69182 i | Broadband in Sri Lanka: A Case Study ii | Broadband in Sri Lanka: A Case Study © 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved The findings, interpretations and conclusions expressed herein are entirely those of the author(s) and do not necessarily reflect the view of infoDev, the Donors of infoDev, the International Bank for Reconstruction and Development/The World Bank and its affiliated organizations, the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. 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Cover design by infoDev To cite this publication: Galpaya, Helani, 2011. Broadband in Sri Lanka: Glass Half Full or Half Empty?. Washington, D.C: infoDev / World Bank. Available at http://www.broadband-toolkit.org/. iii | Broadband in Sri Lanka: A Case Study Table of Contents List of Tables and Figures ……………………………... vi List of Acronyms ……………………………... vii Acknowledgments ……………………………... viii 1. Executive Summary ……………………………... 1 2. Socioeconomic Overview ……………………………... 3 3. The ICT Sector ……………………………... 5 3.1 Regulatory and policy institutions and ……………………………... 5 instruments 3.1.1 ICT policy ……………………………... 5 3.1.2 The regulator ……………………………... 5 3.1.3 The ICT agency ……………………………... 7 3.2 Size and importance of the ICT sector ……………………………... 7 3.3 Operators and services ……………………………... 8 4. The Broadband Sector ……………………………... 10 4.1 Retail broadband ……………………………... 10 4.2 Wholesale infrastructure ……………………………... 10 4.2.1 In-country backbone infrastructure ……………………………... 10 4.2.2 International connectivity ……………………………... 12 4.2.3 Internet Exchange ……………………………... 13 4.3 Penetration of broadband ……………………………... 13 4.4 Retail broadband prices ……………………………... 15 5. Driving the Demand for Broadband ……………………………... 18 5.1 Public access ……………………………... 18 5.2 Digital literacy ……………………………... 20 5.3 Converged and bundled offerings ……………………………... 21 5.4 Content and applications ……………………………... 22 5.4.1 Browsing habits of users ……………………………... 23 5.4.2 E-government applications ……………………………... 23 5.4.3 Emergence of ―App Store‖ model ……………………………... 24 5.4.4 Online payments ……………………………... 25 5.5 Regulatory measures to protect the ……………………………... 25 consumer 5.5.1 Online security ……………………………... 25 5.5.2 Broadband quality ……………………………... 26 6. Assessing Performance: Glass Half ……………………………... 28 Full or Half Empty? 6.1 What worked ……………………………... 28 6.1.1 Early availability of 3G spectrum ……………………………... 28 iv | Broadband in Sri Lanka: A Case Study 6.1.2 Innovations by operators ……………………………... 28 6.1.3 Creating the ecosystem: e-Sri Lanka ……………………………... 29 6.1.4 Tax relief ……………………………... 29 6.2 Challenges ……………………………... 29 6.2.1 Reaching the mass market ……………………………... 29 6.2.2 The language barrier ……………………………... 30 6.2.3 Regulating broadband quality ……………………………... 31 6.2.4 Special dispensation for the telecom ……………………………... 32 sector 6.3 Has Sri Lanka achieved enough, given ……………………………... 32 favorable conditions? 7. Lessons Learned ……………………………... 33 v | Broadband in Sri Lanka: A Case Study List of Tables and Figures Figures Figure 1: Province, District and DS division boundaries of Sri Lanka ……………………………... 3 Figure 2: Sri Lanka GDP composition by sector, 2004-2009 ……………………………... 4 Figure 3: e-Sri Lanka program components ……………………………... 6 Figure 4: Total cost of ownership, mobile services including data, USD, ……………………………... 9 2010 Figure 5: Tail-link cost for 2Mbps backhaul in South Asia, USD ……………………………... 11 Figure 6: Proposed route for the NBN ……………………………... 12 Figure 7: Mobile and fixed broadband subscriptions per 100 people, ……………………………... 16 South Asia, 2010 Figure 8: Sri Lanka’s network readiness, 2009 ……………………………... 18 Figure 9: Internet users, Sri Lanka, 2004-2009 and selected lower ……………………………... 19 middle-income economies, 2009 Figure 10: Services provided by various types of government ……………………………... 23 organizations Figure 11: Mobile broadband speed tests, Sri Lanka, January 2011 ……………………………... 26 Figure 12: Actual download speeds (kbps) per USD, 2009 ……………………………... 31 Tables Table 1: Major telecom operators in Sri Lanka ……………………………... 9 Table 2: Broadband market and operators in Sri Lanka, March ……………………………... 10 2011 Table 3: International Internet connectivity, South Asia ……………………………... 13 Table 4: Fixed and mobile broadband subscriptions, Sri Lanka, ……………………………... 14 2010 Table 5: Year-over-year growth of mobile connections by speed ……………………………... 15 Table 6: Monthly broadband packages, Sri Lanka, USD, ……………………………... 17 February 2011 Table 7: Entry level 3G prices, South Asia, USD, March 2011 ……………………………... 17 Table 8: Top 20 web sites in Sri Lanka, March 2011 ……………………………... 22 vi | Broadband in Sri Lanka: A Case Study List of Acronyms 3G Third Generation ADSL Asymmetric Digital Subscriber Line BPO Business Process Outsourcing CAGR Compound Annual Growth Rate CDMA Code Division Multiple Access DCS Department of Census and Statistics, Sri Lanka DS Divisional Secretariat (a unit of government administration) EBITDA Earnings Before Interest, Tax, Depreciation and Amortization FDI Foreign Direct Investment GDP Gross Domestic Product GPRS General Packet Radio Service GoSL Government of Sri Lanka HSPA High Speed Packet Access ICT Information and Communication Technology ICTA Information and Communication Technology Agency of Sri Lanka IT Information Technology ITeS Information Technology Enabled Services IX Internet Exchange Kbps Kilo bits per second LEARN Lanka Education and Research Network LKR Sri Lankan Rupees (Rs.) Mbps Mega bits per second NBN National Broadband Network NGN Next Generation Network SIM Subscriber Identity Module SLT Sri Lanka Telecom Tbps Terra bits per second TCO Total Cost of Ownership TRCSL Telecom Regulatory Commission of Sri Lanka USD United States Dollars (US$) WCDMA Wideband Code Division Multiple Access WiMAX Worldwide Interoperability for Microwave Access vii | Broadband in Sri Lanka: A Case Study Acknowledgments This report was drafted by Helani Galpaya of LIRNEasia, with significant contributions by Michael Minges, who directed the case studies for the Broadband Strategies Toolkit. The project was carried out under the supervision of Tim Kelly (infoDev) and Carlo Rossotto (ICT Sector Unit), with the Telecommunications Management Group Inc. (USA) providing overall project coordination. Philippe Dongier, Sector Manager (ICT Sector Unit) and Valerie D’Costa, Program Manager (infoDev), provide overall management guidance for the development of the toolkit. Samhir