A different model for supplying payphone services; let’s hope it will work

Posted on May 22, 2007  /  0 Comments

The title of the article “Sri Lanka to de-regulate payphone business,” is a little deceptive, but then that is probably not the fault of the Director General, but of the editor of LBO.

Sri Lanka plans to allow third parties to operate payphone booths in an attempt to popularise them in far flung areas outside the city of Colombo, a top official said.The island’s eight public switched telephone network (PSTN) operators will now be allowed to appoint a third party to operate and maintain a public phone booth on a revenue sharing model.

“Its a scheme similar to selling lottery tickets, where the lottery operator does not undertake the burden of running, maintaining and collecting the money,” the head of Sri Lanka’s telecom watchdog, Kanchana Ratwatte said.

Payphone services are currently offered by three operators who have more than 7,500 booths scattered islandwide serving over 1.8 million customers, according to Telecommunication Regulatory Commission figures.

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What is being proposed is a reseller model, not deregulation as such, which would require an amendment to the Sri Lanka Telecom Act, s. 17A. Even for the reseller model to work, the TRC will have to ensure that the telco operators do not discriminate among various resellers, and especially that they do not directly and unfairly compete with the resellers.

As long as SLTL does not run its payphone business as a unit with separate accounts and continues to not allocate all costs caused by the payphone unit (e.g., a percentage of the salaries of the senior executives who deal with payphone issues) to that account, the resellers will be at a significant disadvantage.

Another problem to be on guard against is the abuse of information from resellers. It was found in the 1990s that shortly after a reseller asked for x number of connections in a specific location (say a railway station), the relevant telco would mysteriously install a number of its own payphones in the near vicinity.

It is also important to ensure that resellers get an adequate discount, possibly revisiting the discount that was implemented for the first time in 1998.

It is noteworthy that 41 percent of BOP users in Sri Lanka have a fixed or mobile phone in their home and international calling is much easier and cheaper from fixed and mobile phones, so the business case for payphones is much weaker now than, say, five years ago.

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