Imposed few weeks back, they specify CDMA phones can be used only at the address it is issued to. (CDMA technology is used in Sri Lanka for fixed wireless and not mobile)

How on earth a CDMA phone can be restricted to one address, asks Udurawana, when you sometimes even have to climb to your neighbour’s wall to receive signals.

We hope the Sri Lanka rural users who have faced similar problems would readily empathise. (We hear once the mother-in-law of a former Director General of TRC too had to take her phone to a particular spot at a paddy field to catch signals)

Mr. Priyantha Kariyapperuma may want to respond to Udurawana. Thanks in advance for CCing LIRNEasia.

Sri Lanka uses CDMA technology for fixed connections but with signals available anywhere within local loop, or if not been blocked by the operator even outside, it can be converted to a ‘mobile’. Given the distinct sharing behaviour we have seen at BOP, many may use their CDMAs in multiple locations. (eg. Guides at Udawalave park use them as car phones). New laws can bring the usage down, unless present non-owner users purchase their own immediately, which is unlikely. This will make government revenue (as tax) less and not more – unless we miss something.

The fight is so intense that Vodafone chief executive Arun Sarin too jumped in, dashing off letters to Prime Minister Manmohan Singh and communications minister A Raja, complaining against the stiffer spectrum allocation norms proposed by the Telecommunication Engineering Centre, an arm of the department of telecommunications.

Reliance Communications chief Anil Ambani, whose company uses CDMA technology, too wrote to the Prime Minister. He accused some “large GSM players”, a reference to Vodafone and Sunil Mittal’s Bharti Telecom, of spreading “misleading and false propaganda” to block fresh competition in telecom, hoard spectrum and indulge in “anti-consumer practices like cartelisation”.

Read the full story in ‘The Times of India’

Other related stories:

Anil Ambani takes telecom rivals to PM – Hindustan Times

Telcos sweat under spectrum deadlock – Business Standard

Telecom tussle engulfs all major players, Ambani writes to PM – The Indian Express quoating PTI

Mobile phone use is taking off in Sri Lanka – though not, perhaps, in ways that service operators might have hoped.

FROM THE ECONOMIST INTELLIGENCE UNIT

In the world’s poorer countries, the purchase of a mobile phone has become increasingly affordable. Using it, however, can still be a struggle. Low-income mobile phone owners in Sri Lanka are getting around this problem with a novel method for keeping costs down.

Known as ring cutting, mobile phone subscribers rely on ring tones to communicate with others, rather than actually staying on the line to talk. By a pre-arranged signal that will convey the desired message – “two rings means I’m home” – callers negate the need for a conversation. They simply hang up as soon as the number of tones are finished. The recipients’ phone log records the number of the person who dialled, and at what time. They can choose to call back, or not.

In a country where regular bloodshed, terrorism and sectarian violence has many people living in fear of their safety, ring cutting has developed into an extremely popular, cost-effective way of keeping in touch. A recent survey by LIRNEasia, a regional telecoms think-tank that studied mobile phone usage patterns in Sri Lanka, India, Pakistan, the Philippines and Thailand, found that Sri Lanka lagged only the Philippines in the ring cut stakes. LIRNEAsia surveyed around 9,000 low income earners aged between 18 and 80 years old. About half of mobile phone users in Sri Lanka are confirmed ring cutters, compared to 65% in the Philippines.

The economics of ring cutting are simply. Sri Lankans can buy a mobile phone for about US$30. But call rates of 5.00 rupees (0.05 US cents) per minute are not affordable to the many who earn less than US$100 a month. However, under a pre-pay system they can pay as little as 20 rupees (0.19 US cents) for a SIM card. If they mostly use their phones to ring cut, the credit on the SIM card can last for months.

Needless to say, telecom service providers are hardly thrilled by the practice. Mobile phone companies offer incoming calls for free and rely on a connection being completed to make their money. Adding insult to injury, many people use landlines, often at their workplace, to return calls, further circumventing the mobile network. Harsha de Silva, LIRNEasia’s lead economist, observes: “Missed calls are not good for the networks – less revenue; not good for the state – less taxes; and not necessarily good for the user – networks get blocked and we can’t talk.”

Model e-village

And for those Sri Lankans not able to jump onto the mobile bandwagon, a new service is taking root that’s even better than ring cutting. Far from the bright lights of Colombo, the country’s first 24-hour outdoor wireless computer network is now up and running in Mahavilachchiya, an tiny village 40km from the nearest town of Anuradhapura.

