US embassy cable - 03COLOMBO604

UNCLAS SECTION 01 OF 02 COLOMBO 000604 
 
SIPDIS 
 
DEPT FOR USTR 
 
E.O. 12958: N/A 
TAGS: KTDB, ECON, ECPS, ETRD, CE, WTO, ECONOMICS 
SUBJECT:  IMI: SRI LANKA LIBERALIZES INTERNATIONAL 
TELECOM GATEWAYS 
 
Ref: 02 Colombo 1610 
 
1.  Summary:  In early March, Sri Lanka opened the 
international voice telephony market, ending the 
monopoly held by Sri Lanka Telecom (SLT), a 
partially state-owned venture.  The entry of 
competitors into the international telecom services 
market has resulted in significant reductions in 
call rates.  The liberalization has also enabled 
Sri Lanka to meet its long overdue WTO commitments 
on international voice services.  The Government 
has announced a new program of rural network 
development to be funded through a charge on 
international communications.  End Summary. 
 
SLT monopoly ends 
----------------- 
2.  Following liberalization, the 
Telecommunications Regulatory Commission of Sri 
Lanka (TRCSL) issued twenty-eight External Gateway 
Operator (EGO) licenses.  The liberalization has 
enabled Sri Lanka to meet its WTO commitments on 
international voice services, which were due in 
year 2000.  The EGOs are now able to offer 
international telecom services, including voice and 
voice over Internet protocol (VOIP).  This ends 
SLT's monopoly control over international switches, 
which affected the competitiveness of other 
operators previously forced to route their 
international voice traffic, except data, through 
SLT switches.  The Government had also prevented 
operators from providing VOIP services. 
 
3.   The new EGO licensees include existing network 
operators as well as non-network operators. A key 
feature of the EGO licenses is the prohibition on 
non-network operators from building domestic 
networks.  Instead, they are required to use 
infrastructure facilities of domestic network 
operators.  The EGO license fee is fixed at $50,000 
and is valid for 10 years.  In addition, the 
operators have to pay an annual fee of 3% of 
revenue.   According to the TRCSL, there will be no 
limit to the number of EGO licenses. 
 
Call rates come down significantly 
---------------------------------- 
4.  Already international call rates have come down 
significantly.  For example, a call to the U.S. 
through SLT has dropped to Rs 20 per minute 
(approximately US cents 20) from Rs 69.60 
(approximately US Cents 70).  Similarly, mobile 
operators have also reduced their rates to US to Rs 
22-Rs 25 (approximately US cents 22-25) per minute. 
Call rates to other countries have similarly 
dropped. 
 
Charges 
------- 
5.  The EGOs are required to pay a Local Access 
Charge (LAC) and an interconnection charge for 
terminating calls.  During the first five years, 
part of the incoming LAC will be retained in a 
rural telephony roll out fund, which will be used 
to subsidize rural connectivity and to expand ICT 
efforts.  Currently, telecom penetration is largely 
concentrated in the Western Province, which houses 
over 65% of the fixed access phones in the country. 
 
Concerns-SLT dominates the cables 
--------------------------------- 
6.  Telecom industry sources highlight some key 
trade concerns, which could inhibit the EGOs' 
ability to obtain international leased lines and 
other connections at reasonable rates and in a 
timely, non-discriminatory manner.  These concerns 
include SLT's exclusive access to the (SEA-ME-WE) 
fiber optic cable running through the region as the 
only local investor to the cable project. Also, 
EGOs are forced to lease circuits from SLT.  A 
senior official at the TRCSL acknowledged that 
leased circuits provided by SLT are not 
competitively priced and a substantial reduction in 
tariffs is warranted, given the excess 
international cable capacity owned by SLT.  TRCSL 
has recently commenced an investigation into the 
matter and hopes to negotiate a new pricing 
structure with the SLT. 
 
7. Other connection options available to EGOs 
include satellite links or investments in a costly 
Indefeasible Right to Use (IRU) circuit directly 
from SEA-ME-WE operators.  Some non-network EGOs 
already complain about the lack of cooperation by 
network operators who fail to give them access to 
the domestic networks. 
 
A strong regulator will be key 
------------------------------ 
8.  Sri Lanka's telecommunications regulator, 
TRCSL, must play a critical role in ensuring a 
level playing field in terms of tariffs and access, 
as well as in ensuring service quality of 
international leased circuits and effective 
interconnection. To meet these demands, the GSL is 
planning a new Communications Convergence Act and a 
strong regulator along the lines of U.S. Federal 
Communications Commission. 
 
Wills