The latest issue features an e-interview with LIRNEasia’s CEO Rohan Samarajiva, but it is not the only reason why we thought of highlighting the issue. The content is interesting and very readable. We publish two e-interviews from July 2010 issue here fully, as they are not available on public domain.

Apart from Samarajiva, This issue carried e-interviews with Alison Gillwald, Indra de Lanerolle, Christoph Stork and Muriuki Mureithi.

If you are interested in future issues please register at http://lists.apc.org/cgi-bin/mailman/listinfo/chakula

The need for competitive research for policy influence
e-interview with Alison Gillwald

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“High quality, rigorous research…is required to compete and complement with each other for policy influence… In mature economies researchers from multiple universities would be debating and refining the positions governments should be taking on everything from regulating next generation networks to demand stimulation for broadband.”
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Alison Gillwald is Executive Director of RIA. She is also Adjunct Professor at the UCT Graduate School of Business, Management of Infrastructure Reform and Regulation, and a member of CPRafrica’s organisation and selection committee.

CHAKULA: You have just held the CPRafrica conference in Cape Town. What are you hoping to achieve through the conference?

ALISON GILLWALD [AG]: There is almost no scholarly research being undertaken in the field of ICT policy and regulation on the continent. A Google scholar search on the subjects throws up around five scholars on the continent who are published in peer reviewed or accredited journals. It is this kind of high quality, rigorous research that is required to compete and complement with each other for policy influence. In mature economies researchers from multiple universities would be debating and refining the positions governments should be taking on everything from regulating next generation networks to demand stimulation for broadband. Although there are pockets of applied research being undertaken there is no tradition of critical intellectual engagement in this area on the continent. The purpose of CPRafrica is to provide a forum for nurturing and showcasing research in the area of ICT policy and regulation on the continent and enhancing its quality through rigorous academic review and debate. The conference is complemented by a young scholars programme to expose young scholars who may be excluded from such peer-review, paper-acceptance-only style conferences without such a category. Some of these are part of the IDRC- [International Development Research Centre] funded PhD programme to encourage doctoral research in ICT policy and regulation. The idea here is to build a cadre of policy intellectuals on the continent able to critically engage government on the basis of relevant research and contribute meaningfully to research and policy excellence. This will further enhance Africa’s standing in international research and governance fora, in which its participation has historically been suboptimal.

CHAKULA: Reviewing some of the papers presented at the conference, it strikes me that there are a couple of threads that are emerging. Two in particular stand out: the notion of “innovation” in the telecommunications space, and the challenges around convergence and policy when two distinct sectors with different ways of doing things are brought into conflict with each other. I also went back to Research ICT Africa’s 2008 M-banking policy paper, which raises similar themes, and I would like to use that as a starting point. First, on the issue of ‘innovation’. In the M-banking paper, the following assertion is made: “Policy-makers and regulators need to ensure that evolving systems serve the broader objectives of economic growth and development as well as protect consumer interests, while creating an environment that encourages and rewards innovation”. In what ways can policy inhibit or encourage innovation in the telecommunication’s sector?

AG: Indeed, providing certainty to investors and operators while retaining the levels of flexibility to enable innovation in a fast-changing environment is one of the most difficult balancing acts that policy-makers and regulators have to perform. I think the linkages and catalysts between technology, market and regulatory innovation are becoming clearer all the time. New technologies and service offerings have prized open markets and the entry into less policy and regulatory constrained markets has made taking certain technologies to market more viable. This has triggered further possibilities across historically distinct platforms, not only between broadcasting and telecommunications, but between fixed and mobile services and even entirely separate sectors such as telecommunications and banking. The challenges to the expansion of such services are really regulatory now rather than technological – and that is not to say that one does not want or need public interest regulation either in the telecommunications or banking sector, but it has to be done in new, innovative ways that enable to extension of these services to those who currently don’t enjoy them. Once these various forces are unleashed they are able to intersect and create new opportunities and innovative ways of doing things that have not been done before.

