Reshaping Kenya’s Digital Future: Major Overhaul of International Telecommunication Licensing Framework

In a move that could re-define Kenya’s telecommunications sector, the Communication Authority of Kenya (the Authority) is set to overhaul the country’s international telecommunications framework. This overhaul is outlined in the Review of the Telecommunications Market Structure (December 2024), which introduces proposals aimed at streamlining licensing categories and ensuring technology neutrality.

With the rapid growth of last mile internet connectivity, the Authority seeks to bring all players in the telecommunications sector by updating the current market structure based on a Unified Licensing Framework (ULF) that was developed in 2008. These changes are designed to attract global investment, improve efficiency, and pave the way for better international connectivity, for example with the recent worldwide entry of Starlink, a US-based satellite internet service provider, into the internet provision market which has brought about a global regulatory conundrum.

The Current Landscape

Currently, the international network gateway market operates under three distinct licenses that allows for connectivity of different networks internationally by translating communications from one protocol to another. These include:

• Submarine Cable Landing Rights (SCLR),

• Satellite Landing Rights (SLR), and

• International Gateway Systems and Services (IGSS).

SCLR licensees acquire rights to land submarine cable systems that pass under the sea into the mainland, SLR licensees acquire rights to land their satellite signal in the countryand IGSS licensees, on the other hand, handle international traffic using satellite technology.

However, this current system has significant flaws, particularly with respect to the ULF, which advocates for technology neutrality. For instance, due to the lack of proper licenses and gaps in the regulatory regime, Starlink was authorized by the Authority to temporarily operate in the proposed Ku frequency band and Swam technology in 5h3 VHF frequency band for a period not exceeding 12 months.

The existing system imposes varying licensing fees and requirements which create an uneven playing field for operators. For instance, the initial fees for SCLR and IGSS licenses are Kshs. 15 million while the SLR requires a modest $12,500. The annual operating fees also differ greatly; where SCLR costs Kshs. 4 million, IGSS costs Kshs. 800,000, and SLR licensees are exempt from annual fees. This inconsistency has discouraged investment and stifled innovation due to lack of competition and led to low-quality telecommunications services.

The Proposed Changes

Kenya is rewriting the rules to simplify and modernize its licensing system. Under the new framework, SCLR licenses will be stripped of their international gateway provisions, thereby simplifying their scope. IGSS licenses will embrace technology neutrality, allowing licensees to use any medium such as submarine cables, satellites, or terrestrial cables to handle international traffic. Billing and switching international traffic will be solely within the purview of IGSS license holders.

The most significant change involves merging the SCLR and SLR licenses into a single, versatile Landing Rights License. This new license will empower investors to land international signals using any technology, and its scope will expand to include innovative services like space research, meteorology, and telemetry, alongside satellite hubs and terrestrial cables transiting through Kenya to neighboring countries.

Financial Implications

The new licensing framework sets a clearer and more consistent application fee structure for the licenses. The application fee for the Landing Rights License is Ksh. 5,000, with an initial license fee of Ksh. 15 million and annual operating fees of Ksh. 4 million or 0.4% of the annual gross turnover, whichever is higher. These changes are designed to provide a more standardized and transparent financial landscape for investors.

The Bottom Line: Opportunities and Challenges

While the overhaul aims to streamline the licensing process, there are both advantages and potential drawbacks for investors, operators, and consumers.

For investors, the introduction of a Landing Rights License simplifies the process, but the higher initial licensing and annual operating fees may deter small-scale or emerging players. With the removal of the “Equity Participation Rule” in 2023 which required telecommunication companies to have at least 30% substantive Kenyan ownership, this could lead to a consolidation of the industry around established operators, reducing competition and potentially stifling innovation. For operators, the increased regulatory fees could limit their flexibility and force them to pass these additional costs onto consumers, leading to higher prices for internet and telecommunications services. This could widen the digital divide, particularly in rural and marginalized areas.

The new framework, however, could position Kenya as a regional hub for telecommunications, attracting international investments for satellite hubs and terrestrial cables. While this would strengthen Kenya’s global competitiveness, there is a risk that the focus on serving international clients could disadvantage local consumers, especially in rural areas that rely on satellite technology for connectivity. Satellite-based services such Starlink may face slower adoption due to the high licensing fees and lack of a defined regulatory system for direct-to-device satellite technology, hence limiting access to these services for Kenyan consumers.

The Future of Kenya’s Telecommunications

As Kenya navigates these changes, it raises critical questions: Will the new licensing framework create a dynamic and competitive telecommunications ecosystem? Or will it disproportionately favor established players and international markets at the expense of Kenyan consumers and small businesses?

At Bellmac Consulting, we recognize the complexities of these regulatory shifts. With our expertise in technology, media, and telecommunications law, we are well-positioned to help businesses navigate these changes and capitalize on new opportunities. Whether you’re seeking to acquire telecommunications licenses, enter into technology and telecommunications agreements, or ensure your business remains compliant, our team is here to provide expert legal and advisory services tailored to meet your specific needs

Contact us today at www.bellmacconsulting.com, and let us guide your business through Kenya’s evolving digital frontier.

The authors are Simon Rutto and Blaise Kwasi, Advocates of the High Court of Kenya.