Fixed line spike in Sri Lanka

Posted on August 16, 2005  /  8 Comments

CDMA is a big story in Sri Lanka these days.  As a result of the frequency refarming process that was started in 2003 with the issuance of 1800 GSM frequencies to Dialog Telekom and Mobitel through an auction, 800 CDMA frequencies were released earlier this year by the Telecom Regulatory Commission.  The article  by Amal Jayasinghe in provides more detail on how the rollout is proceeding.  Shortly after the article was published, Suntel began to offer LKR 1500 discounts, which may be the start of the price reductions I refer to in the Jayasinghe piece.

Suntel has also announced that it will offer pre-paid fixed service for the first time in Sri Lanka.  These developments have many interesting connections with LIRNEasia projects, including the focus on effective regulatory reforms (incl. spectrum refarming) for rural rollout, the role of microfinance and the ICT use on a shoestring project.


  1. The Daily Mirror’s Financial pages had also a story on CDMA where Rohan was also quoted quite a bit. I have the hard copy but if someone could post extracts from that story via the web version that would me the trouble from having to type it in.

    The story appeared on August 16 I think.

  2. Below is an e-mail exchange from the LIRNE.NET.
    The response follows.

    –Rohan Samarajiva


    The SNO pilot in April was CDMA2000 (via QualComm & Ericsson who pretty
    much seem to have monopolised the technology since WW2), and I believe
    they’re planning it to use it for their local loop, but the technology
    wonks over on main campus have tended to be a little scathing about

    Charley Lewis
    LINK Centre

    This is really interesting. Several of the failed cellular licensees were wanting to deploy CDMA here back in 1998 but it was believed that the
    size of the SA market could only accommodate one national standard – GSM, which of course the incumbents had already been using for some time. With the development of UMTS and the common interface between GSM and CDMA interest arose again primarily in the context of the Underserviced Area Licencees but of course the disenabling regulatory enviroment for them as you know scuttled that. (At the moment those that are operating are essentially incumbent GSM franchisees – no price or service innovation at all). Anyway, perhaps because I don’t know enough about the technology, I
    don’t really get why in the case of Sri Lanka you have not gone wireless/mobile the whole way (which in SA is clearly a preference/substitute for fixed
    even at much higher cost). I don’t really understand the costing – if they use technology up to the last mile why don’t they just go with mobile the
    whole way, as the receivers seem to be similarly priced – or is it a regulated price, not cost, issue – so it is priced as fixed call? Or is fixed valued for making affordable internet etc available?
    Thanks for the article, Alison.

  3. I will not get into the technical pros and cons of the various options, but will simply describe the reasoning behind the SL policy actions.

    Overall government policy objectives, during the period the process was started, were
     Introducing lowest cost technology
     Unified licensing where fixed would do mobile and vice versa
     Rationalizing and making transparent the spectrum assignment process.

    Status quo ante

    Existing four mobile operators were using all sorts of standards (TACS, ETACS, AMPS, D-AMPS and GSM) and had various amounts of frequencies; but all wanted to shift to GSM by 2002. Largest operator had 7.5 MHz and smallest had 11 plus. All but one, the last mover which had bet on D-AMPS, were on 900 GSM band.

    The new-entrant fixed operators (2, licensed in 1996) had picked DECT and Proximity (Nortel proprietary standard) at the start and obtained the appropriate frequencies. These standards did not catch: economies of scale did not kick in; prices did not come down (and in fact it was becoming difficult to source equipment). The frequency assignments may be seen on the Master Register at the TRC website.

    To its credit, the government at no stage mandated standards. The choices, right and wrong, were made by operators.

    The reforms

    In the process of finding frequencies for the last mobile operator, the government worked with the regulatory agency to refarm some of the non-optimally used 1800 GSM frequencies through a transparent auction process in 2003 April. Two slots of approx. 7.5 MHz were assigned to two mobile operators (others declined to participate in the auction). The largest operator now had 7.5 MHz in the 800 band and 7 MHz in the 1800 band. The last mover had 7.5 MHz in the 1800 band only. This operator was thus able to relaunch its services. However, it still complained that the “per-line” costs of 1800 were higher than those of 900 GSM.

    The two fixed entrants were pleading for CDMA. Their rollout had almost completely stalled by this time.

    The government and the regulatory agency agreed over many many meetings that each fixed operator (two new entrants plus the incumbent plus the proposed regional telecom network operators under e Sri Lanka) would be given a base assignment of 2.5 MHz of 800 CDMA frequencies under administrative procedures. Expansion would have to be in the 1900 CDMA band; assignment would be through auction. The mobile operators would also be limited to approx 7.5 MHz of 900 GSM frequencies, assigned through administrative means. Expansion would be through auction of 1800 GSM band, following the April 2003 precedent. The rationalizing of the assignment of high-value bands required the cooperation of the operators since a degree of refarming was involved. The base assignments (low cost, compared to the roughly USD 1 million that was paid by one operator in the 2003 auction) were intended to obtain their cooperation and also to recognize their contributions in investing in the sector in difficult times.

