ICT Sector Performance Review for Sri Lanka - Sector Performance Review for Sri Lanka ... Structure of Sri Lanka’s Telecom Regulatory Environment 77 Annex 3: ... BSNL Bharat Sanchar

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  • ICT Sector Performance Reviewfor

    Sri Lanka

    April, 2011

    Written by Buddhika Brahmanage & Harini Weerasekeraof the Institute of Policy Studies of Sri Lanka

    under the guidance of Malathy Knight & Anushka Wijesinhaof the Institute of Policy Studies of Sri Lanka

    buddhika@ips.lk 100/20 Independence Avenue, Colombo 7 Tel +94-11-2143100 Mobile +94-777788056 Fax +94-11-2665065

    URL http://www.ips.lkhttp://ipslk.blogspot.com This research was carried out with the aid of a grant from the International Development Research Center (Canada) and the Department for International Development (United Kingdom). The report is part of LIRNEasias Sector Performance Review (SPR)/Telecom Regulatory Environment (TRE) research project. The 2008 and 2006 TRE country reports are available at www.lirneasia.net The authors gratefully acknowledge the co-operation and participation by the key stakeholders in the TRE survey 2010/11.

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    mailto:buddhika@ips.lkmailto:buddhika@ips.lkmailto:buddhika@ips.lkmailto:buddhika@ips.lkmailto:buddhika@ips.lkhttp://ipslk.blogspot.comhttp://ipslk.blogspot.comhttp://ipslk.blogspot.comhttp://ipslk.blogspot.comhttp://ipslk.blogspot.comhttp://ipslk.blogspot.comhttp://ipslk.blogspot.comhttp://www.lirneasia.nethttp://www.lirneasia.nethttp://www.lirneasia.nethttp://www.lirneasia.nethttp://www.lirneasia.net

  • ContentsList of Tables 5List of Figures 6List of Acronyms 71. Executive Summary 102. Sri Lankas Telecom Sector: a Macroeconomic Perspective 123. Market Structure and Market Dynamics 16

    3.1 Overall Market Structure 163.2 Trends in Market Shares 20

    3.2.1 Fixed Sector 203.2.2 Mobile Sector 223.2.3 Broadband Sector 24

    3.3 Pricing and Profitability 254. ICT infrastructure: availability, affordability and quality 27

    4.1 Domestic Infrastructure 274.2 International Connectivity 294.3 Looking Forward 31

    5. Beyond Telecom: E-Applications, Services, Human Resources, Innovation 325.1 E-Applications and Services 32

    5.1.1 Introduction 325.1.2 Innovative Applications in Telecom: Financial and Agricultural Sectors 335.1.3 Agricultural/Informal Sector: Innovative applications as an effective tool to bridge the gap between the rich and poor 345.1.4 E-Government 355.1.5 E-Health 365.1.6 E-Education 37

    5.2 Human Resources and Innovation 386. Sri Lankas Telecom Regulatory and Policy Environment 40

    6.1 Evolution of Telecom Regulatory Environment 406.2 Regulatory and Policy Instruments 42

    6.2.1 Policy 426.2.2 Acts 436.2.3 Rules 436.2.4 Orders 44

    6.3 Structure of the Regulatory and Policy Environment and Responsibilities of Regulatory Institutions456.4 Regulatory Commission and Regulatory Capture 45

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  • 6.5 Revenue Contribution by the Regulator 466.5.1 Taxes 466.5.2 Other 47

    6.6 Accountability of the Telecom Regulatory Commission 476.7 Uncertainty, Risk and Investment 47

    7. Effectiveness of the Telecom Policy and Regulatory Environment 497.1 Overall scores 507.2 Market Entry 517.3 Allocation of Scarce Resources 537.4 Interconnection 547.5 Tariff Regulation 557.6 Regulation of Anti-Competitive Practices 567.7 Universal Service Obligation (USO) 587.8 Quality of Service (QoS) 59

    8. TRE Stakeholder Perceptions: Concluding Remarks 60Annexure 63

    Annex 1: What is a Telecom Regulatory Environment (TRE) Assessment? 63Annex 1A: TRE Cover Letter 69Annex 1B: TRE Questionnaire 70Annex 1C: TRE Summary of Regulatory Events 76Annex 1C: TRE Summary of Regulatory Events 76Annex: 2: Structure of Sri Lankas Telecom Regulatory Environment 77Annex 3: Dialog GSM Coverage 78Annex 4: Dialog 3G/3.5G Coverage 79Annex 5: Dialog Fixed Broadband Coverage 80Annex 6: Mobitel GSM Coverage 81Annex 7: Mobitel 3G Coverage 82Annex 8: Provincial Distribution of Fixed Phones in Sri Lanka as at December 2010 83

    References 84

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  • List of Tables Table 1: GDP Per Capita and GDP Growth Rate 12Table 2: Growth of Telecom Sector and its Contribution to GDP 12Table 3: ICT Expenditure as Percentage of GDP: 2005 to 2009 13Table 4: Contribution to Government Revenue by Government Entities (Rs. Millions) 14Table 5: Selected ICT Indicators Cross-country comparison (2010) 16Table 6: Telecom Operators in Each Sub-sector 17Table 7: Number of Fixed Lines, Mobile SIMs, and Broadband Connections 18Table 8: Total Cost of Ownership (TCO) of a Mobile Phone (voice and SMS) - 2010 19Table 9: Ten economies with the greatest decrease in the ICT Price Basket 19Table 10: Market Shares of Fixed Operators (Based on Fixed Lines) 22Table 11: SIMs per 100 persons 23Table 12: Changes in Market Shares of Mobile Operators (based on SIMs) 23Table 13: Revenue Indicators of Dialog and Mobitel 26Table 14: Landing Station Charges 31Table 15: Financial Sector- Innovative mobile enabled financial services 34Table 16: List of key policy and regulatory events in Sri Lanka 1980 - 2011 40Table 17: TRE Respondent Profile 2010/11 49Table 18: Comparing the average TRE scores for 2006, 2008 and 2010/11 51

