This is a case of the market responding to what the customer wants in the face of regulatory failure, or a work around of the type we discuss in our book. From 1999, the Telecom Regulatory Commission has been considering a shift to Calling Party Pays, but has balked for various reasons. In 2004, the decision was taken and a news conference was announced. Just hours before the news conference, the politically appointed Secretary to the Ministry/Chairman of the TRC, unilaterally and possibly illegally overrode the Commission decision, saying he cannot be responsible for allowing this decision to go through just before the election. He kicked it to a public hearing. The public hearing committee counted the NUMBER of submissions pro and con, and decided that the public was against CPP even though it was obvious that the con submissions were based on a common template and were orchestrated by a union. So Sri Lanka remained RPP, while both India and Pakistan, which started the process later, converted and gave the customers what they wanted. Regulatory failure caused by political interference and staff incompetence.

The Tigo action comes in the context of a full-blown price war initiated by “No. 2″ operator Mobitel and the response last week by the market leader Dialog. For the last few years, everyone has been inching toward ending RPP. No RPP was being charged from postpaid customers for all practical purposes. The Mobitel salvo ended it for government employees and pensioners a few weeks back. The Dialog response last week ended it for all, but asked for a one-time fee to get the benefit. Now Tigo has written the script for Mobitel’s response and also perhaps for Hutch and Bharti Airtel Lanka.

The people have been given what they want. But the regulator still has work to do. The fixed networks should not get the free ride on the mobile networks they have enjoyed for the past so many years. Completion of a call originated in a fixed network on a mobile network causes costs on the mobile network. From the time mobile was introduced in Sri Lanka in 1989, the fixed networks have collected the retail price of the call (usually the higher price of a national call) and KEPT IT ALL, without giving one cent to the terminating network. The excuse was that the mobile networks could charge for terminating the calls under RPP.

On the other hand when a call to a fixed network is originated on a mobile network, the mobile operator PAYS A TERMINATION CHARGE to the fixed network. In 2007, for example, Sri Lanka Telecom earned LKR 593 million in such payments. A Sri Lankan fixed network operator will pay termination fees to other fixed operators; it will pay termination fees to foreign fixed operators; it will even pay termination fees to foreign mobile operators. The only operators it will not pay termination fees to are Sri Lankan mobile operators.

Now that consumer demands and competition have ended RPP, the mobile operators are providing termination services to fixed operators for free, cross-subsidizing it from origination services. This is wrong.

It is high time that this anomaly is remedied. Sri Lankan mobile operators are offering some of the lowest mobile prices in the world. The least the regulator can do is to ensure that they are treated fairly.