regional traffic via Nairobi. Unlike the Nairobi IXP which was hosted at a neutral location not owned by any licensee at launch, the Mombasa one is hosted by SEACOM for the next 3 years.*  See http://www.businessdailyafrica.com/Company%20Industry/Internet%20data%20exchange%20point%20launched%20in%20Coast/-/539550/978498/-/5hru7b/-/index.html

6.2 Stimulating Demand: Services, Applications and Content

Despite the availability of bandwidth and more than ten retail access providers offering a multitude of broadband technologies (WiMAX, 3G, fiber and ADSL amongst them), and 2 IXPs, Kenyan broadband penetration is currently at only approximately 2 percent demonstrating room for significant improvement. On one hand, the low penetration is partly due to coverage; networks are urban focused and universal service and access must be addressed. On the other hand, the low penetration in the face of the availability of large amounts of bandwidth is evidence of the key difference between broadband networks and mobile networks that catered for voice. While 2G voice networks were successful based on an “if you build it, they will come” approach, this is not the approach for broadband. Once networks are deployed, broadband use and uptake is still dependant on other factors such as digital literacy, levels of education, relevance of content and applications. Affordability is also an issue since broadband access typically entails higher costs than mobile in terms of access devices and sometimes the lack of prepaid options.

Demand stimulation is an important part of Kenya’s broadband framework, and is seen to be a key component of the policy framework in many of the countries that have been successful in developing broadband connectivity.* Williams, M. Broadband for Africa: Policy for Promoting the Development of Backbone Networks. With literacy rates of over 60 percent, high levels of entrepreneurialism and an innovative IT and applications market, Kenya is well positioned to maximize on usage if the right policy framework is in place. This section discusses the Kenyan education and ICT policy framework, an important factor in broadband uptake, and then describes some model initiatives taken and strategies adopted which position Kenya well to increase uptake and usage.

New value added services, and in particular the Internet have emerged over the last decade in parallel with the mobile boom. Amongst the Internet based services available in Kenya are Voice over IP and WiFi which are legally provided and liberally used in Kenya. In developing countries, the existing fixed infrastructure is leveraged to deploy broadband and to offer triple play services — telephone, Internet and television – over IP networks. Notwithstanding the benefits of the mobile revolution, one of its drawbacks is that it has left countries like Kenya at a disadvantage in terms of gaining access to high speed, high quality fixed broadband networks. The growing preference for mobile communications and wireless internet connectivity may satisfy consumers’ needs to use basic applications and access content in the form of e-mails, browsing, and file transfers. However, wireless platforms are not likely to provide high speed, high quality networks for heavy business use or for rolling out triple play services in homes.

Triple play services in Kenya are hampered by the lack of fixed line infrastructure in the country, which in turn negatively affects the availability of fixed line broadband. In another Sub Saharan first, Kenya’s Wanainchi Group, has launched a triple play service branded as Zuku which offers customers television, Internet broadband and telephony on one line using a combination of fibre, cable and Wimax technology. Zuku’s triple play service is only available in a few neighborhoods in Mombasa and Nairobi and starts at KES 1’999 (US$ 24) per month for unlimited broadband (1Mbps) and 43 English channels, plus free on-net voice calls.*  Zuke Website, http://www.zuku.co.ke/coverage/ Zuku has regional aspirations with a plan to launch in 9 countries.

6.2.1 Education

A 2008 study which compared Nairobi to 15 other capital cities in Africa, found that Kenyans had the highest rate of using computers for browsing the Internet (Table 5). In addition, 74 percent of residents in Nairobi have used a computer at least once, followed by Lagos, Nigeria and Kampala, Uganda at 69 and 68 percent, respectively. Kenya’s high urban computer usage can be attributed to high literacy rates and the concerted efforts by the government and other stakeholders in promoting use of ICTs through various programmes and projects discussed in this section. The main challenges with respect to accessibility of ICTs in education are with respect to schools in remote areas and urban slums.*  ICT in Education Options Paper (Ministry of Education & USAID), July 2005

Kenya’s 8-4-4 (primary – secondary - tertiary) educational policy introduced universal free but non-compulsory primary school education in 2003. From a policy perspective, in addition to the 2006 National ICT Policy which promotes e-learning, there is the 2006 National ICT Strategy for Education and Training,* National ICT Strategy for Education and Training, Ministry of Education. 2006. http://www.csdms.in/gesci/pdf/KENYA.pdf which addresses connectivity and infrastructure, digital equipment and content, harnessing emerging technologies, integration of ICT in education, training and research and development.*  Farell, G. ICT in Education in Kenya, Survey of ICT and Education in Africa, Kenya Country Report, 2007. 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.

