Monthly Archive for January, 2011

Press Release

Counterfeit mobile phones draining billions of shillings from Kenya’s economy

Nairobi, Kenya, January 18 2010: Kenya’s economy could be losing up to Shs 3.2 billion in taxes through influx of illegally-imported counterfeit mobile phones, denying the country significant economic benefits, a Nokia Anti-Counterfeiting expert has said.

Mr. Abdulla Hasayen, Brand Protection Manager for Middle East & Africa said high penetration of fake devices is negatively impacting on performance of operator networks and customer satisfaction, lowering operator profits and government tax income. He was speaking when he conducted training for officials from the Weights & Measures Department, the Kenya Bureau of Standards and the Anti-Counterfeit Agency. The training, which was attended by over 25 officials from the government departments, is a part of Nokia’s ongoing anti-counterfeit programme.

Mr. Hasayen said poor protection of intellectual property is making establishment and running of information and communication technology (ICT) companies conducting research and development significantly risky in Kenya.

“Fake devices are imported illegally without import duties or VAT paid. This creates a tax loss of between Shs 2.8 billion and Shs 3.2 billion (US$ 35-40 Million) annually for an average African country. Counterfeits are also undermining attractiveness of local economies because international companies direct their investments elsewhere to countries which can protect their Intellectual Property,” he said.

Counterfeiting is the illegal use of intellectual property rights including trademarks, patents, designs and copyrights. Globally, the spread of counterfeit products has increased in recent years due to the transfer of technology, ease of trade and export transactions through the internet, in addition to the recent economic crises.

“As a global company, Nokia takes a leadership position in offering genuine and quality products and partners with a broad network of organizations including the Coalition of Intellectual Property Rights (CIPR) and International Anti-Counterfeiting Coalition (IACC). We continue to advocate for legislation, regulation and enforcement of anti-counterfeit policies to protect the broader industry because we believe companies conducting genuine business should be supported in their operations,” said Mr Kenneth Oyolla, General Manager, Nokia, East and Southern Africa.

“Customer care and quality is important to Nokia and our advice is that customers should buy Nokia products from authorized distributors and retailers and ensure they get their 12-month warranty. And if a product is purchased from a location other than an authorized dealer then exercise extreme caution especially when the price is substantially less than being stated by Nokia authorized dealers,” said Mr. Oyolla.

Nokia is recommending a robust enforcement program, essential to protect legitimate businesses from counterfeiting. Mr Hasayen said the program should cover both shipments imported at border level and goods sold in the market.

“Brand owners should provide inspectors with regular product training on how to distinguish between fake and genuine products. This would enable them to flag or suspect a shipment. Different government departments should also collaborate to implement a proper enforcement program. A joint task force to manage the enforcement program would be a good option. This would help protect consumers and legitimate business and will create an attractive environment for foreign investment,” he said.

Mr. Hasayen noted that although Nokia is already co-operating with relevant government departments, an elaborate industry-wide program would help accelerate the elimination of the counterfeits in Kenya.

Mr. Hasayen said fake devices are not covered by warranty, resulting in poor consumer satisfaction and impacting negatively, particularly to low-income consumers.

Fake mobile phones are manufactured from sub-standard components containing dangerous chemicals including lead and mercury and do not follow safety standards such as radio emissions. They therefore endanger safety of consumers, said Mr. Hasayen.

It is estimated that counterfeiting and piracy cost G20 economies US$ 85 billion a year in lost taxes and higher spending on unemployment benefits. The International Anti-Counterfeiting Coalition (IACC) has estimated that international counterfeit trade is worth $600 billion a year and makes up 5-7% of world trade.

I am prompted to write this post because of something that happened to me recently. One of the things I like to do on the side is buy and sell highly desirable and generic domain names. In this respect, until the past year or so, it was relatively easy to find and secure domain names within Kenya’s .KE name space. In fact, you could say it was more often than not you could pick any name of choice and you would find it, available, for registration. However, this trend is fast changing.

What happened to me earlier this week is something that should not have happened if it were not for my lack of attention to detail. I had secured several high quality domain names under the .KE space over the years. These domain names were quite clearly “to die for” in any context. However, being in Kenya, and waiting till the last minute to renew them, I was sure I could do so quite easily. This was not to happen. The domain names I had were snapped up within minutes of expiring by other parties. I lost ALL of them except one. It was a sobering moment!

Now, this sort of thing is not uncommon when your dealing with top level global domain names such as .COM or .NET. However, this is something unprecedented for Kenya since we are now seeing a shift to where .KE domain names not only have local but International appeal – the registrant who “grabbed” my expired .KE domain names is actually based in Seattle, USA. More specifically, Kenya is witnessing the arrival of an Internet entrepreneurial class known as “domainers”. Domainers, by simple definition, are people or organizations who professionally buy and sell domain names for profit.

Domainers look for domain names that usually have the potential for high Internet traffic, as well as high resale value. The domain names in question tend to be generic words which can be valuable for type-in traffic and for the dominant position they would have in any field due to their descriptive nature. Hence generic words and phrases such as poker, insurance, travel, sex and others are attractive targets for domainers.

Type-in traffic is a term describing visitors landing at a web site by entering a keyword or phrase with an extension such as .COM or .KE (with no spaces or a hyphen in place of a space) in the web browser’s address bar rather than following a hyperlink from another web page, using a browser bookmark, or a search-box search. Type-in traffic is a form of direct navigation. The amazing thing is that lots of people “assume” a web site for a brand or service in this manner which leads to lots of traffic for the domain name’s owner(s).

What domainers do once they have secured a high traffic domain is that they then use a service provider such as SEDO, Moniker or GoDaddy who helps them monetize the domain name through landing pages that have contextual links to services such as Google’s Adsense. In this manner, a domainer will make money every time someone clicks on one of the Google AdSense links on the landing page. There are domainers who make millions of dollars each year by having thousands of domain names in their portfolio that work in this manner.

In addition to making money through landing pages as described above, domainers will also tend to buy and sell domain names for profit. Case in point is domains like sex.com which in the past held the record for a US$ 13 Million! Imagine that for just a domain name! Domainers with the right domain names do indeed make a tidy profit buying and selling domain names which is why Kenya is now on the map.

Kenya currently has just over 15,000 domain names which is small compared to South Africa which has over 600,000 domain names. However, Kenya has a speculative 6 million Internet users and over 20 million mobile users as well. In addition, the landing of broadband over the last couple of years as well as the growth of local digital content initiatives all serve as catalysts for the domainers to check into this market at this juncture. It really is a gold rush of sorts and the early players will reap the biggest rewards.

Going forward, what is inevitable for Kenya which has not happened yet is what is called a domain aftermarket. In a nutshell, a domain aftermarket is a secondary market for Internet domain names in which a party interested in acquiring a domain that is already registered bids or negotiates a price to effect the transfer of registration from the registered holder of that domain name.

Domain aftermarkets are facilitated by service providers such as SEDO, GoDaddy and Moniker which provide communication methods for buyers and sellers to interact, often anonymously, to negotiate and close a transaction. They often provide additional services, such as financial escrow services and domain parking. It goes without saying that a local domain aftermarket should ideally happen in Kenya in 2011 for .KE domains. Clearly, there is a need and the demand is picking up already.