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ISPs seek licence for exchange

By Washington Akumu, Daily Nation, Tuesday 27 March 2001

Kenya's main Internet service providers last week changed tact in their fight for a controversial local Internet exchange when they applied to the Communications Commission of Kenya for a licence.

But the real struggle for the ISPs may just be beginning, as Telkom Kenya is likely to mount a strong opposition to the application.

And it will be interesting to see how CCK will handle Telkom's protest in light of Director-General Samuel Chepkonga's undertaking last year to register the exchange "if they (ISPs) applied in the right procedure."

Telkom has a major stake in the Internet sector, where it provides backbone services through its Kenstream and JamboNet services, and the licensing of the exchange would have far-reaching implications for its revenue base.

In a Kenya Gazette notice published last Friday and dated March 21, Mr Chepkonga acknowledged the application and invited presentations from the public, as is normal practice during the 60-day "exposure period."

An exchange of the type sought by local ISPs acts as an information 'clearing house' among member ISPs, reducing the time and cost required to send and receive electronic mail locally. With the service, local messages do not have to go through international exchange routes as happens at present even if the mail's destination is literally across the street. Inter-ISP connections attain the same speed as intra-ISP ones, while there are also potential savings in bandwidth and the development of new revenue streams.

The international routes sometimes involve exchanges in more than one continent, forcing ISPs to use the more expensive JamboNet circuits when the much cheaper Kenstream digital link would suffice.

Last year, the ISPs – operating under the umbrella of industry lobby Telecommunications Service Providers of Kenya (Tespok) – had taken the hardline view that they did not need a licence to operate the service and went ahead with installations, sparking acrimonious exchanges with the regulator.

They argued that since the technology used on the Cisco-installed exchange was no different from a Local Area Network connection used in most company networks, they did not require a licence.

But the Mr Chepkonga stood his ground arguing that the exchange fell under the classification "Value Added Services" in the Communications Act and was subject to a Sh100,000 licence fee. Telkom, he said, had no monopoly in such services.

In December, CCK moved in on Kenya's pioneer Internet exchange facility, disabling it amid protest from an industry that felt the move was high-handed, hasty retrogressive and sympathetic to Telkom's continued stranglehold on the industry.

A source who spoke to BusinessWeek said the new strategy to seek a licence was adopted following talks between CCK and Tespok. The latter is understood to have appealed to the CCK Tribunal in January.

A meeting on Monday last week between the two sides reportedly paved the way for the belated application.

In a major shift, the licence is now being pursued by a commercial venture as opposed to last year when the original facility was fronted by Tespok itself.

The ISPs promoting the venture have formed the Kenya Internet Exchange Point Ltd, a consortium that brings together ISP Kenya, Africa Online, Swift Global, Kenyaweb, Insight, NairobiNet, InterConnect, Wananchi Online and Access Kenya. At present, it is a loose structure which is however expected to transform itself into a fully-fledged company if granted the licence.

In an environment where cheaper access technologies such as VSAT (Very Small Aperture Terminals) and fibre optic connections are lacking, the exchange was seen by the ISPs as a viable option to reducing the cost and increasing the reach of the Internet in Kenya.

Kenya has a thriving Internet trade, but many analysts believe its full potential has been severely constrained by regulatory hitches. As a result, the number of people with Internet connections is still under 40,000 in spite of the presence of more than 40 registered ISP in the market.