The National ICT Policy emphasises the importance of integrating ICTs in the curriculum at all levels of education, establishing education networks so that educational resources can be easily accessible and shared, and promoting e-learning. They can also be integrated in the curriculum in order to equip Kenyans to participate in a knowledge based economy. Computer Studies is offered as part of the official Kenya Certificate of Secondary School Examination (KCSE) curriculum defined by the Kenya Institute of Education (KIE). In this curriculum, students are expected to learn and develop practical ICT skills with the main focus being general IT awareness and software development. In the final year of study, candidates are expected to develop a complete software project using a recommended set of tools and programming languages.*  Use of ICT in Enhancing Teaching and Curriculum Delivery in Marginalised Secondary Schools in Kenya http://www.strathmore.edu/hp/ The CCK has initiated a number of universal access projects including the digitisation of the secondary school curriculum. The CCK has collaborated with the Kenya Institute for Education (KIE) and provided KES 15 million (US$ 180,500) of funding to support the acquisition of software and hardware, and provide capacity building, to digitise 11 subjects for the Form 1 KCSE curriculum. The digitised subjects were piloted in 20 schools of which 16 are the beneficiaries of the CCK’s school-based ICT centre initiative.*  http://www.cck.go.ke/services/universal_access/projects/digitisation_of_secondary_school_curriculum.html

Another important institution in the ICT for Education (ICT4E) space is the Kenya ICT Trust Fund, founded in 2004, which facilitates PPPs to mobilize resources to bring a portal for information sharing and the development on a national computer assembly centre.*  Ibid. Its implementation arm is the Network Initiative of Computers in Education (NICE) which is responsible for core activities aimed at promoting ICTs in the learning institutions (primary, secondary and tertiary institutions). Kenya ICT Trust Fund draws its membership from the government, private sector, and regulatory bodies. Kenya ICT Trust Fund in 2010 successfully disbursed over 3000 donated software licenses, issued at least 200 teacher training certificates in collaboration with Microsoft, and refurbished 250 computers donated by the Kenya Ports Authority for distribution in the coastal region of Kenya.*  See Kenya ICT Fund website: http://www.kenyaictfund.or.ke/initiatives.html

At a tertiary and regional level, three East African higher education regulatory authorities have signed an agreement harmonizing their approach to ICTs making the possibilities of distance learning, e-education and use of virtual universities more accessible. This will enhance the EAC, increase the mobility of EAC residents, and promote the use of regional and international standards.

6.2.2 Equipment

Access devices, which are traditionally laptops and computers, and increasingly smartphones and tablets, must be affordable for broadband uptake to increase. In Kenya, laptops and PCs are competitively priced and readily available on the market. In 2003, in line with measures taken in Tanzania and Uganda, the Department of Finance 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 decision is part of a strategy to drastically reduce the cost of computers in the country and complement other projects such as the Technology Parks. The Ministry of Finance in Kenya took bold moves in the 2009/10 financial year and committed to*  2009/10 Budget Vote Speech, Deputy Prime Minister and Minister of Finance, June 2009. http://www.statehousekenya.go.ke/economy/budget2009-2010.pdf:

• invest KES 1.3 billion (US$ 100 million) for mobile computer labs for high schools in all constituencies;
• support Digital Villages in partnership with the World Bank to create business hubs and entrepreneurial opportunities in rural areas
• launch a one million laptop/PC campaign in conjunction with broadband providers by undertaking to underwrite part of the interest on funds that are borrowed to buy personal computers and laptops;
• allow ISPs to offset against their taxable 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 software; and
• exempt all handsets from VAT.

These comprehensive incentives should stimulate the supply of computers, reduce costs and increase PC penetration to stimulate broadband use. However, a related factor that is not included in the favourable tax regime is the 10 percent excise duty on mobile airtime. It is argued by operators that the 10 percent airtime tax coupled with the 16 percent value added tax (VAT) adds to the cost of services for end users and negatively impacts the affordability and accessibility of services.

