“The Communications Commission of Kenya (CCK) has ordered courier firms to raise their prices to the regulatory minimum in a move seen as meant to protect the troubled State-owned Postal Corporation of Kenya (PCK).
The industry regulator has established Sh150 as the minimum fee chargeable by courier companies for parcels weighing under 350 grammes.
…According to CCK data, the volume of letters sent locally dropped by 32.2 per cent in the year ending June to 74 million compared to 109 million in a similar period last year. At the same time, the volume of courier items sent dropped by 22 per cent to 1.6 million”
BUSINESS DAILY (20 November, 2012)
I have a landline at home. It’s been out of order for more than a year now. I’ve only just noticed.
Had my landline been out of order ten years ago, I would have been calling Telkom Kenya incessantly; I would have been going there personally to get the line repaired; I would have been out on the streets looking for technicians to persuade to fix my line.
A landline in those days was a lifeline.
But here’s the thing: despite the vital importance of the landline, there were only around 300,000 of the things installed in Kenya at the time. Latest figures suggest that number is 10 per cent lower today. Meanwhile, Kenya now has close to 30 million mobile phone lines. And Telkom Kenya, fixated on its legacy business for so long, has a tiny piece of the mobile pie.
Bear that in mind as you consider the recent news in this newspaper, excerpted above, that the Communications Commission of Kenya (CCK) seeks to protect the beleaguered Postal Corporation of Kenya (Posta) from competition, by forcing a price floor on courier firms.
A decade ago, when my landline was so vital, so was my post office box. I would ensure that the mail was collected several times a week, for without all that written, printed communication my life would be at a standstill. These days, I barely notice if the postal mail has come or not.
Some more figures in this regard from CCK: Kenya now has 14 million internet users, most of them using mobile subscriptions. In the Kenya of today, people communicate by calling on mobile phones, or sending emails, Tweets or Facebook updates. They are not tethered to their landline or their postal box in anything like the same way they used to be.
Certainly, there will remain a market for printed communication. And certainly, we need a postal corporation that provides universal coverage to reach remote areas as well as cater for the poor. But is price control the best way to achieve this goal? Is inflicting higher prices on Kenyans to delay the inevitable a useful policy?
The institution that should be protecting Posta is Posta itself. It should have seen the writing on the wall. It should have been engaged in a game of reinvention for the past five years. It should have been phasing down its legacy physical business, and moving boldly into the virtual. It should have been using its physical assets to form innovative partnerships with other businesses. It should have been ramping up its customer service to offer different added value to its customers.
Sadly, not much of that has been in evidence. When you are reliant on a regulator for protection, your fate is already sealed. Posta should have learned from the steady decline of Telkom Kenya before it. And Kenya Power should be paying attention to both. The years when you are a dominant monopoly are the very years you should be preparing for a post-monopoly future. By the time competition arrives, you should be ready. You should have ramped up your staff engagement and customer service to industry-leading standards.
If you only start thinking about it once the heat is on, you won’t have to think about it for long.
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{ 7 comments… read them below or add one }
Sunny,
The problem in most of our public companies and state corporations is that their leaderships are political appointments.
They do not have a business passion or ambition. Their mission statements are drafted like speeches for PR purposes. The mottos, visions and goals are googled, cut and pasted on their premises for visitors of such institutions to read but have no expectations. No one thinks of local solutions for local obstacles. The leadership of such public companies and state corporations are basically disconnected, and their staff follow que.
Posta has enjoyed petting from government and business-as-usual grooming. Consumers, courtesy of CCK, are now expected to suffer from uncompetitive pricing. Should regulations be in favour of public interest or old jobs?
Posta has millions of private and business addresses that should have been used to map (Google-earth) Kenya. Mocality is one of the brands that come to mind.
Posta should have pioneered the courier link between online transactions and TRUSTED deliveries. Challenges in online transactions used to be payment. The courier challenge in online transactions is yet to be satisfactory (in Kenya). EMS speedpost as a brand would have been like UPS, but unfortunately it recalls unfavourable memory.