CHAKULA: Innovation here seems necessarily to be tied to market gain – the objective is to increase or capture market share. In both your M-banking paper, and the case study of the mobile operator One Network in Kenya, preconditions exists that facilitate innovation. With M-banking there are low-income earners who are ‘unbanked’ and who could benefit from some kind of low-cost transactional instrument, and with One Network, there is a significant level of cross-border traffic that makes a seamless network attractive.
AG: It is true that innovation is often driven by market forces and pursuit of profits, and, traditionally, with new technologies have focused on high-end markets. But much of the ICT innovation we are witnessing in developing markets is focused on what has been referred to as the ‘gold at the bottom of the pyramid’ – very profitable turn-over of high volumes of sometimes minuscule margins on products that, by breaking them up or making them available at cost, the masses at the bottom of the economic and social pyramid can enjoy things like pre-paid phone vouchers, or transferable airtime vouchers. And many of these products have been commercialised innovative practices by the poor in order to access and affordably use communications services – such as missed calls, multiple sim card usage that allows for same net rates, or ‘plastic roaming’.

CHAKULA: If we consider Indra de Lanerolle’s fascinating case study on the South African convergence scenario, we see two sectors (broadcast and telecommunications) in conflict with each other because policy decisions are made according to different frameworks: simply put, economic versus public interest. In fact, Indra does seem to suggest that these are in competition with each other, and resolves this in an interesting way. It feels hard to believe that ‘consumer interest’ is the same as ‘public interest’?

AG: I think with the shift from public utilities to competitive markets many of the public interest objectives of delivery and service are met through serving the consumer interest. Nevertheless there is public interest regulation that is required to improve wider and collective consumer welfare – to provide access to ‘uneconomic areas’ for example – though with new more cost-effective, rapidly deployable wireless services, this concept in markets that enable competitive entry is regularly not proving to be the case. But as long as we have the large number of poor that we do, we will need some level of social regulation – even though a lot of the current pent-up demand could be met with greater market efficiency (more competitive markets offering better prices). And then there are the more traditional content regulation issues either to restrict certain ‘harmful’ content or activities or to enable it, such as local content regulation. That too may be found to be highly profitable, but may need either protection or encouragement.

CHAKULA: Indra’s paper, like your M-banking policy paper, shows that regulating convergence is tricky because of the ‘convergence’ of two or even more sectors; whether broadcast/telecommunications or telecommunications/banking etc. What are some of the key challenges that policy-makers can expect to face in Africa?

AG: The key challenge for African regulators is that they are still trying to deal with legacy regulation around first and second-generation infrastructure and access. At the same time, if they do not want the agenda to be set for them in international fora, they need to deal with next-generation issues, not only of converged IP [internet protocol] networks and services and the next-generation regulation issues of network and service-neutral regimes, but of cross-cutting issues of electronic commerce frameworks, intellectual copyright rights, security and privacy issues, and so on. And you have to do it all or be left behind…

CHAKULA: One frustration is that when one reads a good paper that seems to offer a solution to a problem, one is also met with the feeling that those with decision-making powers are probably not going to read that paper, or seriously consider its arguments. Do you feel the same? If so, how do you think CPRafrica picks up on this challenge? Is it just a case of repeating issues until policy-makers take them on board?

AG: No. CPRafrica is one of several strategic strands towards having evidence-based ICT policy on the continent. This is about organic and indigenous knowledge creation and contribution, at the national level, at the level of regional association and continentally, and also about global engagement and influence. For too long have the solutions come from the developed world. Of course, there are lessons to be learnt and we don’t need to reinvent the wheel, but we also have different challenges and Africa has demonstrated remarkably innovative responses to these when they are informed by sound policy, effective regulation or thorough and appropriate business plans. The indicator research done by RIA and its analysis in order to assess policy and regulatory outcomes is fed into several initiatives, globally and locally. RIA provides the only comprehensive public domain demand-side data on ICT access and usage on the continent. This is used in national, regional and continental meetings on ICTs, and in the database and reports of multilateral agencies such as the OECD and the International Telecommunication Union (ITU), to better inform their understanding of developments in Africa. It is true that sometime decision-makers do not like to hear of the widespread policy and institutional failure on the continent, but many do – especially those that are rapidly improving and beginning to see the rewards of their reforms. This research is also used to develop training curricula that address the needs of policy and regulators in a developing country context. So, for example, as part of the global research and training collaborative LIRNE.net we conduct a professional development course on alternative regulatory strategies at the UCT Graduate School of Business Infrastructure Reform and Regulation Programme to build institutional capacity on the continent. So CPRafrica is just one arm of a multi-pronged strategy of research and education, institutional capacity building and technical assistance and dissemination and advocacy, through our website database, policy papers and workshop and public presentations.

CHAKULA: What is the way forward for the conference? Will there be more?