Vasdev edited the report and prepared it for publication. This case study is one of an initial series of seven that will contribute to the Broadband Strategies Toolkit, an online resource for policy-makers and regulators, especially in developing countries (see www.broadband- toolkit.org). The case studies are generously funded by the Korean Trust Fund (KTF) on Information and Communications for Development (IC4D). The KTF is a partnership between the government of the Republic of Korea and the World Bank Group whose purpose is to advance the ICT4D agenda to contribute to growth and reduce poverty in developing countries. viii | Broadband in Sri Lanka: A Case Study 1. Executive Summary Sri Lanka, an island nation located in the Indian minutes of use per user enabled operators to make Ocean just south of India, has lately experienced positive EBITDA margins even though the an explosion in the use and availability of Average Revenue per SIM was low, around USD broadband services. The increase is primarily due 2 – 5. to the high rate of adoption of third generation This budget model of telecom that was first (3G) mobile technologies such as HSPA and developed for the voice business is now being HSPA+ dongles and associated SIM cards. This applied to mobile broadband in Sri Lanka. In trend is typical of Sri Lanka and many other South particular, enabling pre-paid mobile broadband Asian countries which do not have access to wide- and allowing for very low value re-charges, the spread copper last mile connectivity, and therefore youth (who have highly variable incomes) have are reliant on wireless networks to increase access, been brought into the mobile broadband market. be it simple voice or broadband. Several factors The two first movers into the 3G space (Dialog have contributed to Sri Lanka’s success in Axiata and Mobitel) offered special promotional connecting it’s citizenry to the internet via mobile discount packages of up to 50% specifically for broadband: students. These early adopters created significant interest in mobile broadband. By 2008, the Innovative Business Models making services English and Sinhala blogosphere in Sri Lanka was accessible to all: The increase in mobile barely mentioning fixed broadband; all the broadband rides on the wave of extremely high discussions and debates about quality and price mobile voice growth, enabled by successful was about mobile broadband. innovations by the Sri Lankan (and Asian) operators. Faced with low ability to pay of many Early availability of 3G spectrum: Of course all consumers in the region, the operators could have of the above was made possible because 3G settled into serving the high-end, rich consumers. spectrum was made available early to the However, because the regulators and policy operators in Sri Lanka. Here, the regulator makers enabled new entry into the market, the deserves credit. As far back as 2003 test intense competition forced operators to innovate frequency was made available. By 2006, in such a way as to be able to profitably serve even commercial 3G was launched. This is in sharp the poorest consumers. Network costs were contrast to India which only managed to allocate reduced drastically by sharing passive and active 3G spectrum in 2010. Early access to spectrum infrastructure, by outsourcing key parts of the enabled Sri Lanka to become the first Asian operation including even the management of the nation to offer 3G services. core network. Cost of billing was completely dispensed with and credit risk eliminated by Government’s e-development agenda moving to a pre-paid model. Distribution costs motivating investment: Apart from the were minimized by enabling electronic reloading regulator, the ICT Agency of Sri Lanka (ICTA) (e-reload), thereby eliminating cost of printing and has had a major focus on broadband in the distributing top-up cards for pre-paid users. country. ICTA is the implementer of e-Sri Lanka, Finally, even consumers with very low and very a cross-sectoral ICT-enabled development variable incomes were attracted to the market by program for the whole country. ICTA set the enabling extremely small top-ups at any time (as ICT agenda through a series of comprehensive low as USD 0.50 or less). This ―budget telecom supply and demand side activities/projects (for model‖ 1 based on low costs high volumes (high example, setting up network of over 500 rural telecenters, announcing plans for a least-cost 1 subsidy scheme to build and operate a fiber Samarajiva, R.(2010). Leveraging the Budget Telecom Network Business Model to Bring Broadband to People: how backbone in rural areas, development of e- voice connectivity was achieved. Information Technologies and International Development, 6, Special Issue: 93-97. Also, The Economist (2009).―The mother of invention: Network in innovative ways‖. Sep 24 2009. Print Edition. Available at Operators in the world are cutting costs and increasing access http://www.economist.com/node/14483880. 1 | Broadband in Sri Lanka: A Case Study government applications, providing ICT skills to broadband. While the Sri Lankan mobile citizens from all walks of life, promoting broadband performs better than Sri Lankan fixed investment in Business Process Outsourcing broadband various quality of service measures, which in turn drives the demand for high speed when compared with the developed world Sri connectivity) and helped create a significant buzz Lankan consumers get less value for money on about the potential demand for BB in the country. broadband. Part of the reason is bad advertising All this helped increase awareness about (promising broadband speeds that are possible opportunities afforded by ICTs. Operators were theoretically, but not in reality). But a bigger part motivated to invest in the network infrastructure is the infrastructure – in particular, bottlenecks in in light of upcoming demand. international connectivity due to high prices. However, having reached this stage, Sri Lanka The other challenge for operators is to keep up needs to overcome several challenges if it is their investments necessary to move to the next continue on its early success and make broadband technology cycle in face of declining margins. a truly mass-market product instead of the niche While at least two mobile operators have popularity it still enjoys. announced LTE network deployments, extending these upgrades beyond the population centers will A key challenge is that of bringing a product of prove challenging because of revenue and margin adequate quality to consumers. Budget erosions due to intense competition. broadband/budget telecom models mean low cost and therefore low prices. But they also mean low quality. This is indeed the case with Sri Lankan 2 | Broadband in Sri Lanka: A Case Study 2. Socioeconomic Overview The Democratic Socialist Republic of Sri Lanka is identifying themselves as Buddhists, 8% as Hindu, an island nation of just over 65,000 square 8% as Islamic and 7% as Catholic and Christian.8 kilometers located in the Indian Ocean near the southern tip of India (Figure 1). Sri Lanka is a Sri Lanka is of late undergoing considerable lower-middle-income economy emerging from economic growth. Year-over-year GDP growth years of conflict. With a GDP Per Capita of USD for the first half of 2010 was 7.8%. 