Posta has facilities in place in the whole country (especially addresses) and should now be employing more delivery personnel. Sadly they want customers to go to them like in the old days, and they want us to buy more stamps…(will CCK dictate that SMSes and e-mails be pegged to the price of a stamp?)
Posta has a goldmine shovel which they are using to dig for copper. This post is enough for them to rethink their place in the industry and a start would be to have a business-oriented person take its’ leadership (feels like I’ve created a job).
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Sunny Bindra Reply:
December 3rd, 2012 at 9:56 pm
Ray:
Great points. They should have engaged you as a strategist.
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I recall years ago KBS being the only public transport company and still failing. As Ray notes above, political appointments and as we know, in Kenya, that means sycophants & family members – hardly the formula for success, but a wonderful paycheck until the firm collapses.
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Sunny Bindra Reply:
December 3rd, 2012 at 9:58 pm
Chandesh:
Monopolies are paradoxically the most prone to collapsing – because they lack the incentives to do the right things. Visionary leaders are required to correct this – but rarely appear.
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Mr Bindra
As you point out, Posta is on its deathbed – I would go one step further and contend that in the scenario where the regulator makes rules to protect monopolies, they (CCK) are on the verge of becoming irrelevant themselves. Instead if seeing the writing on the wall and realising they are operating in a time when reaction to the market and its needs is key, they appear to be pontificating as if they’re the one-eyed man in a land of the blind.
In recent times, CCK has shown a tendency to play to the leading market participants rather than keeping the needs of the consumer paramount; for too long mobile termination rates were kept high (attributed to the largest participant’s lobbying) and now this move in Posta’s favour. Such behaviour will ensure that the market will evolve faster than the regulator can make outdated rules, and the consumer will turn to others (consumer rights groups and the courts) to ensure that their needs are catered to.
This is a dangerous precedent that the regulator is setting for itself; its behaviour is reminiscent of a time when there was no credible regulation, and CCK was carved out of the monopoly that was KPTC. In behaving this way, it is fast-tracking an overhaul of itself while the industry it is meant to police will evolve into one too complex for it to master.
Kimenyi
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Sunny Bindra Reply:
December 5th, 2012 at 11:16 am
Kimenyi:
Valid point. Rapid industry evolution requires a vigilant and sharp-witted regulator. You can’t regulate the industry of today with the thinking of yesterday.
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Aje Sunny
Thanks for warning Kenya Power to be on the lookout. But, are the ‘sonkos’ listening, and planning to act?
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This is just them reaping what they sowed; inefficiency and out-dated models of transacting business are surely not expected to inspire confidence from consumers, and that is what forces them to look to other avenues for efficient service.
Posta (and a host of other government businesses) squandered their advantageous position by frustrating their loyal customers and now they are seeking protection. Worse still, I fear this is one government business that will eventually be put up for “privatization”.
Instead of trying to cover up the folly of their mismanagement, they need to get this business running like a well-oiled profit-making venture; the sooner they better.
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Sunny Bindra Reply:
December 5th, 2012 at 11:17 am
Richard:
Indeed. By the time you go running for protection, it’s usually too late anyway.
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meanwhile the German DHL a wholly government owned postal service is turning profits in its worldwide operations and securing lucrative contracts in Kenya such as distribution of beer for EABL.
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Sunny,
POSTA’s failure is actually not even a result of fierce competition, but a result of business evolution. They are one of the last remaining species, nearly extinct!
One business writer once coined this; “The Tragedy of Success”. Instead of taking advantage of the monopoly or the huge success to better itself into the future, this very success becomes the reason for failure.
Just a thought: So, the management didn’t give one thought to the potential impact of such advances as the Internet and telecommunications on their business??? I doubt it, and like one of the comments above, leadership positions in the parastatals are just rewards for political friends and allies.
I sure do hope other ‘large’ or successful organizations are paying attention. The bigger and monopolistic you are, the more you are targeted by competition.
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