VoIP in Kenya

TelecomDirect News features a story on Telkom Kenya's new international VoIP service. The service can be accessed from any landline through a calling card, which explains why VoIP despite Kenya's rather low teledensity and Internet penetration is actually an option. It also doesn't touch Telkom's national PSTN revenues.

While Kenya is probably not a role model for developed markets, there are some general lessons to be learned valid for all telecom markets where IP communications are gaining a stance (certainly nothing new, but just to cite the evidence). Telkom's VoIP service is a response to other providers offering cheap international calls using VoIP. Previously, Telkom tried to fight competition by re-balancing their tariffs (next to the usual measures such as regulatory intervention, disconnecting competitors, etc.).  But minute-based tariffs and bundles are nothing else than a smoke screen for putting a variable price - based on usage patterns to manage your margins - on what is actually a fixed-cost business. Tariffs do not reflect the actual cost of service but are used to artificially inflate rates and to skim the market - the argument though goes that prices are set in a distance-sensitive way, because the call has to pass a longer way on the network (similar to roaming charges in mobile networks).

With IP distance does not matter anymore, and as bandwidth becomes more widely available and cheaper, incumbents cannot maintain their distance-sensitive business model. Costs are more and more determined by distance-insensitive activities such as corporate overheads and billing. With tariff re-balancing, an incumbent is slowly but steadily pricing itself out of the market, as its share of the pie becomes ever smaller: while you are busy fixing one slice of the pie, another starts eroding.

At some point, you just have to change the way you play your game, and this is why by now all incumbents have some kind of VoIP service in their portfolio. Interestingly enough, all go for a full-blown VoIP approach on foreing markets, e.g. Telecom Italia in Germany or France Télécom in Italy.

Comments

[nicky_aus]

Though kenya is not developed country and doesnot have internet penetrated in its depth…voip has made it possible to make calls there…I m using voip skype to make calls to kenya-mombasa,nairobi at just euro 0183..skype shows that its not the distance from where u r calling but what matters is who u r calling & the service you are using for making calls...