AG: Yes, in order to build and sustain this much-needed capacity we will have to find a way for CPRafrica to become an annual institution.

Related links:

M-Banking the Unbanked: RIA Policy Paper No. 4:

http://www.researchictafrica.net/new/images/uploads/RIA_Mobile-banking.pdf

CPRafrica conference details: http://www.researchictafrica.net/index.php/news/38-cprafrica-looking-back-at-a-decade-of-communications-reform-looking-forward-to-2020
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Innovation through competition: the budget telecom network model
e-interview with Rohan Samarajiva

Paper link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1564529

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“The status quo must be unbearable.”
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Rohan Samarajiva is the Chair and CEO of Lirnasia. His paper, “How the developing world may participate in the global Internet Economy: Innovation driven by competition” was presented at a workshop organised by the OECD and InfoDev in Paris, 10-11 September 2009.

CHAKULA: In your paper, you talk about the Budget Telecom Network Model (BTNM), which is brought about by competition allowing operators to reduce the transaction costs of low-end clients. This, as you point out, is different to the standard Average Revenue Per User (ARPU) model. How does it make the ARPU model redundant?

Rohan Samarajiva [RS]: ARPU is a short-hand that outside observers use to see if the firm is doing well, whether its prospects are good, etc. It is, like any indicator, imperfect. You get it by taking total revenue (preferably without extras like roaming) and dividing by number of subscribers. Of course no one really knows what a subscriber is any more, with even poor people holding up to five SIMs, foreigners having SIMs, no agreement on what an active SIM is and so on. You can get better results by looking at revenue per minute. Take total revenue (less roaming and other stuff) and divide by Average Minutes of Usage per User per Month (MOU). This is a better indicator. But investment analysts are still not used to this and it would require disclosing MOUs to calculate.

CHAKULA: Can ARPU be used as a business model?

[RS]: Operators do not actually do much with the ARPU. It is not a business model as such, just an indicator. But getting more from each subscriber (if this is known) is not a bad idea. Just that it does not predict whether the company will make money or not. The best indicator for that is EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] margin. Sri Lanka in 2007 had an operator with LKR311 (approximately USD3 at the time) ARPU making close to 50% EBITDA margin. In the end, the success of a business model lies in whether it generates profit.

CHAKULA: What is your understanding of ‘innovation’ in the telecommunications space? You talk of “business innovation”, rather than, say, technological innovation?

[RS]: Tech innovation is important, but it is not the only thing. Pure tech innovation is done by manufacturers of network equipment and handsets. That is good. Business process innovations (e.g. lowering the costs of base stations through software) are done by operators. These include technical aspects, but are not limited to them. Shifting from one business model to another (discovering the latter) is also innovation, but it may or may not not have a tech aspect at all.

CHAKULA: What are the preconditions for innovation, do you think?

[RS]: The status quo must be unbearable. The BTNM innovation occurred when competition got so intense that there was no way to gain market share or even survive without doing something new.

CHAKULA: Does BTNM have implications for increased access to broadband internet for the majority of people on a continent like Africa?

[RS]: Yes. The latter part of the paper is entirely on the extension of BTNM to broadband. Some headlines are that operators must have enough money from voice that can be invested in the 3G plus networks. Once the overlay network is built out the operators have to offer low prices. Prepaid sachet pricing is best, where one buys packages of connectivity in minutes or in capacity. Here, because of lower transaction costs and prices there should be an influx of new customers. This is already on offer in Asia. Africa has to lower prices. Access will be over mobile networks, using dongles or built in modems, for laptops and other devices, including phones. ADSL will be a niche product. Wireless access is the future.

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M. Somasekhar’s piece on Hindu Business Line on mobile payments says:

Experts from Sri Lanka, Pakistan, Kenya, Thailand, the Philippines, Bhutan and Bangladesh among other nations met in Islamabad recently to discuss their experiences in providing mobile phone services for the BoP segment in their respective countries. They agreed that a beginning has been made and the road ahead appeared daunting, but technological progress promised quick results.

Don Sambandaraksa’s  piece “Mobile phones offer hope to ‘bottom of the pyramid” to Bangkok Post focuses on mobile use in farming, transport and banking. Says he:

“ICTs cannot solve all problems, chief of which is land reform, but when it comes to making decisions, lowering transaction costs and going to market and selling, information can make a big difference.