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  • List of Figures Figure 1: Sri Lanka FDI trend (USD million) 15Figure 2: Growth of Fixed Lines, Mobile SIMs and Broadband Connections 18Figure 3: Fixed Telephony Market Shares (Based on Fixed Lines) - 2010 21Figure 4: Mobile Telephony Market Shares (based on SIMs) - 2010 22Figure 5: Fixed Broadband Market Shares (Based on the Number of Connections) - 2010 24Figure 6: Mobile Broadband Market Shares (Subscription Based) - 2010 25Figure 7: Provincial Distribution of Fixed Phones as at December 2010 28Figure 8: Provincial Distribution of Payphones as at December 2010 29Figure 9: SEA-WE-4 undersea cable network 30Figure 10: SEA-WE-3 undersea cable network 30Figure 11: FLAG undersea cable network 30Figure 12: Overall scores for 2010/11 each dimension 50Figure 13: TRE scores for Market Entry: 2010/11 52Figure 14: Comparison of TRE Scores for Market Entry: 2006, 2008 and 2010/11 52Figure 15: TRE scores for Allocation of Scarce Resources: 2010/11 53Figure 16: Comparison of TRE scores for Allocation of Scarce Resources: 2006, 2008 and 2010/11 53Figure 17: TRE scores for Interconnection: 2010/11 54Figure 18: Comparison of TRE scores for Interconnection: 2006, 2008 and 2010/11 55Figure 19: TRE Scores for Tariff Regulation: 2010/11 55Figure 20: Comparison of TRE scores for tariff regulation in 2006, 2008 and 2010/11 56Figure 21: TRE scores for Regulation of Anti-Competitive Practices: 2010/11 57Figure 22: Comparison of TRE scores for Anti-Competitive Practices: 2006, 2007 and 2010/11 57Figure 23: TRE scores for USO: 2010/11 58Figure 24: Comparison of TRE scores for USO in 2006, 2008 and 2010/11 58Figure 25: TRE scores for QoS: 2010/11 59Figure 26: Comparative TRE scores for QoS: 2008, 2010/11 60

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  • List of Acronyms2G Second Generation3G Third GenerationADSL Asymmetric Digital Subscriber LineARP Action Research PilotARPU Average Revenue Per UnitBMD Birth Marriage and DeathBOI Board of InvestmentBPO Business Process OutsourcingBSNL Bharat Sanchar Nigam LimitedCAA Consumer Affairs Authority CDMA Code Division Multiple AccessCPI Corruption Perception IndexCPP Calling Party PaysCSE Colombo Stock ExchangeDCS Department of Census and StatisticsEBITDA Earnings Before Interest, Taxes, Depreciation and AmortizationEDGE Enhanced Data rates for GSM EvolutionEGO External Gateway OperatorsFDI Foreign Direct InvestmentFLAG Fibre Optic Link Around the GlobeGATS General Agreement on Trade in ServicesGDP Gross Domestic ProductGoSL Government of Sri LankaGPRS General Packet Radio ServiceGSM Global System for Mobile CommunicationsIFC International Finance CorporationIPB ICT Price BasketISP Internet Service ProviderHSPA High Speed Packet AccessICT Information Communication TechnologyICTA Information Communication Technology Agency IDA International Development AssociationIFC International Finance Corporation ITeS Information Technology-enabled ServicesKYC Know Your CustomerKAM Knowledge Assessment MethodologyLBO Lanka Business OnlineLGN Lanka Government Network ProjectLKR Sri Lankan Rupees

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  • MB Megabyte MNP Mobile Number PortabilityNDB National Development BankNGN Next Generation NetworkPPP Public Private PartnershipPUCSL Public Utilities Commission of Sri LankaQoS Quality of ServiceRPP Receiving Party PaysSE-ME-WE South-East Asia- Middle East- Western EuropeSIM Subscriber Identity ModuleSLT Sri Lanka TelecomSLICTA Sri Lanka Information and Communication Technology AssociationTCO Total Cost of OwnershipTRC Telecommunications Regulatory CommissionTRE Telecom Regulatory EnvironmentUSD US DollarsUSF Universal Service FundUSO Universal Service ObligationUT Usaha TegasVAT Value Added TaxVSAT Very Small Aperture TerminalWCDMA Wideband Code Division Multiple AccessWiMAX Worldwide Interoperability for Microwave AccessWTO World Trade Organizations

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  • Executive Summary The telecom sector in Sri Lanka is one of the country's most dynamic sectors, contributing significantly both directly and indirectly to investment, employment, productivity, innovation, and overall economic growth. The expansion of information and communications technology (ICT) is a major objective under Sri Lankas development vision of becoming the Emerging Wonder of Asia as outlined in the Mahinda Chintana Vision for the Future: the development plan set forth by the government in 2010. As set out in the international literature and evidenced in the reform process in countries around the world, regulatory governance plays a significant role in policy outcomes and sector performance. The objective of this report is to evaluate regulatory efficacy as it pertains to Sri Lankas telecom sector; to understand the dynamics between regulatory governance and sector performance; and, to reach informed and relevant conclusions targeting policy makers, operators, and the regulator.The

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