9 Though 2,053 2 in 2009 (or about USD 4,715 3 PPP agriculture played a significant role in the Sri adjusted), an adult literacy rate of 91%4 among the Lankan economy in the past, today the economy 20.6 5 million population and a Human is driven by the services sector (Figure 2) Development Index of of 91, Sri Lanka is the most developed country in the South Asian region While the economy is on the upswing, until a few behind the Maldives. Primary and secondary years ago Sri Lanka was in the middle of civil war education indicators are good, with only 4.4% of that saw the country unable to capture the the population reported as having never attended economic growth rates experienced by its school and 99.4% of the population aged 5 - 14 emerging market peers. The war that went on for years currently attending school.6 Sri Lanka is a multi-ethnic society consisting of Sinhalese (82%), Tamils (9.4%), Moors (7.9%) and other groups. 7 Sinhala and Tamil are official languages while English is widely spoken (Sri Lanka is a member of the Commonwealth). After the government introduced English medium instruction into primary and secondary education, it has become an increasingly popular choice for students who could previously study only in Sinhalese and Tamil, with English only taught as a second language. Sri Lanka is also a multi- religious society with 77% of the population 2 The Central Bank of Sri Lanka. (2010). Annual Report 2009. http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/an nual_report/ar2009e/ar09_content_2009_e.htm 3 Using IMF PPP exchange rates available at: http://www.imf.org/external/pubs/ft/weo/2010/02/weoda ta/index.aspx 4 Department of Census and Statistics. (2001). Census of Figure 1: Province, District and Divisional Population and Housing 2001: Literacy rates by district, sex and Secretariat division boundaries of Sri Lanka sector. Retrieved 25 March 2011 from (Source: Cartography Division, Department of http://www.statistics.gov.lk/PopHouSat/PDF/Population/ p9p10%20Literacy%20rates%20by%20district,%20sex%20an Census and Statistics, Sri Lanka) d%20sector.pdf 5 Department of Census and Statistics Sri Lanka. (2010). Population and Housing. http://www.statistics.gov.lk/page.asp?page=Population%20a nd%20Housing 8 Department of Census and Statistics (2010). Statistical 6 Department of Census and Statistics. (2010). Household Abstract 2010. Income and Expenditure Survey 2009/10 Preliminary Results. http://www.statistics.gov.lk/abstract2010/Pages/index.htm http://www.statistics.gov.lk/HIES/HIES2009Buletin.pdf 9 Central Bank of Sri Lanka recent economic developments 7 Department of Census and Statistics. (2010). Population and highlights of 2010 and prospects for 2011: Housing. http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/rec http://www.statistics.gov.lk/PopHouSat/PDF/Population/ ent_economic_development/Red2010/Red2010e/red_2010e p9p8%20Ethnicity.pdf _index.htm 3 | Broadband in Sri Lanka: A Case Study nearly 30 years was often limited to the North and resumed in 2005. 10 In 2009, the conflict was North Eastern provinces of the country though ended through a major military operation by the Colombo and other major cities also came under government. Since then, the North-East region intermittent terrorist attacks. Significant outward has been a focus of development activity and is migration (to Canada, Australia and Europe) of expected be a major attractor of investment in Sri the minority Tamil community took place during Lanka. Indications are that the overall country is the years of the war. The conflict and the already benefitting from the end of the war – resulting under-investment saw the war-torn arrival of tourists and foreign direct investment region declining in all socio-economic indicators. into the country has increased. A ceasefire agreement in 2002 led to a resumption of economic activity in the region, only to be curtailed when fighting 6,000 GDP at current prices, LKR. Billion 5,000 4,000 Services 3,000 2,000 Industry 1,000 Agriculture ,0 2004 2005 2006 2007 2008 2009 Figure 2: Sri Lanka GDP composition by sector, 2004-2009 (Source: Central Bank of Sri Lanka, 2010. Economic and Social Statistics of Sri Lanka) . http://www.idrc.ca/cp/ev-118602-201-1- 10 DO_TOPIC.html 4 | Broadband in Sri Lanka: A Case Study 3. The ICT Sector 3.1 Regulatory and policy institutions development for the country and covered multiple and instruments sectors (private, public, education etc.) and geographies (urban and rural). It also saw the creation of the ICT Agency of Sri Lanka (ICTA) Up until 1991, fixed telephone services in Sri as the implementation body for e-Sri Lanka, and Lanka were provided by the Department of therefore the de-factor policy-implementation Telecommunication (DoT) of the Government of (and in some specific areas, the policy making) Sri Lanka. Corporatization of the incumbent was organization (more on ICTA below). Though done under the Telecom Act of 1991, and a new, ICTA was under the Ministry of Economic government owned, corporation called the Sri Reform, Science and Technology at its creation in Lanka Telecom Corporation (SLT Corp) was 2003, the year 2004 saw ICTA being taken under formed by transferring to it DoT’s assets. SLT the office of the Prime Minister when a senior Corp was partially privatized in 1997, creating Sri ICTA official was appointed Secretary to the Lanka Telecom Limited (SLT), of which 35% was Prime Minister. Since that moment ICTA and e-Sri owned by NTT of Japan, 3.5% by SLT employees Lanka gained prominence in the media and Prime and 61.5% by the Government of Sri Lanka Minister