Unintended benefit from Sri Lanka budget: More reasons to get broadband

Posted on November 23, 2011  /  0 Comments

The language on ICTs in the 2012 Sri Lanka budget (paras 50-53) is pretty vague. Basically, LKR 500 million will be added to efforts to provide IT education and all government departments and agencies will have to work with the ICT Agency when they introduce IT into their systems. And, there are plans to set up a technology city in Hambantota that will hopefully attract IT and ITES firms there.

But the really good stuff is in Para 53.

The Telecommunications Regulatory Commission will implement policies and strategies to encourage telecommunication companies to give priority for the development of broad-band network facilities. In keeping with development priorities, telecommunication charges on incoming and outgoing calls will be revised suitably.

Since the LKR 2 billion expected to be generated by the increases in taxes on incoming calls (from USD 0.07 to 0.09 per minute) and on outgoing calls (from LKR 2 to LKR 3) is reflected in the new revenue measures (Table 1), I was scratching my head about this last sentence. It seemed, on the surface, like an ordinary revenue-raising measure; what did it have to do with encouraging broadband development?

But then I realized that it would. Because international calls will be made more expensive by the LKR 3/mt tax on outgoing calls, Sri Lankans will have greater incentive to call their friends, relatives and business contacts using Skype and Gtalk. This will create demand for broadband. All that one needs is a dongle and mobile signal. The government won’t get its 3 rupees, the telecom operators will see their international revenues dipping. But on the good side there will be more demand for broadband. But this is “in keeping with development priorities.”

I still have to figure out the hidden wisdom behind the decision to raise the tax on incoming calls from USD 0.07 (app. LKR 8) to USD 0.09 (app LKR 10). This will, for sure, increase incentives to engage in bypass or grey-market business. The TRC and Police will have lots to do, shutting down bypass businesses and running newspaper ads. The flow of black money into the economy will increase, which is useful for political campaigns and such. Perhaps people will use black money to obtain broadband services? This bit is a work in progress. Ideas, suggestions welcome.

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