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By Anura K. T. De Silva BSc CS&E(USA)

CEO of SpeedNet Networks(Pvt) Ltd, a Technology Management Consultancy firm. He has over 15 years of expertise in the ICT industry in the US and in Sri Lanka. Set up and founded iOnosphere Lanka (Pvt) Ltd and was a former Executive Director for IT(Strategy and Projects) for the BOI.

Background

As we pierce through the under performing local telecom sector, set off by the inefficient monopolistic industry structure and repeated failures in prior reform processes amidst the downturn in the global telecom industry, it is very encouraging to observe that the Ministry of Mass Communication has recognised that a world-class telecom infrastructure is necessary as a key enabler for Sri Lanka's economic growth not only in ICT but also across many other sectors.

But to realise such an ambitious vision, it is necessary that we address the essential structural reforms at the foundation and its building blocks, which have not been adequately addressed thus far.

Else we could easily fall short of realising a true global parity in telecom across the three infrastructure segments(local loops, national backbone and international gateways) in an expedient manner and loose out to opportunities necessary to develop our economy.

Need to reform institutionalised structures in the telecom sector in spite of the significant growth we have made in the telecom sector thus far, Sri Lanka falls well below current global standards in the quality of its communication infrastructure, owing to its poor reliability, bandwidth, availability, costs and range of services. The greatest risk of not realising a higher quality communication infrastructure expediently could lose our chances to compete internationally even in our target export markets due to their demands to be online through global telecom infrastructures.

Sri Lanka could also face significant disadvantages in providing back-end to global e-commerce systems, provide remote network management etc. Moreover, in the domestic market, Sri Lankan users will be unable to deploy modern global networking applications/products that will be developed for high-speed telecom networks.

Sri Lanka will also be constrained to effectively utilise its supply base of knowledge workers, especially those in rural areas, as they would need reliable, affordable telecom with high QOS to receive inputs and deliver outputs to serve developed markets. Hence, if we are serious about using telecom as an enabler for the country's development plans, it is absolutely essential that we address all obstacles however structurally institutionalised they may be, in the most expedient manner, to realise an affordable, reliable and a wide spread telecom infrastructure.

Issues in the policy

The latest reforms in the November 2002 policy document addresses mainly the building blocks (legislative, administrative and market issues), while ignoring the core issues that rests within the foundation.

Very specifically, it has proposed reforms accepting the mighty incumbent player existing in the same form(large footprint across all three segments in the telecom sector), who takes advantage of its cross ownership and leverages its strength as a private and a state enterprise as advantageously, causing a sense of muddiness in the entire local telecom sector.

Therefore, a lot more needs to be done mainly at the foundation levels of reforms to generate independence and a level playing field for existing operators as well as new operators to transfer the benefits eventually to the consumers. From a financial perspective, we could analyse the opportunities loss from the existing structure and the additional investments we could generate by employing the suggested restructure at the foundation levels. Furthermore, any reforms we try to introduce in the presence of this white elephant within a relatively small market creates difficulty to achieve objectives outlined in your policy document in an expedient manner and could lead to further paralysing many industries that could have given relief to most citizens.

Therefore, strong and bold structural reforms at the foundation levels of the telecom policies will need to be applied to send the right signals to the global market that government means business, it is committed to get the basics right and is bold enough to address deep rooted structural reforms to attract telecom investors to prepare Sri Lanka as a partner in the sphere of global development.

Else, from an investment point of view, chances of attracting genuine key telecom players with the current structure would be questionable and possibly contribute to expand the black market in the telecom sector. From a country's economic point of view, we would once again postpone opportunities we could have realised now.

Recommendations

The underlying reason for the under performing of our telecom infrastructure has been the reform structure that favoured the incumbent. Therefore, the new reform policies need to consider a new foundation to grow and expand the entire telecom sector and even to save the incumbent from deteriorating.

The means of achieving such objectives expediently is to restructure at the foundation level, by separating the three segments of telecom infrastructure - local loops, national backbone and international gateways, independently, to an extent that if a single company wishes to play in all three levels, they will have to operate as three independent companies.

This I believe is the most effective way to create a level playing field with the intent to expand our local networks expediently by attracting legitimate investors for the long haul while able to lower rates and enhance the quality of service to the public.

Therefore, seriousness necessary for such reforms cannot be over emphasised any further than to say that we would risk all our development plans in the country if we do not reform telecom from the foundation levels and build a strong and levelled telecom sector. Hence, it is most important that we structure a strong base as recommended above and include the following reforms into our new policies.

Local loops

Introduce a Bill of Consumer Rights and ensure that all players conform to defined customer service standards(service levels) on par with the best and enforce stringent penalties for failure to meet these standards. Service standards should be measurable, actionable and the bill should lay out the timeframe for providing connectivity, guidelines for single-window clearance, reliability targets and benchmarks for fault correction.

Furthermore, it is essential that these performance data are kept available on the web as transparently to any public citizen. Funding required for these expansions can be from the net revenues generated in the international gateway operations.

National and sectoral backbones

Accelerate the deployment of the National Internet backbone to provide high-speed access across the country and with the intent to fuel growth in demand. Liberalisation should be applied to build high-speed backbones around targeted economic sectors and interconnect them with large capacity modern packet switching and fibre optic technology. This telecom segment can be funded as BOO or BOT investments facilitated by the BOI and The Ministry of Mass Communication.

In the case of Internet, Digital Video Broadcast(DVB) technology or similar could be considered very cost effectively to offer fast downstream Internet to reach masses without geographical interference due to the vast coverage through a Satellite footprint as against terrestrial networks. This can be a supplementary national infrastructure to enable rapid access to the Internet for the masses at large.

International gateways

International gateways comprise real profit margins within the entire local telecom sector. Hence, the government needs to develop a fund to transfer these earnings, preferably through a usage-based tax towards expanding the local loops, national and sectoral backbones and their interconnections.

As such, international gateways should be encouraged for investors without placing any limits and the procedures for application and allocation made fair, transparent and timely. But the Ministry of Mass Communication should not loose hold of the international gateways in total, as they are one of our scarce national assets that could not be ever replaced.

It is recommended that interconnection favours new entrants in the early stages.

Suggested priorities

* The ministry and regulator to play a more development role in the sector giving preference to new entrances until the sector reaches some maturity(larger population with access to telecom) and thereafter let the free market forces take its course. Trying to apply purely free market policies to a very infant industry sector amidst a downturn in global telecom could delay the development as we may find it difficult to attract the type of investors we need in the long haul.

* The next priority should be to separate the three telecom infrastructure segments to enable level playing fields and independence to realise rapid network expansions, lower rates and enhance quality of service, most expediently.

* Priority should be given to monitor and enforce the delivery of service levels to consumers and service providers who depend on each other.

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