Mahavilachchiya is surrounded on three sides by the Vilpattu jungle, and most of the residents are farmers or labourers with a monthly income of about 5,000-10,000 rupees (US$50-100). While the village is connected to electricity supply, it is not yet covered by either terrestrial or mobile phone networks. The number of phones in the village: zero. The number of PCs in the village: 50 and rising.

Given the absence of telecommunications infrastructure and the scattered nature of the settlement, a more traditional wired network was not practical in technical terms, nor economically feasible. But thanks to the efforts of a charity, the Horizon Lanka Foundation, and the Information and Communication Technology Agency of Sri Lanka (ICTA), a workable solution has been found. Most of the computers are situated in the homes of local children, and as many as 200 use the machines for their studies, to access the Internet, and to send emails. Given a set of headphones, internet telephony is also possible. The computers are linked to a multimedia lab, which provides training and resources.

Projects like these, however, are not crimping growth in Sri Lanka’s telecom sector which soared to 7.3m users in 2006, led by a 59% rise in new mobile phone connections. Growth was spurred by competition from new market players and call rate cuts of as much as 40%, the Sri Lanka Telecommunications Regulatory Commission says. Although the waiting list for fixed-line phone services remains long – 366,000 at last count – fixed-line subscribers rose to 1.9m in 2006 from 1.2m a year earlier, after the Commission granted CDMA licenses to three firms, allowing them to use the cheaper technology to expand their offerings outside the main centres.

But it is cellular services, based on both GSM and CDMA technology, which have enabled many rural residents to get phones. The number of cellular phone users grew to 5.4m by the end of 2006, from 3.4m a in 2005. Liberalisation of the sector is hitting its mark and it’s an ongoing process. India’s largest private phone company, Bharti Airtel, is set to become the fifth mobile phone player in Sri Lanka, launching services by the end of 2007. Bharti plans to invest US$100m in the first year of operation, so the number of those without access to a phone can only keep falling.

As competition increases, rates will need to continue to fall, otherwise service providers will find more and more of their customers deserting them for internet telephony and tricks like ring cutting.

SOURCE: INDUSTRY BRIEFING

Read article on Global Technology Forum

LIRNEasia researcher, Divakar Goswami, was also interviewed. The interview is featured in the online edition here. The interview is in bahasa. The English text of the interview is below:
1. How’s the growth of ICT in Indonesia for along 2006 (as we see from regulations, infrastructure development (hardware and software), human being, ICT industry etc)?

Information and Communication Technology sector (ICT) in Indonesia is one of the most dynamic sectors of the economy contributing most to GDP growth rate (around 16%) than any other sector. The ICT sector in Indonesia is dynamic, growing and profitable. Compared to the past, the regulatory environment is more transparent, pro-market, pro-growth and therefore pro-poor.

ICT Sector

Wherever competition has been introduced, growth has been spectacular; those sectors lacking competition have grown more slowly. Take the example of the mobile sector that has added 6.6 million subscribers during the first half of the year and where operators have aggressively invested in infrastructure. For the year 2006, we may see an investment of more than $2.5 billion dollars made in the mobile infrastructure as the existing operators gear up to face the challenge from Hutch and Maxis who are rapidly rolling out their infrastructure. The mobile operators have been expanding their network at a frenetic pace: Since the end of 2005, Telkomsel has increased its number of base stations from 7,741 to 12,156 a growth of 57 percent; Excelcomindo’s base stations during that same period have grown from 3,620 to 6,052, a growth of 67 percent. Despite making substantial investments, mobile companies continue to be profitable. Excelcom and Bakrie Telecom that had losses in 2005 have made profits this year.

The fixed sector’s performance on the other hand is poor. The growth of fixed line phones per 100 inhabitants will probably be negative this year as the number of fixed phones remain stagnant and the population increases. Because of Telkom’s de facto monopoly in the fixed line market it is unlikely that the company has any incentives to invest in this sector and nor can investment come in from other operators if the sector is not fully opened up to competition.

Many have argued that why bother with fixed if mobile is doing so well. Since most of Internet service provision is currently relying on fixed infrastructure, the lack of fixed line growth means that there is also no growth in Internet subscribers. According to BPS’ survey from 2005, there are an estimated 10.3 million Internet users who access the Internet from home, office, warnets etc. For a country of 222 million that is less than 0.05 percent of the total population that use the Internet. If one looks at Telkom’s broadband subscribers, it stands at a pathetic 35,000. What are the reasons for this and how can we bridge this digital divide?