The researched categorised the decision-making process and information value in each from decisions to seed, planting, growing to harvesting and selling.

Information search costs are highest at the beginning of the cycle. Information on deciding what to grow are three times all other costs, and this is where ICTs have a potential role to play.

Sriganesh Lokanathan said that ideally he wanted to change the decision-making chain into a cycle where the decision on what the farmer wants to grow is based on the price when he expects to harvest. For this to happen, prices and supply and demand needed to be predicted and farmers need to get into forward sales contracts which does not often happen in this part of the world.”

Meanwhile we see Pakistan Telecom Authority, the co-organiser takes the message forward. ‘PTA Focuses on Value-Added Services Including E-Commerce, E-Agriculture & E-Education’ was the title of a report from Pakistan Telecom News Bulletin. It says:

Chairman, Pakistan Telecommunication Authority (PTA) Dr. Mohammed Yaseen has said that PTA’s focus is on value added services and with a high penetration level of mobile and low penetration of internet we have to explore the available possibilities which could be gained via mobile 2.0 theories. I very much foresee the further development of presently available technologies and those coming ahead through value added services and content. He was addressing to Connect 2010 ICT Forum – Telecom Session at Expo Centre Karachi and talking to media men on the occasion. He said that our emphasis is on e-commerce, e-agriculture and e-education, it is the time to open doors of opportunities to our young innovative minds and to bridge the unseen gaps between all potentials players of ICT proliferation.

For the full media coverage and presentations,  please see here.

Presentation began by looking at the potential for M-money.

Why should we use m-money?

Improving efficiency: Improve services, financial services. BOP a target.

BOP (migrants) relies on various forms of remittances

Looking at Filipinos, 9% of BOP had a relative living abroad, and 13% in another part of the country, so there is a vested interest in m-money.

At present about 5% is going through informal channels according to the Filipino central bank. According to respondents about 80% sent through banks.

Workers need access to bank accounts in both the remitting and remitted country for remittances through banks. This is a limitation. M-money may not necessarily need an account in the remitting country.

Filipino workers generally prefere formal channels. Todays presentation will focus on m-money channels such as smart money of g-cash.

ADB: Transaction costs about 2.5%-3.5% of remittances.

For local remittances: Pawn shops used. Roughly remits around Php 500-1000. These are potential targets for m-money.

RS: How does the Pawn shops work? Pawn shops have a wide network, usually works through a call or SMS. A transaction number will be given to the person sending the money. The number will be given to the person who is due to receive the money. Identification is required for acquiring the cash. This is with regards to local remittances.

HG: Do the pawn shops work together, or is there a network that belong to one company. There is one network which has about 12,000 pawn shops.

Vasana: Are they licenced? EA: They are regulated by the central bank to a certain extend.

Central bank regulation is due to Anti Terrorism laws. Pawn shops charge a higher rate of interest. Technology is a catalyst for changing remittance landscape.

M-banking is one component of electronic money according to Circular 649 of Filipino Central Bank. M-Money is E-money stored in a mobile.

Electronic money defined as stored value or pre-paid payment mechanisms.

RS: can money loaded to the a pre-paid mobile account be refunded? EA: It is one of the issues which is going through regulatory process now.

3 modes of e-money issuers in Philippines: Bank (Smart money), Non bank financial institution recognised by BSP (Central Bank), Non bank registered with BSP as a money transfer agent (Example, GLOBE)

Registration is easier with Globe. Can do through SMS.

Looking at potential of M-money at the BOP the following method was used:
Method of access, Material access, skills access, Usage access

Method of access
Using LIRNEasia survey data, re-method of access, 566% of those who didnt use it said didnt know how to use it. According to focus group discussions, even though they were aware, they needed proof of efficiency, price.

With e-loading, familiarity with the Roman script is an advantage. If a person is familiar with transferring e-loads then using m-money will be easier.

Trust issues, Central bank looking at some of the issues. Security mechanisms such as PIN codes. At present Php 100,000 is the limit for any type of e-money. Same for M-money. Even if you have four m-money accounts, the total should be 100,000.

Material Access:
Only 13% of BOP have access to Bank accounts

On avearge there were 1.36 mobiles per household. More access to a mobile phones so there fore more potential for m-money.

Identification documents and physical access to cash in are seen as barriers to M-banking.

Individuals can get there m-money (Gcash) out from ATMs and cash in cash out venues. Therefore accessibility is an issue. There are already some Pawn shops being used as cash in cash out venues.

