Telecom Regulatory and Policy Environment in Sri Lanka: Results and Analysis of the 2008 TRE Survey
This project was done in collaboration with LIRNEasia, a regional ICT policy and regulation capacity building entity, incorporated in 2004 as a non-profit organization under Section 21 of the Companies Act No.17 of 1982. LIRNEasia is the Asian affiliate of LIRNE.NET, a collaboration among leading universities in Denmark, the Netherlands, South Africa and the United Kingdom. The TRE 2008 Survey was conducted in parallel in selected countries in South and South-East Asia.
The Telecom Regulatory and Policy Environment study for Sri Lanka is based on the combined results of the 2008 TRE survey, on telecom indicator data from National Statistical Organizations, telecom operators and the Telecommunications Regulatory Commission and on key developments in the telecom regulatory and policy space in Sri Lanka in the period May 2007- May 2008. The principal research questions that this study addressed are: how has the regulatory and policy environment pertaining to the telecom sector in Sri Lanka evolved over time; how has the telecom sector performed over time (as per the indicator data); to what extent is the performance of the telecom sector a result of regulatory and policy events; what do the results of the 2008 TRE survey point to with regard to the efficacy of regulatory and policy decisions in the fixed, mobile and broadband sectors; and what policy conclusions and recommendations can we draw from the results of this survey.
The TRE (Telecom Regulatory Environment) instrument, which is a diagnostic tool designed to assess the efficacy of regulation and policies pertaining to a particular country’s telecom sector was developed by LIRNEasia and was used previously in Sri Lanka in 2004 and in 2006 for the fixed and mobile sub-sectors; this year’s TRE survey includes the broadband sub-sector as a new component in the analysis of telecom sector performance. In this report, the TRE methodology is used to capture the perceptions of informed stakeholders on the telecom regulatory and policy environment of Sri Lanka, based on seven parameters: market entry; access to scarce resources; interconnection; tariff regulation; regulation of anti-competitive practices; universal service obligations (USOs); and, quality of service (QoS). Key regulatory and policy episodes that occurred in the May 2007 to May 2008 time period provide a contextual background to the survey questionnaire. This report also compares the 2008 survey results with those of a similar survey conducted in 2006 to arrive at a better understanding of the dynamics underlying the TRE scores.
The results of the 2008 TRE survey indicate a below average score across six of the seven dimensions, with the exception being mobile sector USOs. The key facts that emerge from a comparison of the two survey periods, 2006 and 2008, is that overall TRE scores have improved marginally in both the fixed sector and in the mobile sector; scores for market entry in the mobile sector have shown a significant drop; scores for fixed sector interconnection have increased significantly; and, scores for USOs in both sectors have recorded increases.
However, our analysis of the TRE scores for Sri Lanka indicates that these numbers are not entirely a reflection of regulatory and policy actions or of market dynamics. In addition, our analysis suggests that disparities between the definition of a particular parameter contained in the survey questionnaire and the perception of respondents as to the definition of a particular parameter could also bias the results of the TRE scores.
In general however, what emerges from our analysis is that market behaviour – specific actions taken by operators – in spite of bad regulatory and policy actions – facilitated by the dynamics of competition, is driving the telecom sector. Initial pro-competitive reforms and liberalization efforts from 1980 until the mid-late 1990s created a momentum for competition that appears to have taken off, by-passing regulation.
The policy recommendations emerging from our analysis focus on the principles regulation only where necessary; and, regulation for competition. For instance, we argue that areas such as tariff regulation and QoS should be left to the market – according to the tenets of consumer choice and revealed preference, whilst areas such as interconnection, licensing, and access to scarce resources need to be addressed in a systematic and transparent basis by the regulator.