Telecommunications market overhaul by communications authority

The Communications Authority of Kenya (the Authority) facilitates the development of telecommunications, e-commerce, cybersecurity, multimedia, broadcasting as well as postal and courier services. While the Authority has noted a growing increase in Internet Service Providers (ISPs), most of these providers have been operating in a regulatory grey area, deploying unauthorized networks on licence-free frequency bands originally intended for industrial, scientific and medical applications.

As these illegal ISPs operate in limited, localized and densely populated estates, they create a complex web of overlapping coverage preserved for licensed providers hence limiting their potential market scope. In due regard, the Authority has made proposals in its “Review of the Telecommunications Market Structure” circular in December 2024 for public consultation. These proposals aim to tackle the growing challenge of proliferation of unauthorized internet service providers operating in the shadows of Kenya’s booming telecommunications sector.

This article will seek to expound on the proposed changes affecting Public Communications Access Centres (Cybercafes) and Ordinary Vendors and Equipment Distributors.

Public Communication Access Centre (Internet Cybercafes)

Current Status

Kenya’s digital transformation is taking an ambitious leap forward towards achieving the last mile internet connectivity. Under the National Digital Superhighway Programme the government has unveiled a comprehensive ICT development plan that promises to revolutionize internet accessibility across the nation. At its core, this initiative aims to weave a digital fabric that connects even the most remote corners of the country by implementing the following five components:

Installation of 25,000 public Wi-Fi hotspots, bringing free internet access to communities nationwide
Establishment of three (3) state of the art data centres strategically positioned to power Kenya’s digital infrastructure;
Deployment of 100,ooo Km of fiber cable across the country thus creating a digital backbone that spans the country;
Establishment of 1,45o Digital Village Smart Hubs and Studios, serving as innovation and learning centres for local communities; and
Cyber security management to protect the growing digital ecosystem.

In line with the Authority’s mission of enabling regulation, it currently provides for a license for cybercafe’s under the Public Communication Access Centre (PCAC) regime. Notably, there exists a large number of entities operating as cybercafes countrywide that pose regulatory challenges. Of particular concern is the role cybercafes play in cybercrime, acting as potential safe havens for malicious actors who exploit the current lack of user tracking and identification systems.

Proposals

As the current regime closely mirrors the challenges of ordinary vendor license category, the following are proposals by the Authority aimed to cure the regulatory loopholes:

Record-keeping: Cybercafes will be required to maintain detailed records of customers including their Identification Document (ID) card details. This will improve accountability and aid tracking individuals who misuse these facilities for illegal activities.
Identification: They will be required to identify individuals who use their services or facility. This measure will deter criminal activities and enhance the overall security of Cybercafé operations.
Logging software: Operators of cybercafes will also be required to implement logging software on all devices used. The software will track user activity providing a digital trail that can be used for monitoring and investigative purposes.
CCTV: It will be a mandatory requirement for cybercafes owners or operators to install CCTV systems to monitor their premises.
Class Licence: PCACs that provide internet browsing services will now be licenced under the category of Internet Cafes.

The Authority aims at ensuring efficient and effective Information and Communications Technology (ICT). As part of its strategic plan aimed at bringing cybercafes under regulation, the Authority can borrow from other jurisdictions such as Malaysia, which has a robust by-law system for cybercafes run in the jurisdiction of respective local authorities.

Ordinary Vendors & Equipment Distributors

Current Status

Under the current licensing regime, vendors of mobile phones and vehicle tracking devices among other low power telecommunication terminal equipment are required to operate under a Vendor License. Despite the existence of the licence, instances of non-compliance with local standards such as requirement for a unique International Mobile Equipment Identity (IMEI) continues to raise concerns as oftentimes most vendors import and sell sub-standard communications devices. This regulatory challenge has further been made worse by the large number of vendors who make it nearly impossible to control the sale of substandard devices in the market.

Proposals

The Authority proposes the following under this licensing category:

License Category: the proposal seeks to introduce the Telecommunication Equipment Distributor (TED) license to be issued to wholesalers of communications equipment and entities importing communications equipment for sale. Foreign and local manufacturers seeking to distribute their own equipment will be required to obtain this license. Manufacturers domiciled in Kenya will be required to sell only to licensed TEDs.
Scope of License: the TED license will be limited to the supply and sale of ordinary both terminal and complex network equipment and provision of after-sale support through supply of spares to vendors. As such, the TED license will not include installation and maintenance activities in its scope of services.
Type Approvals: only licensed TEDs will be able to seek type approval/acceptance services for all low power communications equipment they sell and ensure they have a minimum of one-year warranty period and avail spares for all equipment it imports or manufactures.
Class License: class licenses are usually not issued to individual providers of a service but instead under some published terms and conditions govern the license in relation to the provision of the service. The current vendor license will be converted into a class license and renamed Communications Equipment Vendor (CEV) licence applicable to entities selling low power communications equipment to end-users with terms and conditions set by the Authority. Additionally, CEVs will only obtain their equipment from licensed TEDs.
Telecommunications Contractors (TECs): TECs currently engaged in importation or manufacturing and distribution of telecommunications equipment will have their current TEC license synchronized with the TED license provided the TEC license remains valid and is subject to modifications resulting from the proposals under the market structure review.
Proposed Fees: the newly proposed TED license will have the following regulatory fees:
1. License Term: 15 years
2. Application fee: Kshs.5,000/=
3. Initial license fees: Kshs. 250,000/=
4. Annual operating fees: Kshs. 120,00 or 0.4% of gross annual turnover, whichever is higher.

Conclusions

Given the exponential growth of the telecommunications market, the proposals by the Authority are well timed as the industry requires proper regulation especially in the wake of advancements of technology. As retailers will only be required to obtain their goods from licenced wholesalers and importers, this will ensure that such ICT equipment importers will bear the responsibility of ensuring all imported or manufactured equipment adheres to Kenyan standards. TED license requirements will also have the ripple effect of reducing the proliferation of e-waste as ‘dumping’ of electronic waste by developed countries will be limited.

With our expertise in technology, media, and telecommunications law at Bellmac Consulting, we remain keen on the complexities and effects of these regulatory shifts. 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.