|
|
|
  |
| Sunday, 20 February 2005 |
 |
|
 |
Features |  |
| News Business Features Editorial
|
Once more on telecom regulation - Part I This article refers to two articles published in the Sunday Observer under the above caption: on 12th Dec 2004 and 2nd Jan 2005. by K.K. Gunawardana The article of Mr. S. distorts/ignores the data quoted in the first article. This he does to intently conceal the harsh impact inflicted on the cost effectiveness/affordability of services caused by the unaccountability and lack of transparency of those responsible for management of public goods- vital to sustain market competitiveness of the telecom sector. The highlights of the paper presented to the IEE were: a) the importance of private sector participation for the development of the national economy; b) the need to identify /manage the essential public goods, to sustain a healthy balance between the profit making motive of the private sector investments and the joint interests of the nation and the consumer through sustenance of market competitiveness; c) the necessity that entities managing the social capital allocated for strengthening of public goods are fully accountable for the measurability/ productivity of its outputs. The paper cites several instances of privatizing public goods such as the track of the British Railways that led to the failure of these sectors to realize their goals - offer timely affordable services/goods at acceptable quality nation wide. It also cites instances of exploitations to weaken market competitiveness by colluding interests involving guardians of the public sector goods to promote pseudo cartels/syndicates etc; d)that in the context of the Telecom Sector, information services rank quite high in the need hierarchy of today's society. The per line diurnal usage is hence, as important as per capita consumption of food essential to sustain the social well being and the productivity of the nation; e) trend of zero tariffs by 2004 -connection rental and usage - cited in a World Bank (WB) report that this trend would enable people even in the poorest countries to satisfy fully their demand for tele services: voice and non voice. The paper quotes tariffs to show evidence of this trend even in those of markets of the SAARC region; f) the connection charges levied by the Sri Lanka market are exorbitant and as compared with other competitive markets of the region, exhibits a trend reverse to that of the zero tariff predicted by the WB. This charge is far more than the per line investment cost. The charges levied in other overseas markets are uniform nation wide and is over tenfold less than those of Sri Lanka and are on the decline. Furthermore evidence shows that this exorbitant charge has not at all been accounted when determining periodic rentals and usage tariffs based on cost -in particular when approving the recent increase in the monthly rental with a sweetener of 200 units of free calls to appease the subscriber. Had it been accounted rental and usage charges will be almost zero g) that network interconnectivity is a public good, its shortcomings as currently implemented are similar in character to those encountered by the privatized rail track of the British Railways now restructured and named network rail, operated as a public good. The network rail is collectively managed by all stakeholders including the state with all profits reinvested. The paper cites dismal failure of the EGO licensees issued by the TRCSL on the advice of the PIPU due to impediments encountered to interconnect to the national network despite PIPU engaging expertise at exorbitant fees to formulate and implement mechanisms for interconnection; h) the paramount importance to strengthen the public good, network interconnectivity, by setting up of a national platform for interconnection of any to any network readily and cost effectively - a prerequisite to improve competitiveness of the market, the development of ICT applications and accelerate the attainment of near zero tariff quoted in the WB publication Mr. S deliberately does not refer to the SAARC countries' tariff data cited in the first article - quoted in my paper to illustrate the affordability and trend of declining tariffs that is consistent with the trend of zero tariffs cited by the WB. Instead Mr. S. refers to the data of the UK market. The aim of the UK data quoted in my presentation is to illustrate the performance of well regulated competitive markets and convey to the policy formulator/regulators the importance of monitoring impact of policies, regulations on the network performance. If not the outcome will be no different to treatment prescribed by quack doctors intently prolonging ailments of patients to boost their income. Mr S contrary to the aim of my paper states that it is a fundamental error to compare Sri Lankan market with that of the UK - its like comparing a putrid apple with a healthy orange he says. The putrid apple Mr. S. refers to is the Sri Lanka Telecom Department (SLTD) the predecessor of SLT. Just as much as Mr. S. manipulated to create the PIPU to promote public interest but in reality an agency setup to market services of international consultants, some of the privileged classes at the time manipulated the scarce resources of the SLTD to serve their interests. These shortcomings: lack of autonomy to manage SLTD; freedom to mobilize funds to expand the network commensurate with the demand and those cited by Mr. S. -were reported in the Sessional paper No III 1985 published by the Presidential Committee appointed in 1985 and chaired by the then head of SLTD. It is the stepwise strategy recommended in