    The planning process proceeded apace until the unexpected and premature elections of March 2004. The period of political uncertainty preceding the election (from November 2003) precluded the completion of the reassignments, a key step being the release of a portion of the 10 MHz of AMPS/CDMA 800 frequencies held by the last-mover into GSM. It was necessary to assign GSM 900 frequencies to it in return for releasing the 800 CDMA frequencies.

    Following further consultations, the government finally completed a key part of the reassignment scheme in 2005, issuing two slots of 2.5 MHz of CDMA 800 frequencies each to the fixed new entrants. It is expected that the incumbent will also receive 2.5 MHz of CDMA 800.


    The SL process shows the benefits as well as the costs of allowing the market, rather than governments decide on standards. But it must be emphasized that simply telling operators they are free to pick any standard they want. The attractive and low-cost technology standards require the use of specific frequencies. The government, together with the regulator, took action to clear the frequencies desired by the operators.

    The low-cost CDMA story is essentially an Asian story. In 1996-97 when Sri Lanka’s new entrants and South Africa’s incumbent were selecting the standards for fixed wireless telephony, CDMA was not an attractive choice. It was used as a mobile technology in Korea and the US, and it had no special price advantages. It was only after 1999 or so, when operators in India and China started to use CDMA, that costs came down drastically.

    In the case of India, the adoption came in the form of taking advantage of gaps in regulatory rules. First TRAI allowed BSNL, the government owned fixed incumbent that dominated all areas outside of Delhi and Mumbai, to use CDMA for something called limited mobility service. Then, the hitherto dormant fixed licensee, controlled by one of India’s most aggressive business houses, started rolling out its own limited mobility services. With certain non-technical innovations such as temporary registrations and roaming, they managed to make the fixed service look almost identical to mobile. Given the many advantages enjoyed by the fixed services such as favorable interconnection terms and lower/no license fees, this resulted in a plethora of court cases. In late 2002, the Indian government broke the logjam, promising unification of licenses and other measures to level the playing field and the court cases were withdrawn.

    The promise of unified licensing requires frequency rationalization, as now understood by TRAI. In Sri Lanka, the government sought to rationalize the frequencies prior to unifying the licenses. Both countries aimed for the same end-point, but differed on the path.

    Lowest cost CDMA use involves the use of handsets no different from mobile handsets. This also allows people without electricity in the locations where the phone is used (but with recharging options nearby) to enjoy phone service. However, as TRAI found out, this makes CDMA virtually indistinguishable from mobile. Regulatory restrictions on the technical possibilities such as not allowing use of multiple base stations were easily subverted in India, allowing for temporary registrations and roaming. The TDSAT decision of August 2002 is informative on the problems.

    It appears that the TRC has prohibited the use of the lowest cost terminal equipment. In Sri Lanka, at present, subscribers are offered desk-type sets in a box. They buy the box; take it home and plug it to the wall; the phone is ready for use. However, it appears that consumer innovation is beginning to chip away at the artificially imposed fixedness: persons having a residence and an office within the same base-station area are reported to be taking the phone to work, along with the lunch box. The newspapers also carried a picture of a blind person who charges the CDMA phone, and then sets up on the side of the road as a reseller for the three hours that the charge holds.


    CDMA 800 is an attractive technology for all developing countries, not solely because of its technical features by because the cost per line have been driven down (by some estimates) to around USD 40. The manufacturing of CDMA equipment is not dominated by the big Western firms; Chinese suppliers such as Huawei have redefined the market and compelled the big firms to respond.

    What governments and regulators must do is to create the conditions for the adoption of these low-cost technologies. It was not possible to predict back in 1996-97 when all forms of wireless started booming, that CDMA would be so attractive. But now that it is attractive, what governments that care about extending service to rural areas and people with less disposable income is to clear the frequencies; assign them through transparent means; and let the market do the job.

  4. The issues of CDMA mobility are being played out in Pakistan, following the recent issuance of fixed and mobile licenses by the PTA. According to the news report at
    the Pakistan scenario is different from that of India and similar to Sri Lanka.

  5. More reporting on CDMA developments in Sri Lanka:

    The gist is that very rapid growth is occurring; the new entrants are capturing the early demand; the incumbent will take six months to rollout.

  6. Here is the story from the Daily Mirror on this issue:

    Phones ringing in Lankan villages as new technology arrives

    COLOMBO, Aug 14 (AFP) – After decades of waiting, telephones have finally begun ringing in villages and rural areas across Sri Lanka.