Mahinda Rajapaksa also leveraged it in (GoSL). SLT continued to have the monopoly in the run-up to his presidential election campaign12. fixed line services until 1996 (when WLL licenses Prime Minister Rajapaksa’s election manifesto were issued) and on international telephony until Mahinda Chintanaya13 had a section devoted to IT, 2003 (when EGO licenses were issued). which mentioned all areas that are targeted by the The 1991 Act also created the regulatory agency. original e-Sri Lanka project, and specifically set a In 2003, the ICT Agency of Sri Lanka was created target of increasing IT literacy to 60% over 3 as the apex ICT policy implementing body in Sri years. When he was elected President in 2005, Lanka. ICTA was kept under his wing, and therefore moved under the office of the President. Moving 3.1.1 ICT policy ICTs away from a single ministry into the office of ICT policy making in Sri Lanka has traditionally the Prime Minister and later the office of the been carried out by a ministry (often the Ministry President was justified based on the cross cutting of Post and Telecommunications). However, In nature of the e-Sri Lanka initiative, and the high 2002, ICT was brought to the fore-front of the level leadership demanded by certain e-Sri Lanka government’s development strategy, away from activities, specifically the reform of government any one ministry when the then government’s processes using ICTs. primary policy document titled Regaining Sri Lanka11 made particular mention of using ICTs to 3.1.2 The regulator achieve its goal of pro-poor growth (closing the ―information divide between poor communities and dynamics markets‖ was mentioned, as was The Telecommunications Regulatory Commission ―improving access to telecommunication facilities of Sri Lanka is the national regulatory agency. The and bringing the Internet to the countryside‖). Commissioners consist of the Director General of Regaining Sri Lanka proposed ―e-Sri Lanka‖, an the TRCSL, the Secretary to the Minister of the initiative/project to ―apply the benefits of modern relevant Ministry (policy maker) and three technology to the workings of government and the private sector‖. E-Sri Lanka (further detailed 12 In fact the President’s website mentions ―re-energizing the in the e-Sri Lanka Roadmap) laid down a ICT Agency‖ and ―Taking IT and computer literacy to rural comprehensive plan for ICT-enabled areas under the Nenasala [telecenter] project‖ as key development projects undertaken during his tenure as the Prime Minister. See 11 World Bank. (2002). Regaining Sri Lanka: Vision and Strategy http://www.mahindarajapaksa.com/dev/index.php for Accelerated Development. 13 Available at http://siteresources.worldbank.org/INTPRS1/Resources/C http://www.mahindarajapaksa.com/MahindaChinthanaEngli ountry-Papers-and-JSAs/Sri_Lanka_PRSP.pdf sh.pdf (page 68) 5 | Broadband in Sri Lanka: A Case Study members appointed by the Minister from the Telecommunications (Amendment) act of 199615. fields of law, finance and management, It can regulate most aspects impacting on the respectively. Since 2005, the TRCSL has been sector including the allocation of spectrum under the office of the President, therefore the (including broadcasting spectrum), tariffs, anti- policy maker (i.e. the ―Ministry‖) is the office of competitive practices and quality of service. The the President of Sri Lanka and the Chairman of only significant activity that the regulator cannot TRCSL is the Secretary to the President. In light do is issue new licenses – this power lies with the Figure 3: e-Sri Lanka program components (Source: ICTA) of the (previously discussed) prominence given to Minister (i.e. the office of the President at ICTs in the national level, and the importance of present), though on the basis of the regulator’s TRCSL to achieve certain goals specified in e-Sri recommendations. Lanka, it was perhaps a natural progression for the TRCSL to be taken under the office of the TRCSL is an independent regulator in that it is President, though it is unclear if this was the only autonomous from the incumbent operator. motivation. However, as in many countries, there are times that the TRCSL is accused of acting in the interest The TRCSL was established in 1991 under the of only the largest operators or it appears that at Telecommunications Act of 1991 14 , which was times the regulator’s independence is later amended by the Sri Lanka compromised by the government itself. 14See http://www.customs.gov.lk/docs/25386.pdf for the 15http://www.trc.gov.lk/about-us/legislation.html for act. consolidated act (1991 and 1996) 6 | Broadband in Sri Lanka: A Case Study 3.1.3 The ICT agency 33,000 telecenter users, 112 on-line e-government The ICT Agency of Sri Lanka (ICTA) was created services for the private sector in 2010 from zero in through an act of Parliament in 2003 and 2004, some 35,000 people trained in ICTs and the mandated to be the ―apex ICT-policy making creation of Chief Information Officers in almost body‖ in Sri Lanka. Its primary mandate was the 600 government agencies.17 implementation of e-Sri Lanka, the comprehensive and cross-sectoral development program with ICT 3.2 Size and importance of the ICT at the center. The e-Sri Lanka strategy, and sector therefore ICTA’s activities focuses multiple facets of ICT-enabled development (Figure 3)16: Sri Lanka’s growth is increasingly fueled by services (as opposed to manufacturing or a) the supply of infrastructure for internet/ agriculture) as seen in Figure 2, and the ICT sector broadband connectivity (through the is part of the services sector growth. provision of backbone networks, the provision of a government-wide While the overall contribution to GDP made by broadband network and the installation of the telecom sector is small at under 1.7 percent in a network of telecenters to enable access 200918 (and was around 3.04 percent in 200719), it in primarily rural areas), is still the largest contributor to GDP growth. b) re-engineering of key government process According to the Ministry of Finance and and the introduction of ICT into these Planning, the post and telecommunications sector processes to increase efficiency and accounted for 11.7 percent of Sri Lanka’s GDP enable online access, growth in 2009 (down from 36% in 2005 and c) developing human capacity in ICTs by 21.5% in 200720). introducing ICT into all levels of education (primary, secondary, tertiary) The regulator, TRCSL, is the organization that