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Heavy price competition and monopoly in Lanka’s communications industry

Bids to layout island-wide fibre optic cable network to be examined in January
Peliyagoda communication tower to be shared

Sri Lanka’s telecommunication industry provides the best technologies at the lowest cost, the head of Telecommunication Commission said, but monopoly is some sectors within the industry and a reluctance to share infrastructure is hurting players in the industry.

"Sri Lanka has the best telecommunication technology in South Asia and the best tariff, according to a recent World Bank report and this is to the credit of the private sector that runs the industry. The TRC merely regulates and creates the environment for the industry’s growth," TRC director-general Priyantha Kariyapperuma told journalists yesterday.

In 2005, Sri Lanka had three million mobile subscribers. Today it exceeds 13 million, reflecting the level of competition between the five mobile service providers in the country. Fixed lines, with less than a million subscribers in 2005 is numbering 3.5 million.

But this competition is hurting many of the operators as price competition forces call charges down affecting the build up of capital to be reinvested for expansion.

"This is true," Kariyapperuma said, "We have been trying to introduce an interconnection rate but it was kept on hold for the past 24 months. We have been successful in keeping the matter out of commercial courts through dialogue."

"We need the consensus of the entire industry for this. We have come up with an interconnection charge of 60 cents per minute but discussions are still ongoing. We will need some time to finalise things, probably till February next year," he said.

Kariyapperuma said many of service providers are facing a lull with somewhat saturated market but said once broadband connectivity is improved in Sri Lanka it would open up new markets for new services.

He also said no new taxes would be introduced to the industry, already paying around 35 percent of profits in taxes.

"There would also be a waiver on duty for imports of broadband equipment," Kariyapperuma said.

The TRC is building a US$100 million communications tower in Peliyagoda. The tower is expected to bring together communication towers of all service providers under one roof.

"It would be the first of its kind in the region and would be a big attraction complete with restaurants and viewing platforms. The communication equipment would be right on top. At the moment we are discouraging the erection of new communication towers," Kariyapperuma said.

Sri Lanka is making a bid to create a knowledge-based economy by improving the standard of, and dissemination of English education and making information technology more affordable and accessible.

Improving the country’s broadband capacity is regarded to be crucial in this endeavour. But the monopoly status held by a company over a fibre optic cable network is making things difficult.

Fibre optic backbone…

Sri Lanka, with a grant from the World Bank, is also hoping to lay a fibre optic network covering the entire island and connecting all households allowing access to broadband and other high speed communication services.

The TRC has received several bids from six companies (including Sri Lanka Telecom, Dialog and a few Indian companies) and evaluation of the bids is expected to commence early next year.

"It would be a US$150 million investment and to be completed in three phases. We would select one company to carry out all three phases," Kariyapperuma said.

He said the network would have to be shared by service providers with the TRC closely regulating the price.

Presently Sri Lanka Telecom has an extensive fibre optic cable network.

"Unbundling is an issue and SLT is like a monopoly at the moment," he said.

The telecommunication industry is reluctant to share existing infrastructure and Kariyapperuma said the TRC is working to get around this difficult problem.

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