ADSL pricing soars in Kenya

July 6, 2006 6:07 AM

Dear MeFites, please can you help me to challenge recent ADSL broadband price increases in Kenya.

Having slashed ADSL costs significantly in February 2006, Telkom Kenya has hiked their entry level ADSL pricing by 64% after only 5 months.

The service in question is the 32/128kbps pre-paid unlimited ADSL bundle. This was revolutionary when it came out and uptake was good. New users parted with the KSh3800 ($51) connection fee, the KSh8500 ($115) modem fee and then committed themselves to a KSh5604 ($76) monthly fee with a belief that, as per broadband pricing across the rest of the known world, the price would either remain constant and the speeds increase, or the prices would come down over the course of the next 12 months or so. The really nice bit was the fact that access was via scratch cards that could be purchased as needed (no monthly bills). Though a bit fiddly for the first time user to set up each month, it provided flexibility to the consumer. It also gave users a neat way to sidestep Telkom’s notoriously erratic billing.

Seeing as I was on this tariff, I was mightily pissed off to pick up a letter in my post box today informing me of this (back dated a week, mind you). Not many people who parted with their KSh17904 ($242) first bill saw a 64% increase coming in as little as 5 months. The same service now costs an astonishing KSh9188 ($125) a month. That’s $25 more than the average monthly wage here.

At the same time, Telkom have introduced a new tariff for “home users”. The speed is 32/128kbps. The cost is KSh5604 ($76). The difference is the introduction of a 90hr monthly access limit. So that’s three hours access a day (or 6 hours if you’re a night owl and use the service between 8pm and 8am at half price). This means that KSh5604 ($76) now buys you 87.5% less time than it used to. This hourly limit means that access on the tariff is now a fraction over the cost of using an Internet café (average price of browsing in an urban Internet café is Ksh60 ($0.83) an hour).

I called Telkom and eventually a very helpful lady in the marketing department agreed to answer some questions about why the prices had gone up so sharply.

It turns out just about every Internet café owner within spitting distance of a digital exchange in Kenya has switched to 32/128kbps PAYG tariff since its launch. Businesses are supposed to use the 64/256kbps service which costs KSh16008 ($218) per month. By moving to the 32/128kbps tariff, they could slash their monthly overheads by as much as a half, what with competitor’s prices being either just as expensive as Telkom's 64/256kbps service or requiring higher initial capital outlay and additional licensing for VSAT or radio equipment. The lady in marketing revealed that the original 32/128kbps service was not for business use and that the changes in tariff were introduced to address this mass switch over.

I can see why Telkom wanted to take action against businesses using an inappropriate tariff, what I don’t see is why home users on the same tariff, who have invested a large amount of money to access a service, are being penalised so harshly; surely there must be ways or ensuring that businesses (for which read multiple users/Internet cafes in particular) are not able to use this tariff, but home users are?

Wherein lies my question:

How can Telkom offer this 32/128kbps service to home users on a pre-paid basis, whilst preventing businesses from taking advantage of a tariff they are not offered.

Any ideas are appreciated as I have been asked to forward my thoughts on the matter to Telkom. Unfortunately, I'm not very technically minded and I'm a bit jaundiced in view right now, what with being directly affected by the increase.

posted by davehat to computers & internet (4 comments total)

In the US the definition of business users is based on the number of phone lines in a property, four or more is a business. See here for an introduction to telecoms regulation in the US. Would a similar definition work to address this problem? (Dammit Jim, I'm an energy regulator not a switchboard.)

You might also consider contacting the local telecoms regulator, which is the Communications Commission of Kenya, they might be able to offer some advice about what action you might be able to take given the less than transparent pricing structure and indeed might be able to take some action about a problem which they may not yet be aware of. In the end it's likely that it will need to be the CCK who take any overriding action at the national level to solve the problem anyway.
posted by biffa at 6:51 AM on July 6, 2006

Hi biffa.

In the US the definition of business users is based on the number of phone lines in a property, four or more is a business.

Not sure this would work. Phone penetration is low in Kenya, especially since the introduction of the mobile phone. Telkom are essentially a telecoms monopoly here. No matter how you communicate, Telkom end up getting paid somehow. I think you can just about get away with using tin cans and string without paying them owt. Anyway, I would think only a handful of businesses have 4+ telephone lines.

Thanks for the CCK link. I hadn't thought about that. I've just emailed them. Any other people I should email?
posted by davehat at 7:46 AM on July 6, 2006

Telkom have an interest in making as much money as possible, if they can't afford to run the ASDL service and have it open to both business and domestic companies at a given price it may be that they can operate most profitably be coming up with some way to charge business and domestic consumers different prices. If they can find some way to charge like this then maybe you'll get your cheaper service while businesses will also have a separately charged service. This may be better (ie more profitable) for Telkom than losing all their domestic customers.

The four lines doesn't have to apply, it could be more than one or two, though that may still not be effective for the reasons you note.
There may be technological solutions to this which would let Telkom identify properties by other parameters and classify them as businesses but I'm afraid that's straying much too far outside my knowledge.

CCK act as both regulator and consumer watchdog so probably the only worthwhile body. You could consider the Ministry of information and Communications but its probably the CCK's business.
posted by biffa at 9:06 AM on July 6, 2006

CCK act as both regulator and consumer watchdog so probably the only worthwhile body.

True. I emailed them and cc'd an editorial column in the Nation newspaper called Watchdog. Hopefully that will spur something.
posted by davehat at 9:45 AM on July 6, 2006