The significant cost components of an Internet Service Provider (ISP) in Indonesia are its leased line and international bandwidth costs. As my WiFi study on Indonesia (available on www.lirneasia.net/projects) has shown, leased line prices in Indonesia are around 48 time the price in India for a comparable link. International bandwidth costs are also a couple of times higher compared to countries in the region. Both the domestic and international leased lines have limited competition and hence the prices tend to be high. This translates to nearly $4000 in monthly leased line and internet connectivity costs (512 Kbps) for an ISP. Taking into consideration the average income of an Indonesian, it is astronomical sum! No wonder Internet access in Indonesia is unaffordable to the vast majority and will continue to be so unless competition is introduced in the “big pipes”—in the domestic and international backbone infrastructure markets.

Broadband penetration will continue to be low as long as there is only one provider of ADSL. Hopefully, in the future, competition from wireless broadband providers will lower the prices and make it more affordable for Indonesian people.

ICT Regulation

The Ministry and BRTI have undertaken a number of pro-growth initiatives in the last year or two. It has successfully conducted 3G auction that has been widely perceived as the most transparent licensing in Indonesia’s history. Two new mobile operators have been introduced and the increased competition will hopefully drive down mobile retail prices and make them more affordable for those in the “bottom of the pyramid.” A new cost-based interconnection regime has been introduced, which mandates cost-oriented interconnection and provides enforcement “teeth” to the regulators. When implemented from 2007, it will hopefully promote fixed-line competition and ensure greater transparency in this contentious area.

BRTI’s regulation to implement a phased reduction of leased line prices based on cost calculations may help lower Internet retail prices and help diffusion of Internet connectivity.

However, there are a number of regulatory barriers that are preventing faster growth of the sector. Indonesia has an archaic licensing framework that may have been relevant 10 years ago, but not anymore. Converged services where voice, data, video may be combined blurs the boundary between traditional fixed and mobile services. Indonesia’s regulatory environment is simply not relevant to converged IP-based networks like the New Generation Network (NGN) that are being ushered in all across the globe. The current licensing framework is not technology neutral and has different rules and licensing requirements based on a particular technology. This has resulted, for example, in a situation where the regulator is trying to prevent Bakrie Telecom and Telkom Flexi from providing full mobility services because their license treats them as fixed operators although the CDMA technology can be used to provide full mobile services that will significantly enhance the utility of the service to customers.

Why Bakrie Telecom is licensed to provide service in only two regions is beyond my understanding. When a country does not have enough telecom infrastructure I would think it is in the interest of the Government and the public if an operator is allowed to build a network throughout the country. There are many other serious problems with the licensing framework which I will not get into, but this by far remains an area where more of the Government’s energies should be focussed.

Most of the operators I have spoken to, with the exception of Telkom, feel that although the current regulatory structure is better than what existed previously, it is still not independent in its decision-making. If you look at the structure of the organization it is apparent that BRTI is embedded within the Government that also controls two of the largest telecom operators in the country, Telkom and Indosat. The credibility of BRTI’s decisions will be considerably enhanced among the operators and other stakeholders if it were reformed and given more independent powers and separated from DGPT. The small degree of independence for BRTI has shown impressive results in terms of investment that has come into the sector. Imagine the investor confidence if a fully independent regulator can be put in place?

2. Is there any progress in 2006 than 2005? If yes, what is the indicator?

The following graph indicates quite clearly the progress of the ICT sector from 2005 till half of 2006:
The number of mobile phones in Indonesia per 100 inhabitants has increased quite significantly from 21.6 in the end of 2005 to 24.32 in the middle of this year. The number will probably go up by the end of the year, although growth from 2005 to 2006 may not be as rapid as from 2004 to 2005. However, with the introduction of Hutch and Maxis in the mobile sector, we should see more rapid growth in the number of mobile subscribers who are added to the network at the end of 2007. More competition in the mobile sector will lower mobile retail prices that are quite high compared to the region and make it more affordable to those on the “bottom of the pyramid.”

Although the penetration of fixed wireless access (FWA: CDMA) seems to grow slowly from 2005 to 2006, it does not reflect the impressive performance of Bakrie Telecom that has grown its network from 0.3 million to 1.3 million in less than a year. The slowing growth of FWA is primarily because Telkom Flexi shed a significant number of non-revenue generating subscribers from its network.

