In the fixed network service segment, Telkom Kenya Ltd (TKL), the incumbent fixed telecommunications service provider was given specific pricing targets to implement in charging for its services for a five-year period commencing from 1st July 1999. In the initial licence period, TKL was required to rebalance its tariffs to ensure that prices charged, as much as possible, reflect the real cost of service provision and eliminate any cross-subsidies between local, long-distance and international telecommunications services. This entailed a rise in local call charges and a drop in long-distance and international call charges respectively. All these charges had to and still have to be filed with the Commission before TKL can implement them.

In the long run, a price cap method will be used to arrive at charges for fixed services. The price cap method, often denoted by the formula RPI-X% [where RPI refers to the retail price Index or the relative prices of a basket of goods and services indexed to inflation. The Ministry of Finance and Planning calculates the Retail Price Index, while X refers to a productivity factor]. Under this regime, charges shall not be allowed to go beyond the price cap until full competition is introduced, when demand and supply forces are sufficient to regulate prices.

Additionally, the Long Run incremental Cost (LRIC) method will be used to determine costs and ultimately determine appropriate interconnection rates between the various licensees that interconnect.

In the Mobile Cellular Sector, it is expected that competitive forces will align prices accordingly but mobile operators are required to present their prices to the Commission before they can use them. In the International telephone arena, administrations settle telecommunications payments through bilateral agreements. One method used in international settlements [payments] has been the International Accounting Rate System. An Accounting Rate is:

• agreed bilaterally between organizations concerned in providing an international telecommunication service.
• reflects the amounts operators require for making their facilities available.
• a Total Accounting Rate includes: Terminal charges + Transit charges
• is calculated in units of Special Drawing Rights (SDR) rates and paid in US dollars.

There is however a movement towards reforming this system as countries continue to liberalise their telecom markets and implement cost-based methodologies in calculating settlement rates.

The Commission acknowledges the importance of the Internet in stimulating economic activity and increasing the country's competitiveness through provision of strategic information to the Kenyan public. The Commission's decision to reduce Internet Service Provider annual license fees from Kshs. 350,000.00 to Kshs. 100,000.00 resulted in the licensing of over 70 ISPs since 1999 and ultimately led to some of the lowest Internet access tariffs in the region and has therefore achieved the objective of encouraging ISPs to pass this enormous cost gain to consumers through lower connection and access tariffs.