6.2.3 Promoting Applications, Content and Services

BPO sector

Kenya’s BPO strategy is central to Vision 2030 and is highlighted as one of the means to make Kenya a middle-income country within a period of 20 years; in part through creating 7,500 direct jobs in the BPO sector and 2,500 indirect jobs by 2012* Vision 2030, http://www.communication.go.ke/documents/Vision_2030_Popular_Version.pdf. Kenya compares itself to Mauritius—one of Africa’s BPO successes—in the ICT sector Strategic Plan and hopes that increased bandwidth, cheap labour, clear accents and its location could help it tap this multi-billion dollar industry. As with other aspects of the country’s broadband strategy, Kenya’s policy framework (Kenya ICT Strategy 2006) provides strategic direction on how to realize the BPO vision. In terms of institutions, a self-regulatory regime is provided for – the “Kenya BPO and Contact Centre Society*  http://www.kenyabposociety.or.ke/” has been formed to set standards and provide for self-regulation. The Kenya ICT Board is responsible, as part of its role of marketing the sector, for promoting the country abroad as a BPO destination. The Kenya ICT Board furthermore provides bandwidth subsidies to the BPO sector through a grant from the World Bank (See Box 4), in anticipation of price decreases until the impact of the newly landed cables is felt.

Other measures taken in countries like India and Philippines that have thriving BPO sectors include government-supported corporate locations such as business and technology parks and export processing zones; laws supporting intellectual property; attractive labour laws; and reasonable rates for skilled and unskilled workers. Similarly, Kenya has identified Export Processing Zones (EPZ) which will be used to locate technology parks such as Kitengela (See Section 6.2.4, Public Private Partnerships). It is also in the process of amending and updating its IP legislation. Following the various funding and policy initiatives relating to the BPO sector, Kenya currently has 25 licensed BPO operators, although not all of them are operational.*  CCK Register of Licensees under Unified Licensing Framework http://www.cck.go.ke/licensing/telecoms/register.html According to the KICTB, by 2009 about 3,550 BPO jobs had been created from a baseline of 500 in 2007.*  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

Online government services

The Kenyan government is taking steps to digitise content and provide services online. Although there is still significant work to be done in this area, the Kenyan e-government portal (http://www.e-government.go.ke) enables citizens to apply for public service jobs, track the status of ID and passport applications, obtain exam results, submit tax returns and report corruption. In addition there is a business licensing e-registry. Providing e-government services has proven to be challenging in light of the ‘silo effect’ discussed earlier and the need for line ministries to take responsibility for developing and digitising relevant content for users.

The fact that ICT Units are not necessarily senior in the organisational structure of a ministry means that the projects may not be prioritised or given the strategic importance that they deserve. Kenya has seen that line ministry projects that are done in collaboration with the MOIC, such as the Judiciary Telepresence Project (see Box 5) and the Technology Park project which is partnered with the Trade Ministry are likely to achieve success.

Encouraging local innovation

Kenya is earning a reputation as an innovation hub, and a centre for the development of relevant African applications and content. Initially developed on narrowband mobile and SMS platforms, many of Kenya’s innovations have had regional and global impact. Innovations include:

• Ushahidi, an open source application used in conjunction with Google Maps, use crowd sourcing for social activism and have since been replicated in Haiti.
• M-Pesa which has generated considerable publicity leading to similarly styled mobile money solutions to spread across the continent. Interestingly, although M-Pesa is a 2G mobile solution, it is finding relevance online through its recent partnership with Visa, and can be used as a tool to generate demand.
• KenyaImagine, a local website originally founded to address the gap in quality of online content from Kenyan news and magazines, has turned into an online content hub, with involvement of local Kenyans as well as the Kenyan Diaspora.

In addition, to these innovations which have taken place in a narrowband context, applications like PesaPal, a locally developed payment platform that is a sort of hybrid of PayPal and M-Pesa, will find greater relevance as broadband take up increases. PesaPal enables Kenyans to buy and sell on the Internet using mobile money or a credit card and has targeted applications such as school fee payment, e-ticketing and e-commerce (See Box 6).

