Property firms, telcos risk fines for locking out small internet firms from buildings

Large internet service providers (ISP) are on the radar of the Competition Authority of Kenya (CAK) for signing contracts with real estate developers that lock out smaller ISPs from providing services to households and even businesses.

The competition watchdog has directed the ISPs and real estate owners that have anti-competitive agreements to quit and allow competition in internet service provision.

It warned that it is ready to penalise both the telecommunication companies and real estate firms found to employ anti-competitive practices. The firms risk penalties of 10 per cent of their annual turnover. 

CAK said management companies of many gated communities, as well as agents in high-rise apartment buildings, have signed exclusive contracts with a single internet service provider for internet provision in their developments.

Poor service

This has meant that, other than a lack of choice among residents, they also have no alternatives to turn to in case of poor service, such as slow and unreliable speeds. The residents also suffer from overpriced services due to lack of competition.

“It has come to the authority’s attention, through market surveillance and numerous consumer complaints, that property developers and estate managers are signing exclusive contracts with specific internet service providers and restricting competing firms from offering alternative services,” said CAK in a public notice Tuesday.

“Property developers, real estate managers and ISPs engaging in exclusive internet service provision agreements that have anti-competitive effects are hereby directed to cease engaging in this exclusive conduct and prevent its recurrence and facilitate entry of competitor ISPs in their developments.”

The Communications Authority of Kenya (CA) has also raised concerns about property owners denying residents access to multiple ISPs. “It has come to the attention of the authority that some private, public entities and landlords are denying access, or limiting access or locking in specific telecommunication service providers and service to their premises,” said CA in a statement last month.

 “Please note that this contravenes the constitution of Kenya, Chapter Four of the Bill of Rights, Articles 33, 34, and 35 that grant free access to information and communication systems of any nature by the members of the public.”

The Competition Authority noted that the Competition Act prohibits “undertakings from engaging in conduct that has the intention or effect of preventing, distorting or lessening competition in the trade of goods or services in Kenya”. 

“Parties are cautioned that exclusive dealings, including those entered into by certain ISPs and real estate developers or estate managers, deny Kenyan consumers choice of services that meet their specific needs, contrary to the Constitution of Kenya and the Act,” said CAK.

“This conduct by ISPs denies consumers the benefits of competition, which include fair pricing, enhanced service quality and innovative solutions. Further, foreclosing competitor ISPs from accessing certain markets risks creating monopoly-like enterprises in the affected estates.”

It added: “Undertakings that infringe the Act risk being penalised up to 10 per cent of their preceding year’s gross annual turnover in Kenya. For criminal prosecutions, they face fines of up to Sh10 million and imprisonment for a maximum of five years, or both.”

Among the largest firms offering internet services to homes and businesses premises in the country include Safaricom, which has 36.1 per cent market share of Kenya’s fixed broadband market as of December 2024.

Other dominant players are Jamii Telecommunications with a 23.6 per cent market share and Wananchi Group, which operates Zuku with a 15.4 per cent share, according to CA data.

In its warning, Kenya’s competition and consumer watchdog appears to be borrowing from other jurisdictions in its bid to protect both local smaller ISPs and consumers by requiring landlords and real estate managers to open up their developments to competition in internet provision.

The Competition Commission in South Africa (SA), for instance, has also flagged exclusive rights granted to fibre network operators in estates and gated communities as problematic.

Open-access ducting

The SA competition watchdog recommended open-access frameworks to allow multiple access and discourage exclusive arrangements in new buildings. It also encourages developers to install open-access ducting to support multiple ISPs, with finances for blocking competitor service providers. 

In the United States, the Federal Communications Commission (FCC) banned exclusive contracts between telecom providers and apartment building owners in multi-tenant environments (MTEs) in 2008.

It cited such issues as consumer harm, foreclosure of competition and stagnation of service improvement. 

In the UK, Ofcom – the telecommunications industry regulator – promotes network neutrality in infrastructure access and discourages exclusive arrangements in new buildings. It also encourages developers to install open-access ducting, supporting multiple ISPs and also fines building owners and ISPs for blocking competition.

In Singapore, the authorities address the challenge by structurally separating the fibre infrastructure owners (NetLink Trust) from the ISPs to ensure open access to all ISPs at the wholesale level.

This eliminated the risk of dominant developers or ISPs monopolising estates.

Alongside CAK’s directive to telcos and developers to quit getting into contracts that lock out smaller ISPs, Kenya has recently developed a new building code that classifies internet access as an essential service, requiring new buildings to include open-access fibre ducts that can support multiple providers.

The National Building Code 2024 requires developers to have fibre optic networks and data cabling in new buildings, and each dwelling unit to have at least one network termination point.