Can register from a distance but need to go to the bank to cash in. No identification cards in Philippines. Propoer identification is a problem in the Philippines.

Skills Access
40% of those surveyed in the LINREasia survey are familiar with e-loading.

99% of surveyed mobile users use SMS.

Filipinos top up small values at shorter time frames. Use to exchanging mobile top ups. This is consistent with remittance patterns.  Comparatively, Filipinos send money often in smaller amounts

GCASH and Smart are accepted as forms of payment in Philippines, but this maybe more common among the more affluent users.

GLOBE (2006): Transacting USD 117 Million on average.

SMART (2006) Transacting USD 257,200 average daily transactions.

HG: How much is charged for Transactions? EA: Basic of SMS cost, plus 1% of transaction cost or minimum of Php 10.

HG: Transmission takes one or multiple SMS? EA: Have to confirm but it maybe a minimum of 2 SMSs.

Challenges and Policy issues:

1) Developing mental access: Increasing awareness, better financial advantages.

2) Developing Material access: Making services that work with the kinds of phones used by BOP, making cash in/cash out more accessible.
Regulating GCASH and SMART:

100% reserve requirement

HG: 100% reserve requirement for just e-money or any transfer? EA: Thats for e-money.

HG: Is there a time limit on the money put in the e-money account? a 100% RR is very high. EA: They do not work as banks. Money is earned through transactions.

Policy Issues:
Security of the systems

prevention of fraud

Interoperability

Tracking users

Increasing access

RS: Comparisson with M-Pesa in Kenya will be useful.

HG: Comaprison with the regular banking transactions will also be useful.

Dialog Telekom PLC in collaboration with its partners Dialog University of Moratuwa Mobile Communications Research Laboratory and Microimage Technologies together with the Disaster Management Centre (DMC) of Sri Lanka launched Sri Lanka’s first ever mass alert warning system; the ‘Disaster and Emergency Warning Network’ (DEWN) yesterday under the patronage of Disaster Management and Human Rights Minister, Mahinda Samarasinghe.

Speaking on the launch of DEWN Group Chief Executive Officer, Dialog Telekom PLC, Dr. Hans Wijayasuriya said that “There are 10 million people in this country who have access to telecommunication and mobile services. Now the mobile has become a powerful tool which could be called as a ‘Digital Empowerment Device’ and our citizens are digitally empowered into the digital network”. Dr. Wijayasuriya went onto say that now one can even provide banking and other information services via a mobile phone unit adding that the Dialog News Alert service has now reached 350,000 subscribers.

DEWN is a system that was being tested by the Disaster Management Centre (DMC) to alert Dialog mobile users of potential disasters via a method called ‘Cell Broadcast’. Users only need to configure area information reception settings on their Dialog mobiles to receive the alerts issued. The DMC takes the responsibility to adequately verify any emergency situation and issue alerts. A Memorandum of Understanding was signed by Dialog Telekom PLC and Disaster Management Centre to start the DEWN. In a potential disaster scenario, the DMC will first use DEWN to alert emergency personnel on their individual phones, and public alerts will be issued only when a threat is adequately verified. In addition to alerts received on the mobile phones, specially designed DEWN remote alarms will also be used to alert nominated emergency personnel. Cell Broadcast is currently available only on the Dialog GSM network and not yet available on #G mode.

Addressing the gathering Minister of Disaster Management and Human Rights, Mahinda Samarasinghe said that “since December 26th 2004, when we lost 38,000 lives and when the tsunami caused serious damage to the assets of our economy and development of the country, the Government has moved into make Sri Lanka a safe place”. The Minister also highlighted the importance of private sector corporate social responsibility projects that enhance and enrich the lives of people. “Disaster prevention and mitigation in this country is essential for rapid economic strategy and sustainable economic development of Sri Lanka” Minister Samarasinghe said adding that the 24 hour operating Disaster Management Centre will be the focal point when sending the alerts via Dialog network.

Read the full story in Daily Mirror here.

The Nation Economist, Sunday 26 August 2007 | See Print version

I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

By Indika Sakalasooriya
The entry of the Indian business tycoon Sunil Miththal’s Bharti Airtel, India’s biggest mobile operator into the Sri Lankan market has left many players in the telecom sector to ponder on the harsh effects of severe competition in the future.