and all sectors (government, citizens, makes the single largest contribution to students), government revenue as a result of the fees and d) development of a vibrant, export oriented levies it collects from the sector. Today, IT and IT enabled Service (ITeS) industry contributions from the TRCSL account for 50% in the county, of total Government revenues from state owned e) taking ICTs to rural masses and enterprises (the number was higher in the past, traditionally disadvantaged groups through innovative applications under the e-Society program and 17 World Bank (2010). Implementation Status and Results E-Lanka f) creating the environment for ICT-enabled Development (P081771) (Rep. No. ISR2333). http://www- development through the enactment of wds.worldbank.org/external/default/WDSContentServer/W relevant laws (e.g. e-Transactions, DSP/SAR/2010/12/25/0D9887F3F94C315385257804003D Computer Crimes Law, intellectual 75E0/1_0/Rendered/PDF/P0817710ISR0Di0225201012932 75514930.pdf. property laws) and the development of 18 The Central Bank of Sri Lanka. (2010). Annual Report 2009. technical standards (e.g. local language http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/an fonts, internet domain names and inter- nual_report/ar2009e/ar09_content_2009_e.htm 19 The Central Bank of Sri Lanka. (2007). Annual Report 2007. operability frameworks). http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/an nual_report/Ar2007/content.htm The funding for ICTA is primarily from the 20 Ministry of Finance and Planning Sri Lanka. (2009). Annual World Bank and the Government of Sri Lanka Report 2009. (GoSL), with some funding also coming from the http://www.treasury.gov.lk/FPPFM/fpd/pdfdocs/annualre Korean Export Import Bank and several other ports/annualreport2009-eng.pdf. Note that GDP growth countries and organizations. Some claimed results contribution figures are reported for the post and of the e-Sri Lanka Development project include telecommunication sector combined. However, given that the Department of Post has reported a net loss for each of the creation of 629 telecenters, an estimated these years (according to the Ministry of Finance and Planning 2009 Annual report, page 55), it’s reasonable to 16http://www.apdip.net/projects/e- attribute to all positive GDP growth contributions to the government/capblg/casestudies/SriLanka-Rainford.pdf telecom sector 7 | Broadband in Sri Lanka: A Case Study with TRCSL contributing more than all state- A key enabler to the IT/BPO growth is the owned banks combined21). telecom sector itself, which makes it possible to engage in off-shoring to begin with. The telecom sector continues to be a primary target for foreign direct investment (FDI) into the country. In 2008, the services sector attracted 3.3 Telecom Operators and services US$ 362 million worth of investment, with telecommunications leading the way with US$ 290 Telecommunications services in Sri Lanka are million 22 or 80%. According to the Board of competitive, with eight operators in the country Investment, telecoms and power usually account making retail offerings at the time of writing. Sri for over 60% of FDI into Sri Lanka23 though this Lanka Telecom (SLT) is the partially privatized percentage is expected to decrease as a result of incumbent (government owns 52%, Global increasing investment into the tourism sector after Telecommunications Holdings N.V of the end of civil war. Netherlands owns 44.9% and the general public owns the rest), and the only firm with a copper Apart from the importance of the telecom sector access network to reach homes and businesses. in terms of revenue generation to the government, Of the five mobile operators, four (Dialog Axiata, the broader ICT sector is also experiencing Etisalat, Airtel and Hutch) are private companies growth and gaining prominence. The ICT Agency that are part of large international or regional and the industry associations engaged in a strategic telecom operators, and one (Mobitel) is a fully initiative to promote Sri Lanka’s export-oriented owned subsidiary of the incumbent SLT. Two IT enabled Services (ITeS) sector (which includes other operators (Suntel and Lanka Bell) primarily Business Process Outsourcing (BPO) and IT). provide CDMA based (fixed-wireless) Developing human capacity in the IT/BPO telecommunications services (Table 1). industry (through financial assistance to IT professionals to achieve internationally recognized The mobile market is highly competitive, with Sri certifications and through the creation of Lanka having among the lowest prices in the educational standards for call-center operator world (Figure 4). Following an aggressive price training) and several years of industry promotion war in anticipation of the arrival of new entrant overseas have yielded positive results. Starting Bharati Airtel, mobile operators saw margin from USD 173 million in 2006 24 , the export erosion in late 2009: for example EBITDA revenues from the IT/BPO industry grew to USD margins which were over 50% fell to the 20-30% 392 million by 2010, a CAGR of 26%. Of this range with negative net profits27. Heavy lobbying USD 294 million was from IT exports while USD by the operators then prompted the regulator to 98 million were from BPO exports25. . According impose termination rates on all calls (eliminating to the ICT Agency, in 2010, the sector was the the sender keeps all interconnection regime that fifth largest foreign exchange generator for the existed previously), in effect imposing floor country26. (minimum) prices in the sector. 