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

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Surprisingly, it is not in Colombo. It is not even in any of the other key places. It was installed in Mahavilachchiya, a little known village, 40 km from the nearest town Anuradhapura, and surrounded three sides by the Vilpattu jungle.

Most of the villagers are either farmers or labourers with a monthly income of about Rs. 5,000 -  10,000 (US$ 50 – 100). Though there is electricity, it is not yet covered by any of the terrestrial or mobile phone networks. This means there is not a single telephone in this village.

On the other hand, Mahavilachchiya has more than 50 PCs and a sophisticated multimedia lab. Majority of the computers are at the houses of the children, who in addition to use them for their studies, design web sites of some of the foreign companies. These PCs are now connected by using the “Mesh Wireless technology” which gives them direct Internet and E-mail facilities.

Wireless was the only approach that could be used, as there were no telephone lines the distribution of the houses makes a wired network set up too expensive.

-as reported by Chanuka Wattegama