    Not mobiles, nor standard landlines, but a clever combination of the two that is quickly making telephony accessible to all.

    “We have not been able to get a land line all our life even though I was the village headman,” said H. P. Gunaratne, the now retired top official in the southern village of Hiyare.

    “I needed the phone because two of my three children are in university and I had no way of keeping in touch with them. Now they can call me regularly and we know what the children are doing.”

    But it’s not only rural consumers who are benefiting from the new telecoms regime — the arrival of the wireless technology known as CDMA (code division multiple access) sparked a mini-stampede in the capital Colombo for the new product.

    CDMA is commonly used by operators in Asia and elsewhere for faster mobile phone connections but in Sri Lanka it is being used to provide fixed-line access so that telecommunication is available at affordable prices even in the most far flung regions. The island’s telecoms regulator in March gave licences to two fixed-line operators to adapt cheaper mobile phone technology to fixed line units to ensure a quick and cheaper roll out across the country.

    Hardware store keeper Lal Jayantha in the village of Pasgoda in southern Matara district said he used to have to travel a kilometre to the nearest public telecoms booth, but thanks to CDMA he now has a phone at home.

    “We never had a phone before because we were always told that there were no ‘loops’ (a pair of copper wires) for us to get connected,” Jayantha said. “Business is also improving after we got the phone. Life is much easier.”

    Some 500 members of a rural cooperative bank operating across rural Sri Lanka are also signing up for the new connections, underscoring the potential for the two phone companies — Suntel, the Sri Lankan arm of Telia of Sweden and the Sri Lankan-owned operator Lanka Bell.

    Suntel engineering director Mahinda Ramasundera said they were overwhelmed by the response when CDMA phones were launched last month. Their entire stock of handsets were sold out within 10 days, he said.

    “We had to rush and place another order for handsets because we never anticipated this demand,” Ramasundera said. “The demand is not only from the villages, but urban areas where people are switching to CDMA as a cheaper option.”

    At 130 dollars a connection, a CDMA phone is more expensive than a mobile unit, but the call tariffs are about four times cheaper as they are considered fixed-line and, unlike cellulars, incoming calls are free.

    The new CDMA instruments resemble standard phones but are not connected to exchanges through conventional copper cables. Instead, they use the same wireless technology adopted by mobile phone companies.

    “We are going to see a spike in the number of phones in the country with CDMA coming in and making it cheaper for operators to go out into rural areas,” said Rohan Samarajiva, a former telecommunications authority in the island.

    Samarajiva said he expected prices of CDMA phones to fall significantly, the way mobile handset units did soon after they were launched.

    CDMA technology, he added, was allowing operators more easily to go into rural areas as “per line costs” had come down by more than tenfold compared to conventional technology.

    The Indian Ocean island republic of 19.5 million people was the first in South Asia to introduce mobile phones 16 years ago at a time when there was a 10 to 12 year wait for a traditional phone.

    Since then, the mobile sector has been hailed as one of Sri Lanka’s biggest success stories, with the number of handsets jumping 58 percent last year to 2.21 million after recording a 49 percent increase in 2003.

    In April, Lanka Bell signed an equipment deal with China’s Huawei Technologies Co., Ltd, to deploy a low cost CDMA rural network in the island.

    Lanka Bell Managing Director Suren Goonewardena said a combination of lower tariffs and easy availability was driving demand for their CDMA connections.

    “Lower income groups in cities are also opting for these phones,” Goonewardena said. “For the first time, Sri Lankan subscribers can get a land-line phone over the counter.”

    Even in Colombo which accounts for 44 percent of the 991,000 fixed-line phones in the country, the demand for CDMA phones had been phenomenal.

    “People in the city rushing to get these phones suggest that our demand forecasts may be terribly underestimated,” Samarajiva said.

    The two networks have already sold about 50,000 connections across Sri Lanka since starting in July. However, the service is not available in rebel-held areas of the island’s northeast.

  7. Last week the psychological barrier of LKR 10,000 (USD 100) was crossed by Lanka Bell for a new CDMA connection, fulfilling a prediction made by me in August

    This means that CDMA connections from the new entrants are going for around half the price of a wireline connection from the incumbent.

    Current estimates are that around 160,000 new connections will be given by Suntel and Lanka Bell this year, with 200,000 being likely depending on the buying mood of the public over the year-end holiday season and of course the lowering of the connection fee by Suntel to below LKR 10,000 as well.

    Even the low estimate of 160,000 will double the number of connections given by these companies. In other words, they will give as many connections in 2005 as they gave over the entire 1997-2004 period. Unfortunately this is still less than the number of registered waiters which was over 350,000 in mid 2005. More needs to be done.

  8. Hi lirne,

    have you new prodect cdma telephone 2008 ?

    please send me one photo cdma telephone and price ?


    I am waitting for your replay