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Paper on perverse incentives created by the Bangladesh ILDTS policy

The paper was presented at the ITS India conference early this year. Somehow, we neglected to do a post about it. But, better late than never. Here it is.

A subsequent revision of the ILDTS in late 2009 failed to address the concerns raised in this paper. Instead the focus of the revision was mainly to increase competition in the IGW and IIG space from the earlier arbitrarily hard-coded number of operators in that space. The BTRC has however mandated monitoring (somewhat along the lines of what is outlined in Recommendation 4 above) and increased the fines for those caught engaging in or “allowing” illegal bypass to occur. However by not addressing the misalignment of incentives with the ability to monitor, it is unlikely that BTRC will be able to significantly reduce illegal bypass. Furthermore it creates additional administrative burden on BTRC to police infringements.

For countries such as Pakistan and Sri Lanka, where the international termination rate is much higher (USD 0.125/ minute in Pakistan and USD 0.09/minute in Sri Lanka), what was done in Bangladesh should provide some learnings. Clearly the high rates in Sri Lanka and Pakistan create arbitrage opportunities for illegal bypass to thrive, and is not ideal. But it is highly unlikely that these governments would reduce them. In the absence of the optimal solution, the best way forward is for governments to create incentives amongst the stakeholders such that bypass can be significantly reduced.

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