6.2.4 Funding Local Demand

Loans, grants and subsides

While it is still early and the impact cannot be evaluated, Kenya has put in place several funding mechanisms to support local development of content and applications, and to stimulate the BPO sector. The institutions that mainly support this are the Kenya ICT Board (KICTB) and the newly established Universal Service Fund managed by the CCK and focused on under serviced areas. The USF is funded from a levy imposed on licensed operators, while the KICTB receives funding for projects mainly from donors, including a Revolving Fund for Digital Villages.

In 2007, as part of the World Bank’s Regional Communications Infrastructure Project, Kenya agreed to rollout Digital Villages in rural areas to promote Internet connectivity to enable citizens to access government and commercially generated information available on the web.*  Drury, Peter. 2011. Kenya’s Pasha Centres: Development Ground for Digital Villages. http://www.cisco.com/web/about/ac79/emgmkt/index.html. The KICTB started with a pilot programme in 2009 called the “Pilot Pasha Centres” (Pasha means “to inform” in Swahili). The pilot programme was important to ensure the development of a model that was relevant within the Kenyan rural context and was sustainable. Although a single model was initially envisaged, the pilot resulted in three categories of Pasha Centres being developed. The categories acknowledge the evolving definition of broadband and the types of applications supported by different speeds. Accordingly, human resource capacity and training will vary depending on the category of the Pasha Centre that is deployed. Five digital villages located in Nkubu, Garissa, Kangundo, Malindi and Mukuru were established in the pilot phase.*  http://www.ict.go.ke/index.php/sport/pasha/pasha-updates/299 The Kenya ICT Board in 2009 and 2010 had conducted nationwide training of 1000 people in business management, entrepreneurship, marketing, basic accounting and technical management (a “starter-kit”) to prepare potential Pasha Centre managers to run their centres, and from January 2011 will disburse at least one loan for a Pasha Centre per county. KICTB’s target is to have 210 Pasha Centres, one in each constituency, by 2012.

While Pasha Centres are a significant project aiming to increase digital inclusion, other projects are underway involving other consumer groups such as academia. The Kenya Education Network (KENET) and the KICTB have worked together to disburse 200 MB of bandwidth to 64 tertiary institutions across Kenya using private and donor funding.*  KICTB Interim Update (11 June 2010) at http://www.ict.go.ke/index.php/theboard/board-reports/update-on-11th-june-2010-

The KICTB recognizes the need for locally developed and relevant national content and has issued grants for digital content and software applications as part of the Tandaa Digital Content Strategy. The KICTB has amongst its priorities: issuing Kenyan firms and software application developers grants to support local content and software applications; providing subsidies for laptops for university students (“Wezesha”), although uptake has been low and through interviews with university students it appears that many are able to obtain laptops relatively easily, the low cost of hardware and the competitive nature of the market being two contributing factors. The cost of the laptop or PC is far less of a concern that the cost of connectivity itself.

Public-private partnerships

Most of the demand side initiatives in Kenya have been either led by donors or established through PPPs. Kenya has managed to successfully structure PPPs to stimulate demand. The biggest success stories do two important things – they leverage the strengths of the private and public sectors, and they break the “silo effect” by encouraging collaboration across government departments and line ministries. This is exemplified in the approach to the establishment of technology parks.

The Government has committed to establishing Multimedia Technology Parks and promoting home-grown industries developing ICT products through fostering a partnership between the MOIC, the Ministry of Trade and Industry and private investors. The Minister of Trade and Industry has identified Export Processing Zones (EPZs) which will also house the Technology Parks, thus linking the ICT sector to broader economic projects. The government through the MOIC will, in terms of the PPP, provide land (500 hectares in Kitengela which is about 25 kilometers outside of Nairobi) and the plans for the layout. Private sector players interested in the concept, land and plan, will then be able to build out the business premises and either use it for their own operations or lease it out to other appropriate businesses.

PPPs are furthermore used in Kenya to establish data recovery centres, to provide storage and recovery for all government databases, and for the establishment of Incubation Centres and Satellite Assembly Centres where local PCs will be assembled. Additionally skilled graduates will be employed at Incubation Centres and Satellite Assembly Centres , thus increasing the impact of broadband on job creation.