21 Author calculations, based on Ministry of Finance and Planning, Annual Report, 2009, table 3.1 22 Trade Chakra. (n.d.). FDI in Sri Lanka. Retrieved 25 March 2011 from http://www.tradechakra.com/economy/sri- lanka/fdi-in-sri-lanka-337.php 23 Lanka Business Online. (2010). Investment Swing: Sri Lanka expects leisure to loom larger in FDI. Retrieved 25 March 2011 from http://www.lbo.lk/fullstory.php?nid=1012423880 24 Export Development Board. (2008). Export Value Survey of the Sri Lankan IT/ITES Industry. Retrieved 25 March 2011 from http://www.slasscom.lk/informationcenter 25 www.slasscom.lk 27Largest operator Dialog’s EBITDA margin for the second 26 SundayTimes. (2011, January 30). Retrieved Arpil 2011, half of 2007 was 50.3%. By Q3 2009 it was 29%. As reported from Sunday Times: sundaytimes.lk/110130/It/it01.html on www.dialog.lk and by Wireless Intelligence/GSMA. 8 | Broadband in Sri Lanka: A Case Study Operator Markets Comment Incumbent operator. Partially privatized in Fixed, fixed wireless, fixed broadband, 1997 through 35% sale to NTT, Japan. Sri Lanka Telecom (SLT) IPTV, mobile (through Mobitel), Mobitel started in 1993 as JV between SLT international connectivity and Telstra, Australia. SLT bought out Telstra’s share in 2002, for full ownership28 Owned by a combination of foreign Suntel Fixed wireless (Swedish, Hong Kong SAR) and local companies as well as the IFC Formed in 1997. Bought by Milford Holdings Lanka Bell Fixed wireless Pvt. Limited, Sri Lanka Subsidiary of Axiata Group Berhad of Dialog Axiata Mobile, fixed wireless, broadcasting Malaysia (formerly TM International). Owned by Hutchinson Whampoa Limited, Hutch Mobile Hong Kong Owned by Etisalat, United Arab Emirates. Etisalat Mobile Purchased from Millicom in 2009. Airtel Mobile Owned by Bharti Airtel, India Table 1: Major telecom operators in Sri Lanka Monthly TCO World Average $,30 $,25 $,20 $,15 $,10 $,5 $,0 Vietnam Sri Lanka Sudan Guinea Chad China Indonesia Burkina Faso Zambia Honduras Bangladesh Kenya Ethiopia Côte d'Ivoire Malawi Iran Ghana Uganda Algeria Colombia Peru India Philippines South Africa Ecuador DRC Guatemala Argentina Uzbekistan Thailand Mozambique Chile Brazil Pakistan Egypt Tanzania Morocco Bolivia Nigeria Syria Senegal Madagascar Tunisia Turkey Haiti Cambodia Zimbabwe Kazakhstan Angola Dominican Republic Cameroon Figure 4: Total Cost of Ownership (in USD) for mobile services including data, 2010 (Source: Nokia, 2010) Note: Basket covers prorated handset cost and consuming the equivalent of the OECD “low use� mobile basket of minutes and SMSs per month as well as 2 MB data allowance per month. 28Sri Lanka Telecom, Annual Report 2003. Retrieved 25 March 2011 from http://www.slt.lk/data/investor/pdf/annu_2003/html_verti on/financial/reportdirectors.htm 9 | Broadband in Sri Lanka: A Case Study 4. The Broadband Sector 4.1 Retail broadband majority of the country including the formerly war torn North East (3G coverage is still not available Sri Lankan retail users (consumers and businesses) in low density population areas). Etisalat is in the process of investing to increase its 3/3.5G have a choice of broadband technologies and footprint. 31 Airtel covers the major population service providers to choose from. The retail centers of Colombo, Galle, and Kandy with 3G. service offerings can be summarized as described in Table 2. At the time of writing, both Dialog Axiata and In addition to the retail offerings shown above, Mobitel were engaged in LTE trials in Colombo. businesses that need dedicated, higher speed Mobitel had also signed agreements (on tax free Internet connectivity can obtain leased lines from concessions) with the board of investment to invest in its LTE network32. most of the operators shown in Table 2. All mobile operators have nationwide coverage of basic voice and GPRS services. Dialog and Mobitel also provide 3G/3.5G coverage in the Type of broadband Operators with retail-level services offerings connectivity Fixed wired broadband 1. ADSL through Sri Lanka Telecom (incumbent fixed operator) 1. WiMAX through 3 operators: - Dialog Axiata (largest mobile operator) Fixed wireless (limited - Sky Networks (subsidiary of Sri Lanka Telecom) mobility) broadband - LankaBell29 (CDMA-based “fixed� phone operator) 2. Microwave based broadband through Suntel30 (a CDMA based phone operator) 1. WCDMA based broadband from multiple operators: - Dialog Axiata (largest mobile operator) - Mobitel (mobile operator owned by fixed incumbent) - Airtel (new entrant, part of India’s Bharati Airtel) Mobile broadband - Etisalat (pre-paid only mobile operator), about to enter the 3G broadband market at the time of writing. 2. WiMAX (802.16e) based mobile broadband (with plug-and-play dongles) through Sky Networks (subsidiary of Sri Lanka Telecom). About the enter the market at the time of writing. Table 2: Broadband market and operators in Sri Lanka, March 2011 31 Dialog had 673 3G base stations at the end of 2009 and 3/3.5G coverage map is available at http://www.dialog.lk/content/uploads/pdfs/annual_reports /2009_annual_report_en.pdf. Mobitel’s 3G coverage map is available at http://www.mobitel.lk/coverage/. Airtel 3G 29 http://www.lankabell.net/fixed-broadband.htm maps for Colombo, Galle, Kandy are available at http://www.airtel.lk/AirtelSL/broadband/3g_coverage.html. and http://www.lankabell.net/broadband- 32 Telecoms.com. (2011). Sri Lanka hits the LTE with trials, technology.htm rollouts. http://www.telecoms.com/27530/sri-lanka-hits-the- 30 http://www.suntel.lk/business/broadband.php lte-road-with-trials-rollouts/ 10 | Broadband in Sri Lanka: A Case Study 4.2 Wholesale infrastructure broadband speeds of over 20 Mbps to almost all its fixed line subscribers. 4.2.1 In-country backbone infrastructure While the retail broadband market is competitive Despite the significant market power over such as and characterized by competitive and reducing key facility as the optic fiber backbone, SLT is not legally required by the regulator to sell access to prices, a few players dominate the wholesale competitors. As a result, competing operators 18,000 15,865 16,000 14,000 12,000 10,000 8,000 6,000 4,203 4,000 3,163 2,000 ,812 1,040 ,56 ,369 ,392 - Bangladesh Pakistan India Bhutan Sri Lanka Maldives Indonesia Philippines Figure 5: Tail-link cost (in USD) for 2Mbps backhaul in South Asia (Source: LIRNEasia, Broadband Benchmarks Emerging Asia, February 2010.) market. At the time of writing, only two operators were using microwave technology for backhaul had an optic fiber based national backbone. where possible due to the high prices of SLT Incumbent Sri Lanka Telecom (SLT) has the backhaul (for example, backhaul in Sri Lanka was widest fiber coverage with some 8,000 kilometers the second most expensive in South Asia in 2010, of fiber connecting large areas of the country and surpassed only by the Maldives, an island nation another 4,000 kilometers planned by the end of that had many more geographical challenges to 2011. SLT is also transitioning to a Next deal with than Sri Lanka - Figure 5). 35 Several Generation Network (NGN) with around 20% of years ago Dialog began installing fiber optic rings its customers served by this technology at the end starting in the populated cities and offering of 2010. 33 NGNs are the subject of a recent wholesale access non-discriminately. consultation issued by the regulator. 