3. If no progress or stagnant, would you please to explain it?

Fixed wireline penetration has been negative because of a lack of competition in that sector. In a country with such low penetration one does not expect to see negative growth rates. Telkom, the monopoly provider, has no incentive to invest in fixed line infrastructure in the absence of competition.

Internet penetration numbers from 2006 are not available although growth in the number of Internet subscribers will continue to remain low because Internet prices remain unaffordable to a vast majority of Indonesian. Furthermore, only 3.74 people out of 100 own a PC in Indonesia. Of those PC owners only 27 percent use their PCs to access the Internet. Low PC ownership and low Internet use even among those who own PCs are also other factors that are contributing to stagnant Internet growth.

4. What do you think about the commitment of Indonesia’s government or Information Communication Department (Depkominfo)?

In view of the past year’s performance, I believe that the Minister Sofyan Djalil is someone who would like to reform the ICT sector and bring more competition to develop ICT infrastructure and lower prices. However, as an outsider, one gets the impression that not everyone in the Depkominfo is on the same page as the Minister. Furthermore, since the Indonesian government is dependent on dividends it receives from Telkom, it is probably hard to take decisions that may affect the profitability of the company. It is therefore crucial to separate the policy and regulatory functions. Let the Depkominfo develop policy and leave the day to day business of regulating the ICT sector to the BRTI.

5. What is the important think in this year that must be done by the government but not yet finished?

The Government has been collecting Universal Service Obligation (USO) funds from operators to roll out basic telephone service to 40,000 villages in Indonesia that do not have any connectivity. A least-cost subsidy auction was supposed to be held this year to disburse the USO funds in a transparent manner. However, a Ministerial decree is awaited to launch this very critical program to extend access to the digital “have-nots.” It is hoped that the auction will be held soon and will be open to all network operators (fixed and mobile).

6. What do you think about Dewan Teknologi Informasi (Information and Technology Council) formed by The President SBY? Are you optimist or pessimist with this council?

The formation of the National Information and Communication Technology Council (NICTC) by the President Susilo Bambang Yudhoyono, is a very important development for Indonesia’s ICT sector. It signals the recognition at the highest level of government that the ICT sector is important for Indonesia’s development and growth. Since the lapse of the 1999 Blueprint, the ICT sector in Indonesia is rudderless. Although the Government has good intentions, many of the policy/regulatory actions have been taken on an ad hoc basis without the guidance of a coherent vision. So a number of decrees have been issued that are overlapping and licensing is being done on an ad hoc basis. For infrastructure sectors with high sunk costs and long gestation periods, like for telecoms, there must be continuity and coherence in the Government’s policies.

Clear vision informed by the views of the various stakeholders can make the Council a guiding hand that can lead the sector to a higher trajectory of growth. The leadership can remove many hurdles imposed by bureaucracy and narrow vested interests.

The first meeting of the Council will be key in defining the objectives that the Government and other stakeholders aim to achieve for the ICT sector. The success of the Council will depend on it developing a time-bound road map or action plan that lays out what the Government would like to see achieved and in what time frame. When the Technical Coordination meeting is held every three months, they would be in a position to evaluate the implementation of the action plans. The biannual Council meeting led by the President would ideally evaluate progress of the action plans, make changes when required and bring to task parties that are responsible for delays in implementation. If that happens, watch the Indonesian ICT sector take-off like a rocket!

8. According to you, what must they do to make a good ICT implementation? And what improvement we can do next?

Good implementation of ICT projects must take into consideration sustainability of the projects when funding stops. For example, it is laudable that Qualcomm has provided wireless access to high schools in Way Kanan in Lampung and plans to connect 59 villages with “warcells,” cellular kiosks. However, the key to success to these projects is to develop a financially viable model to sustain this initiative when Qualcomm stops funding this program. As Grameen in Bangladesh has shown with the Village Phone Program, it is possible for a company to provide connectivity to rural villages in a profitable manner. Because Grameen is making profits from providing telephone connectivity to villages it is in its own interest to expand the service to more villages and in turn help bridge the digital divide.