this paper for liberalization and privatization of the sector - to speedily ensure timely delivery of affordable service nation wide to all segments of the society that started the process of sector reform - but unmentioned by Mr S to imply that the management of SLTD was condoning with the malpractices he has quoted. Mr. S. also ignores the data cited in the paper to show that connection charge is over ten fold less in other countries and it is uniform nation wide. For e.g. in Pakistan the connection charge for urban areas nation wide is equivalent to nearly SL Rs 1200 and for rural areas SL Rs. 800 and these charges are on the decline in keeping with the trend of zero tariff. In Sri Lanka the connection charge levied is more than that of the per line investment cost. For e.g. in 1998 the surplus earned per new connection provided exceeded US$ 400 - i.e. over twofold more than the typical market cost prevailing at the time. Despite more than adequate funding raised from the exorbitant connection charges levied by the Telecom sector of Sri Lanka majority of rural areas remain un-served. Furthermore the charge contrary to accepted practice is unaccounted in determining rental and call charges - notorious outcomes of the weakening market competition. The increasing per minute cost to the user of telecom service of the market by nearly 18% per annum is quoted in my paper to illustrate its impact on the per line diurnal usage. It is shown to be decreasing at a pace of nearly 6% per annum - a reliable symptom of eroding market competitiveness. The increase in the diurnal usage in competitive markets such as UK following the decline of its per minute cost to their users is quoted in my paper to show the impact of effective regulation This shows that diurnal usage is a catalytic reagent for development of ICT- as important as per capita consumption of food essential to sustain the social well-being and the productivity of the nation. Unaware of the fundamental characteristic of the Telephone Network and that it has no shelf value Mr. S. says diurnal usage is unimportant. It is less now than before he says due to the increase in the subscriber population and not due to increase of price. This is fundamentally incorrect. The congestion in the network reported when SLT announces free of charge calls on festive public holidays is a typical illustration of this basic fact. Another example is the drop in the revenues of a prominent pay phone service provider by over 25% when the tariffs were increased. On the contrary the diurnal usage was much less then than now - the traffic then was predominately due to voice calls. The externalities arising from the network growth as well as the dramatic change of traffic solely from that of voice to a significant mix of voice and non voice, following commercialization of the Internet continued to boost the diurnal usage of the PSTN in markets operated competitively. He further states that prior to privatization the official phones were rarely on hook. But the fact that it is even far worse now in view of the escalation of the per minute cost to the end user is ignored. This is revealed from the fact that the State is reported to have imposed recently an upper limit for payment of official telephone bills with State funds . A study of the revenues to the SLT from telephone bills of the State organizations and the debt accruing from non paid bills will aptly show proof of above. On numerous other instances he has publicly emphasized importance of ICT. However based on his article in the Sunday Observer he implies that decline in the diurnal usage is unimportant and therefore a few minutes of usage is adequate to serve the needs of ICT applications. This is highly unrealistic and defeats the efforts of the Govt. to promote ICT. On the average ICT applications require over 20 minutes of usage per day per user-particularly if using dial up access to the internet. In several markets offering competitive ADSL services diurnal session time is reported to be increasing and in some markets it is reported to exceed four hours. Confident that the public is not familiar with these network characteristics he boldly yarns to mislead the public. This practice of his to exploit public unawareness is also endorsed by the remarks he made while appearing on a recent TV program on Tsunami. Mr. S. then goes to justify that the increase in per minute cost to the end user is attributable to the tariff rebalancing-a plausible reason adduced to increase tariffs: domestic call charges; rental and connection charges. Mr S. fails to mention of the rapidly diminishing cost of a unit of access network capacity entailing from its shrinking modularity. This trend aided by increasing diurnal usage in competitive markets is steeply driving down the per minute usage cost levied by these markets. In this context he does not mention the fact that several countries like Thailand that did not yield slavishly to the pressure of rate rebalancing and maintained their domestic tariffs unchanged. Consequently their market competitiveness increased dramatically driving down tariffs and boosting growth rates. The pace of decline usage costs of access networks has been further accentuated through increase of usage of the latent band width of the wired access network local loop by unbundling it for provision of ADSL services -a prerequisite for the development of ICT. However with the intention of supporting the unjust rate rebalancing Mr. S. instructed his expert to recommend to withhold unbundling of the access networks. |
|
| News | Business | Features
| Editorial | Security
| Produced by Lake House |