34 SLT has also launched its ―i-Sri Lanka‖ project placing fiber closer to the customer to reduce the length of copper loops. This will enable SLT to offer 33Sri Lanka Telecom. (2011). Annual Report 2010. http://www.slt.lk/data/investor/pdf/annual_report_2010/a 35LIRNEasia (2010). Broadband Benchmarks Emerging Asia, nnual_report_2010.pdf February 2010. Retrieved 25 March 2011 from 34 http://lirneasia.net/wp- http://www.trc.gov.lk/images/pdf/TRCSL_Repoet_on_Pub content/uploads/2010/03/LIRNEasia-Broadband-prices- lic_Consultation_on_NGN.pdf EmergingAsia-Feb-2010.pdf 11 | Broadband in Sri Lanka: A Case Study The regulator and the Office of the President are North Eastern regions where fiber did not extend currently planning for nationwide fiber backbone to at the time of design (Figure 6). According to connectivity through a National Broadband stakeholders, the design was problematic in that Network (NBN). Initially planned by the ICT rights of way from CEB and SLGR were not Agency under the e-Sri Lanka initiative, the guaranteed and the winner of the bid would have procurement process was under way in 2008-2009 to negotiate with each of these entities and there to competitively select a firm based on a least- was uncertainty about the price they would charge cost-subsidy auction and to build and operate the to lay cable along their facilities. In any case, the network. The rights of-way were to be obtained competitive procurement process was halted, and via the Ceylon Electricity Board (CEB) and the Sri in early 2011 it was decided by the Cabinet that Lanka Government Railway (SLGR). SLT would be asked to build the NBN, using Geographically, the new network was to cover the government funds (instead of World Bank funds Deep South as well as the North Central and which were previously allocated for the least-cost Jaffna Kilinocchi Southern Ring (Phase 1) Central Ring (Phase 1) Mannar Vavuniya Western Ring (Phase 1) Eastern Ring (Phase 2) Trincomalee Northern Ring (Phase 3) Anuradhapura Points of interconnection Polonnaruwa Matale Puttalam Badulla Batticaloa Karunegala Kandy Ampara Kegalle Gampaha Colombo Nuwara-Eliya Kaluthara Monaragala Rathanapura Hambantota Galle Matara Figure 6: Proposed route for the NBN (Source: Spectrum Strategy Consultants & Value Partners. (2008), Consultation on Planning and Implementation of a National Fiber Backbone) 12 | Broadband in Sri Lanka: A Case Study subsidy). According to the Director General of station. Operators still claim that if prices to TRCSL, SLT would be given the contract to build connect to the landing station are cost-based, the NBN, with the condition that they then give Internet connectivity prices could come down by non-discriminatory re-sale to other operators. 30%. This claim however has to be balanced by the fact that that only a low volume of traffic 4.2.2 International connectivity flows through the competing FLAG cable, Sri Lanka has access to multiple international primarily due to high prices (presumably prices cables: SE-ME-WE 3 and 4, the SLT-Dhiraagu higher than through SE-ME-WE, because cable between Sri Lanka and the Maldives, the otherwise the cheaper option would have the BSNL-SLT cable between Sri Lanka and India, majority of traffic), even when no access problems and the FLAG cable (international cable system or bottlenecks are reported at the FLAG landing with over 16 countries). Landing stations for the stations. In any case, the FLAG cable does first three are controlled by SLT while Lanka Bell provide a useful point of redundancy in case of owns the last. Although capacity on the SE-ME- problems with the alternate. WE cables is competitively priced, the landing point itself acts as bottleneck. For example, SLT SLT reported 8.3 Gbps of international backbone does not allow operators to directly connect using capacity in 2010. It appears that there may be their own fiber, forcing them instead to lease insufficient international bandwidth in Sri Lanka connectivity from SLT and charging high rates for that could be impacting quality. While Sri Lanka this leased line. Non-price barriers are also had the second highest international bandwidth reported, such as delays in implementing requests per person in 2008 in South Asia (after Maldives), for increased capacity. According to operators, by 2010 it was ranked fourth in this metric (Table until recently, the cost of 3). Likewise, its average download speed (1.2 Mbps) only ranks fourth in the region and actually Average download International Internet bandwidth speed Gbps Bits per person Kbps 2010 2008 2009 2010 2009 2010 Bangladesh 15.4 12 … 93 485 739 Bhutan 0.3 66 230 482 … … India 535.0 125 212 440 1,202 1,411 Maldives 0.3† 783 … … 1,821 1,819 Nepal 0.1† 6 … … 387 417 Pakistan 9.0† 56 … … 1,273 1,488 Sri Lanka 8.3 149 306 406 1,284 1,169 Table 3: International Internet connectivity, South Asia (Source: Adapted from World Bank and operator and regulator reports and OOKLA) Note: †2008 connecting to this international cable landing station was estimated to be over 10 times higher than on a reasonable cost-based basis and was even higher than Singapore. As a result, the regulator intervened and facilitated a 50% reduction in the fees to connect to the landing 13 | Broadband in Sri Lanka: A Case Study declined between 2009 and 2010. through a breakdown between those using a mobile handset and those using a data card. There 4.2.3 Internet Exchange are also mobile broadband definitional and Sri Lanka has an Internet exchange (IX) that is terminology issues with 3G often interchangeably operated and managed by Lanka Com (a used for different speeds and further nuances such subsidiary of Singapore Telecomm International) as 3.5G. Some take a broad view—any network with all major operators having a link to the IX.36 based on IMT-2000 standards (that would There is little locally hosted content, and email incorporate technologies such as EDGE and accounts used by a majority of users are CDMA 2000 1x that operate at speeds less than international (Google mail, Yahoo, etc.). As such, 256 kbps). Others take a narrower view that the the amount of traffic to be peered locally appears technology should be faster than 256 kbps such as to be very little. High Speed Packet Access (HSPA) or EV-DO while others take a more restrictive view and 4.3 Penetration of broadband consider only HSPA (sometimes referred to as 3.75G). There is a further complication of There are acknowledged problems counting exact