This document discusses the convergence of mobile and financial services and the implications for mobile telecommunications regulation. It covers topics such as the meaning and levels of ICT convergence, how mobile networks are used to offer many services, and models for mobile financial services. It also examines how convergence impacts regulation through overlaps, arbitrage, inertia and conflicts. Specific issues for Kenyan mobile telecom regulation are discussed, including licensing, interconnection, competition, universal access, and quality of service. Recommendations focus on regulatory convergence, cooperation, and balancing ex ante and ex post approaches.

1. CONVERGENCE OF MOBILE AND
FINANCIAL SERVICES:
IMPLICATIONS FOR MOBILE
TELECOMMUNICATIONS
REGULATION
BY:
JEREMMY OKONJO
MWAGAMBO & OKONJO ADVOCATES

2. Convergence in ICTs
Meaning: the shift from the traditional “vertical
silos”
architecture,
whereby
different
communications services were provided through
separate networks (for example, fixed
telecoms, mobile telecoms, CATV, IP), to a
situation in which communications services are
accessed and used seamlessly across different
networks and provided over multiple platforms
in an interactive way.

3. Levels of ICTs Convergence
1. Network convergence
2. Service convergence
3. Industry/market convergence
4. Regulatory convergence

4. Convergence
ICTs convergence most prolific in mobile
telecommunications sector for 2 reasons:
1. Mobile phone infrastructure used to offer
most ICTS and other services;
1. Convergence in mobile telephony has been at
the expense of other ICTs sub-sectors e.g.
ISPs, fixed line telecoms, branchless banking
etc;

5. Mobile & Financial Services as
Converged Services

6. Mobile Financial Services Models
• Bank Model
• Mobile Network Operator (MNO) Model
• Hybrid Model

7. The Role of Regulation in
Telecoms, and Mobile Financial
Services

8. Impact of Convergence on Mobile and
Financial Services on mobile telecoms
regulation
• Regulatory overlap
• Regulatory arbitrage
• Regulatory inertia
• Regulatory conflict

9. Implications of MFS on Regulation of
Mobile Telecoms in Kenya
1. Authorization and Licensing
2. Interconnection and interoperability
3. Competition
4. Universal access
5. Quality of service

10. Authorization and Licensing
• Introduction of the Unified Licensing
Framework (ULF) of Licensing;
• Classification of MFS as Value Added Services
under the ULF Licenses

11. Authorization and Licensing
Importance of Licensing:
1. Raising fees/revenue
2. Registration of Licenses
3. Regulation of market entry
4. Quality control
5. Enforcement of regulations
6. Contract between MNO and Government

12. Interconnection and Interoperability
• Interconnection - the physical and logical
linking of telecommunication networks used
by the same or different service licensees in
order to allow the users of one licensee to
communicate with the users of the same or
another licensee or to access services
provided by another licensee.

13. Interconnection and Interoperability
• Interoperability - the ability of communication
systems, units or elements to provide services
and to accept services from other
systems, units or forces, and to use the
services exchanged to enable them operate
effectively together.

14. Justification for Interconnection and
Interoperability
1. Consumer benefit perspective
2. Capturing valuable network externalties
3. competition

15. Levels of Interconnection and
Interoperability in MFS
1. Platform interconnection
2. Agent interconnection
3. Customer level inter-operability

16. Regulation of Interconnection and
interoperability
• Should Interconnection and interoperability
be regulated by CCK?
• How do regulators balance access and
interconnection rights with proprietary
rights, and the need to encourage innovation
and investments in MFS?

17. Competition
• Competition pushes firms to be
efficient, innovative and customer oriented in
order to thrive and survive in the market.
• Effects of competition:
1. Lower prices/tarrifs
2. Higher productivity
3. Increased innovation
4. Greater connectivity

18. Elements of Competition in the MFS
sub-sector in Kenya
1.
2.
3.
4.
Market entry
Interconnection and interoperability
Exclusive dealing agreements
Cross-subsidy, service bundling and
predatory pricing
5. Mobile Number Portability (MNP)

19. Universal Access and Service
• the objectives and policies that a government
implements to ensure that all its citizens have
access
to
the
benefits
of
modern
communications
infrastructure
and
services, regardless of region or location, socioeconomic status, ethnicity, gender, disability, or
any other factor.
• Universal Service and universal access to
telecommunications are distinct.

20. Universal Access and Service
• Universal service refers to service at the
individual or household level, for example, a
mobile phone in each home.
• Universal access, on the other hand, refers to
a publicly shared level of service, for
example, “simu-ya-jamii” payphones, or MFS
agents networks.

21. Rationale for Universal Access and
Service
• Telecoms, and ICTs generally, are socioeconomic enablers;
• Market forces cannot eliminate market gaps
left by service providers;
• Market supply and demand forces increases
importance of universal access and services

22. Universal Access and Services
• Do the telecoms regulations on Universal
Access and Service apply to VAS such as
Mobile Financial Services?

23. Universal Access and Services
Why should UAS by applied on MFS?
1. MFS are bundled services
2. They are important for social inclusion
1. Regulatory inertia?

24. Universal Access and Service Concerns
Relevant to Mobile Financial Services
• Extent and quality of network coverage;
• Provision of technology-agnostic mobile financial
services;
• Design of user-friendly interfaces and subscriberfriendly registration procedures;
• Interconnection and interoperability.

25. Quality of Service (QoS)
In Kenya’s liberalized telecommunications
sector, competition is considered one of the
main tools for fostering innovation, fair
pricing, and promoting high quality of
telecommunications services. The objective to
keep down churn rates in a competitive market
is seen as an incentive for the provision of high
quality services.

26. Quality of Services (QoS)
• Imperfect Markets;
• Safaricom and Orange Telkom - have been
declared significant market players (SMPs) by
the CCK;
• Need to implement a system for monitoring
and reporting Quality of Service (QoS) of
mobile telecommunications services.

27. Rationale for QoS Regulation of MFS
• Price/quality trade-off by service providers
• Insensitivity of MNOs in asymmetrical
telecoms and MFS markets;
• Published, comparable QoS indicators are
essential for assisting customers make
informed choices and foster market
competition;

28. Applicability of Quality of Service
Regulations to Mobile Financial
Services
• Indirect application – indicators ensure
network strength and availability, hence aid
the provision of MFS;
• Direct application – the KICA QoS regulations
do not address peculiarities of MFS;

29. QoS Elements Critical to Provision of
Mobile Financial Services
• Complaints or redress mechanism
• Authentication and registration;
• Verification and tracking of transactions;

30. Recommendations and Conclusion
Regulatory response required at the institutional
level:
1. Regulatory convergence;
2. Regulatory cooperation;
3. Balance of ex ante and ex post regulatory
approaches;
4. Regulatory trend-setting.

31. Recommendations and Conclusion
Regulatory Responses to specific telecoms
regulatory issues:
1. Licensing
2. Interconnection and interoperability
3. Competition
4. Universal Access and Services
5. Quality of Service