Sri Lanka’s telco sector is long overdue for major reforms
Written by Sanath Nanayakare
As the country’s economy continues to experience unprecedented turmoil, most Sri Lankans are tightening their wallets wherever they can. While luxuries can be cut back, Sri Lankans are spoiled for choice when it comes to essentials. Meanwhile, in an increasingly digital world, the definition of ‘essential’ has also expanded to include telecommunications.
Although the island-wide expansion of telecom coverage has led to explosive growth in mobile data consumption, Sri Lanka’s lowest income groups still rely on mobile data and direct voice calls to stay connected.
However, a knowledgeable source in the telco sector who spoke to The Island yesterday said structural problems in the sector – from delays in the implementation of Mobile Number Portability (MNP) to regressive fee structures such as the existing Interconnection Usage Charges (IUC) – place a disproportionate burden on Sri Lanka’s low-income earners.
IUC is the price charged by a particular network owner when receiving a call from outside their network to interconnect a voice call to their network. Typically, telcos with the largest user base earn the highest revenue from these IUCs. But always this fee is charged by the user. The source indicated that these fees act as a ‘proxy tax’ on the most dependent segments, while the benefits of this ‘tax’ are enjoyed only by industrialists with the largest customer base.
Abolition of such fees will bring Sri Lanka’s mobile industry closer to established global best practices by reducing standard call charges for voice calls to all Sri Lankans. After significant delays, IUCs were phased out in India in January 2021, a move widely acknowledged to have significantly eased the financial burden on consumers. Similar measures have been introduced in Bangladesh, Nepal and Israel.
After the introduction and popularity of Airtel Lanka’s unlimited monthly plans for voice and social media for prepaid and postpaid customers last quarter, the Sri Lankan market has shifted to mirror their products, with unlimited deals now appearing on all networks. However, while such unlimited offers are available now, the abolition of IUC will make unlimited call packages more affordable.
“Data has become the core business of all telecom service providers. At the same time, voice calls are not the privilege they were in previous decades. Given these historical trends, especially in light of the current financial pain felt by all Sri Lankans, the time has come to abolish IUCs and implement initiatives like the MNP to provide the maximum possible benefit to the low-income groups. largest consumers of voice calls.” he said.
Such measures will even affect the telecom playing field, increasing competition between operators and most importantly, lower prices for consumers. However, without pressure from consumers and regulators, these reforms are unlikely to proceed and will therefore remain stagnant.