The existing mobile operators in the market seem to have appraised the impact even before the physical arrival of the Indian giant. The majority of the industry analysts are now of the view that the profit margins of the mobile operators will become thin due to the expected intense competition in the market.

However, amidst all these developments, from the government’s side we heard a story of further taxation of the growing mobile industry. The Nation Economist thought it opportune to get some insights from Professor Rohan Samarajeewa, a former head of the Telecommunications Regulatory Commission of Sri Lanka who is a keen observer of developments in the telecommunication sector in the Asian region to find out his assessment of the Sri Lankan mobile industry and where it is heading.

Here are the excerpts of the interview
Q : What is your general assessment of the Sri Lankan telecom sector as it stands today?
A : Doing well and could do much better. Why do I say doing well is compared with every other sector, the telecom sector is doing well. Its contribution to the GNP growth rates is considerable. Why do I say it can do better is Pakistan has overtaken us in mobile and our ADSL data situation is not really satisfactory in terms of people getting value for money. A lot of the BPO industry is not growing as fast as we expected. So in that sense we really could do much better than we are doing now.

Q : What kind of an impact will the arrival of Bharti Airtel have on SL telecom industry and to the mobile operators in the market?
A : Well, first we have to look at the Indian market and Bharti Airtel. India is one of the exciting markets in the world because every month 7 million new phones are added to the market. That means 7 million new subscribers. So now you get a sense of how big the Indian market is. And also India belongs to BRIC (Brazil, Russia, India and China). BRIC has the most happening markets in the world and we are sitting next to a BRIC. In the Indian telecom industry Sunil Miththal and Bharti are seen as innovators. He is getting awards and prizes in India. We have to find out for what he is getting prizes?

They are not getting those for being the biggest or for being profitable. We have to understand that there is no technological innovation but business innovation when Bharti is considered. The business innovation is how you make high profits on very low revenues per user. The company has pioneered very innovative techniques and that is they don’t run their networks. They outsource the whole thing down to the supplier. So what they are doing is basically brand managing. They own the brand and manage the interface with the government and they supervise the outsourcing process. Having the two facts in mind let us think of the size of Sri Lanka. Sri Lanka is about the size of greater Mumbai or greater Delhi. So, here we have is a company extremely good at managing costs and handling numbers. So here they come to Sri Lanka. I’ll be very concerned if I’m one of their competitors.

However there are two things that go against them. One is Sri Lanka has a few very efficient and sharp mobile companies and among them nobody is a sleeper. The second reason is Bharti is investing two little. It suggests to me that they are basically going to do a very conservative roll out. In 2004 the Central Bank of Sri Lanka in the Consumer Finance Service said 25% Sri Lankan households except in Mannar, Kilinochchi and Mulathiwe areas had some kind of phone. Now I’m willing to stick my neck and say it has gone up to 55% by now and that’s an extrapolation from some data we have. So we have to understand that this is a highly saturated market. At the same time we don’t have mobile number portability. The only country that has mobile number portability is Pakistan. So considering all these facts I’d say it is not easy for Bharti.

Q : Will the competition be healthy in terms of survival of the industry?
A : Yes sure. I’m always there for intense competition. Many think that the margins of the service providers will go down with the entrance of a new player. But I don’t think so. In 1994 when Dialog enter the market many people thought Sri Lanka was a tiny little market and there was no way that a fourth mobile operator can succeed. First it was said that Dialog would not succeed and secondly the margins will come down. But what happened? A fourth player came. Did the margins come down? Let us assume that what you are saying is correct. So the worst thing that can happen is the exiting of one player. The player who cannot give the enough commitment will exit the market. What is wrong in that?

Q: With the arrival of Bharti it was reported that some parties in the government had proposed to further tax the mobile industry as the sector is considered to be profitable. What is your reading on that?
A : I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

Q: Since you mentioned the issue of number portability, what are the pros and cons of number portability? Will the implementation of number portability lead to some perfect competition?
A : Competition has to be the basic rule we should be working on. An essential quality of competition is when a customer is not satisfied he or she should be free to go to another supplier. So now the question is if I’m not satisfied by my present mobile services provider I still have to bare it since I’m not ready to change my mobile number. But in a place where you have total competition you should be free to go to another service provider while keeping the same number. That is what mobile number portability is all about. People might ask me if the number portability is so important why didn’t you push for it when you were the DG of TRC? I had to deal with less than million phones and we had various problems such as interconnection. So during that time the idea of having number portability is very close to a dream. By now our telecom industry is growing and today mobile number portability has become a very important aspect of the industry.
There are two ways of doing number portability. One is call forwarding and the other way is to do it in a straight way through an intelligent network. It has costs and will take time. But it will definitely improve the market.