India has one of the world’s lowest revenue rates for mobile phones.
© 2006 The Associated Press
© 2006 Dialog, a Thomson business. All rights reserved
Source: http://www.telecomasia.net/popup_article.php?type=article&id_article=2612

Qualcomm claims that CDMA handset prices in India were already some of the lowest in the world and that royalty was only about $2 per handset. It further argues that Reliance’s move into GSM has to do with flawed spectrum policy of the Indian Telecom Ministry (DoT) that provides more than twice the spectrum to GSM operators compared to CDMA operators like Reliance. This is because according to Qualcomm, GSM technology allows only a finite number of subscribers in a cell whereas the CDMA technology on the other hand poses no such restrictions. “For instance India’s GSM operators get 4.4 MHz of spectrum initially while CDMA operators get 2.5 MHz. But when the subscribers of GSM operators cross one million they become eligible for a total of 10 MHz. For crossing that level, the CDMA operators get only 5 MHz. That’s because DoT, the spectrum allocater, feels that since the CDMA technology can carry about five times more traffic, it can operate efficiently with much lower spectrum.”

The announcement by Reliance has however spurred Qualcomm CEO, Paul Jacobs, to visit India and meet with Reliance and Tata, the two dominant CDMA operators. India contributes 2.2% of all Qualcomm royalty revenues and 8.8% of CDMA handsets sold worldwide. Jacobs is also meeting with the Indian regulator TRAI and the DoT minister.  Although Qualcomm has ruled out lowering  royalty fees it is promising increased investment and contributions in kind. The above issues are discussed in detail here:

Telcos in a spectrum jam

 Qualcomm says no to royalty cut

Of these sectors, the Transport, storage and telecommunication sector expanded by 11.8 per cent during this period. The post and telecommunications sector which has continued to grow at a high pace, expanded further by 24.9 per cent in this quarter. With the latest CDMA technology, subscriber levels of Fixed Access – Wireless Local Loop phones increased by 159,162 new connections, a notable expansion for this category. The subscriber level of cellular phones expanded by 52 per cent and the mobile penetration ratio (Mobile connections per 100 people) was around 17.

By Poornima Weerasekara (Daily Mirror, 1 March 2006)

Suntel yesterday unveiling its roadmap for the next three years announced their plans to invest Rs. 8 billion to expand the CDMA network island wide.
“The coverage of our 155 base stations is better and wider than most of the mobile operators today,” Suntel Managing Director Jerry Huxtable said.
“We have plans to build about 40 base stations by the middle of the year, with plans to construct another 50-60 base stations in the 2nd quarter,” he added.
The Suntel CDMA network is currently the largest network in Sri Lanka covering 80% of the population in 22 districts.
They are also planning to build base stations in Jaffna, given the situation is stabilised in the region.
“Earlier we had a plan to build 4 base stations in Jaffna. But this was put on hold as the situation in the region at that time deteriorated,” Mr. Huxtable said.
However, he said that Suntel was optimistic about entering the region now that the peace situation seems to be stabilised.
Suntel has also completed a successful test run of the Evolutionary Data Optimiser (EVDO) technology, which is capable of providing broadband wireless connectivity with peak data rates of 1.2 mega bits per second. They have currently applied for a new frequency in order to roll out the service, However, after 4-5 months of waiting the TRCSL is yet to allocate the required frequency.
Suntel also urges the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) and other ministries concerned to “create a licensing environment that is fair for all operators.”
“Increasing offers are made by SLT and Mobitel together. Increasingly Dialog is also moving into the fixed line arena,” Mr, Huxtable said, adding that “the Suntel CDMA network is able to provide the mobility required by users.”
“So if creating an equitable playing field means going for a mobile license, then yes we are prepared to go for it,” he added.
The company also recorded a year on year revenue increase of 35% and profits and a 23% EBITDA (earnings before interest, taxes, depreciation, and amortization). Their customer base also soared by 81% to 188,000 customers in the last six months since rolling out their CDMA technology.
“We are estimating a revenue growth in the range of 35-40% in 2006,” Mr. Huxtable added.
However, the import duty imposed on fixed line handsets is threatening to erode the profits of wireless local loop operators.

Box story: Prices of CDMA connections to rise because of duty on hand set imports.

Suntel Ltd. Technical Director Mr. Mahinda Ramasundara yesterday said that import duties on CDMA handsets was threatening to push up the prices of CDMA phones.
According to Mr. Ramasundara CDMA import duties stood at around 18%, and that the telecom operators were requested to pay up the duty in retrospect.
“Our earlier prices were calculated without the duty component. So now we are unable to recover that cost from consumers. This would also push up CDMA telephone prices significantly,” he added, highlighting that this would make the technology inaccessible to the lower-income segments.
Suntel urged the TRCSL and the ministries concerned to create a more equitable playing field in the telecom market highlighting that there was a “clear anomaly between the costs of importing a mobile phone and fixed phones.”