Q: As a former TRC DG and present advisor to the government of Bangladesh on telecom related matters, what are the reforms you are suggesting for the present telecom regulatory regime for the betterment of the industry?
A: I am a policy and regulation guy. For the industry to grow what we really need is a greater attention to be paid to what we call wholesale access. All the mobile operators should get the privilege to use the under sea cable going out from Mt. Lavinia on a non discriminatory cost oriented way. At the moment there are only three companies using the cable, SLT, GSNL and Dialog. But these other two companies get step motherly treatment from the SLT and that should be straightened. That’s a regulator’s job. Within the country majority of the fiber optic cables belong to SLT. But they should offer that facility to other companies at reasonable prices. Because it doesn’t make any sense in our country for every company to have their own fiber optic cables or to build microwave networks on top of already existing networks. So at a fundamental level I would put that as the highest priority because that can reduce the cost of a call. The other thing as I mentioned earlier is the mobile number portability.

Q : What are the key areas that the existing and the prospective telecom service providers should concentrate in carrying out operations?
A : The bottom of the pyramid is the place they should focus. I’m telling this because we have done research on the matter. The companies should understand that it is where the money is. As Professor Prahalag said, there is a fortune to be made at the bottom of the pyramid. The other fact is in Sri Lanka the main two growing sectors are telecom and banking. Why can’t we put the industries together since that is where the action is.

Q : Some say that the present regulatory system is in favour of the SLT of which the government still has the major stake. What is your opinion on this?
A : The Act we at the moment have is archaic and obsolete. The law is not very good and the staff is not very competent and it is possible that the regulatory authority is not doing well. What I can say is in my time Sri Lanka Telecom was fined for violating its licence condition. Therefore at least I can say during my period SLT was not favoured.

Q : As a person who is running a research body that overlooks the entire Asian region, can you explain why India still does not practise 3G operations?
A : Well the reason is the problem we also have. But India has it in a bigger way. Indian military is occupying a lot of frequencies. Therefore to start 3G operations the Indian Army and the other defence forces should be moved away to clear the frequency. We are not in bad shape as in India but we are close to it. We have not only military problems but also there are other parties who are using these frequencies for low value purposes.

These disruptions have major consequences for any business that relies on telecom for delivering their services, including, banking, trading, call centers, remotely managed services etc. This event also underlines the necessity for redundancy and why policymakers and regulators must liberalize international gateways to allow a number of different submarine cables connecting different destinations to land in a country.
From Bloomberg:

Damaged cables include the APCN2 cable and Sea-Me-We3 cables, Chunghwa’s Leng said. Eight STM-1 cables from Okinawa off Japan and 4 STM-1 cables to Shanghai are acting as backup, Chunghwa said in a statement. The company may also use the ST-1 satellite.
Singapore Telecom, France Telecom SA and Pakistan Telecommunication Co. are among companies that own the Sea-Me-We3 cables linking Europe to Asia. Operators in the APCN2 cable network that connects Japan, Korea, China, Taiwan, Hong Kong, Philippines, Malaysia and Singapore include China Unicom Ltd., StarHub Ltd., Telekom Malaysia Bhd. and Telstra Corp.
[..]“The repairs could take two to three weeks,” said Leng Tai-feng, president of Chunghwa Telecom Co.’s international business. The Taipei-based company, Taiwan’s largest phone operator, said two of its undersea cables were cut.
HSBC Holdings Plc said its online banking services were down, while Chunghwa said almost no calls could be made to Southeast Asia, causing disruption to companies including First State Investments in Singapore.
“I can’t trade if I don’t know the prices,” said David Leong, who heads the Singapore trading desk at First State, which manages $15 billion in equities in Asia and emerging markets. “I’ve put in limit orders to try to minimize the damage, but even then you need to have the basic information.”

I think the talk provides the "big picture" of the necessity of telecom reforms of the type that we at LIRNEasia are involved in. If we are to go beyond simply giving people phones, to giving them "money in the pocket and hope in the heart" this big picture is essential.

_note_: For those reluctant to read Word Documents online (ie me) I’ve added the talk as HTML on the following page.