whether wireless technologies such as EV-DO or broadband subscriptions. First, TRCSL does not WiMAX can be used in both fixed and mobile publish data on fixed broadband subscriptions and modes. All of these issues apply to Sri Lanka that has only recently begun publishing data for mobile has a plethora of broadband technologies in use. broadband subscriptions. Second, not all of the As there is no internationally agreed upon operators report the number of broadband solutions to these dilemmas, the context of the subscriptions. Third, there are methodological available broadband data is explained below. issues related to the definition of mobile broadband. These include differences between the Penetration of fixed broadband: In respect to Per 100 2010 Source Comment people Dept. of Population 20,653,000 Census and Mid-year Statistics Internet & Email Provisional including dial-up, ADSL 280,00037 1.4 TRCSL Subscribers – fixed and fixed wireless ADSL subscriptions 213,816 1.0 SLT Provisional. Assumed to include Mobile broadband 294,000 1.4 TRCSL only data cards and postpaid subscribers data subscribers. GSMA HSPA connections 1,000,000 4.8 (Wireless For Q4 2010 Intelligence) Table 4: Fixed and mobile broadband subscriptions, Sri Lanka, 2010 (Source: As noted in table) theoretical capability to use a mobile broadband the overall market for Internet subscriptions, network (through ownership of a mobile TRCSL reported 280,000 fixed Internet and email broadband enabled handset) and active use subscriptions in 2010 or 1.4% of the population. (through access to the Internet in a recent period In terms of fixed wired broadband connections, using the mobile broadband network). Active SLT is the only mass-market retail provider with mobile broadband users can be further analyzed 213,816 ADSL subscriptions at the end of 2010. It offers packages with speeds ranging from 512 36 http://www.robtex.com/as/as45338.html#peer has list of kbps to 4 Mbps (leased lines using SLT’s Metro companies peering at the SL-IX. Ethernet are also available for corporate users 37 Includes ADSL, and fixed wireless (WiMAX) connections. with speeds of up to 2 Gbps). Since neither the 14 | Broadband in Sri Lanka: A Case Study TRCSL nor the fixed wireless operators publish and this number had grown to 1 million information about broadband subscriptions, the connections for WCDMA HSPA by the end of only certain fixed broadband subscription data is 2010. The GSMA data is based on operator that of SLT. The resulting fixed broadband network software is capable of counting (at any penetration is one percent of the population. given moment for any given location) the active ADSL accounts for 76% of the total Internet and data connections at various speeds. email subscriptions. Almost one quarter of SLT’s fixed (copper) lines are connected to ADSL (Table The available statistics suggest that mobile 4). broadband penetration in Sri Lanka was between 1.4% to 4.8% of the population in 2010 (Table 4). Penetration of mobile broadband: In Therefore, while penetration is higher than in December 2010 there were 17.4 million SIM cards fixed, mobile broadband has a long way to grow. Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Total Connections 28.86 % 25.94 % 22.93 % 17.74 % 15.88 % All WCDMA 109.71 % 102.46 % 91.34 % 79.53 % 78.59 % connections HSPA connections 212.16 % 199.65 % 179.03 % 153.45 % 142.45 % Table 5: Year-over-year growth of mobile connections by speed (Source: Wireless Intelligence, Market Tracking Table - Sri Lanka, Q4 2010) in Sri Lanka and the market penetration was But it is happening – while overall mobile 82% 38 . The number of reported mobile connection growth has reached a plateau, broadband subscriptions varies according to the WCDMA based broadband connections are source, reinforcing the methodological challenges growing faster and the fastest HSPA connections discussed above. According to TRCSL there were specifically for mobile broadband data is growing 294,000 mobile broadband subscriptions in even faster (Table 5). 2010. 39 However TRCSL data only captures the connections that are counted through a sale of a In mobile broadband, Sri Lanka compares well HSPA dongle and/or have subscription to a data with its South Asian neighbors, coming only plan, therefore leaving out users who are using a behind the Maldives (a much richer country with pre-paid connection or connecting at HSPA over 100% SIM penetration) (Figure 7, left). Sri speeds through their mobile phones without a Lanka ranks third in the region in fixed broadband formal data plan. As a result, secondary sources subscriptions per 100 people (based only on SLT’s report higher figures. According to published ADSL connections) (Figure 7, right). GSMA figures, there were 546,811 mobile broadband subscriptions in Sri Lanka at 2010 Q140 4.4 Retail broadband prices There are a wide variety of pricing packages in Sri Lanka’s dynamic broadband market. Table 6 lists 38 The penetration number is in itself problematic, because of multiple SIM use. prices compiled by TRCSL as part of its 39 Telecommunications Regulatory Commission of Sri Lanka. broadband quality monitoring for February 2011. (2010). Statistical Overview. Retrieved 25 March 2011 from Mobile broadband is generally cheaper on a http://www.trc.gov.lk/information/statistics.html. Note that monthly basis but packages are capped whereas SLT reported 90,000 mobile 3.5G broadband subscriptions for its Mobitel subsidiary in 2010 while Dialog reported fixed broadband packages are unlimited. On a 28,000 mobile broadband subscriptions in 2009 (2010 data not published). 40 GSM Association. (2010). Mobile Broadband: Asia-Pacific http://www.gsmamobilebroadband.com/upload/resources/f Regional Fact Sheet. Retrieved 25 March 2011 from iles/16082010112500.pdf 15 | Broadband in Sri Lanka: A Case Study Mobile broadband (per 100 people), Fixed broadband (per 100 people), 2010 2010 Maldives 3.7 Maldives 8.3 Bhutan 1.2 Sri Lanka 1.4 Sri Lanka 1.1 Bhutan 0.3 India 0.9 Pakistan 0.07 Pakistan 0.5 India 0.01 Nepal 0.002 Nepal 0.4 Bangladesh 0 Bangladesh 0.003 Figure 7: Mobile and fixed broadband subscriptions per 100 people, South Asia, 2010 Source: Maldives refers to “Mobile broadband� reported by the Communications Authority of the Maldives (CAM) in January 2011 (left chart) and “Broadband ADSL� reported by CAM for December 2010 (right chart). Sri Lanka refers to “Mobile broadband� reported by TRCSL for December 2010 (left chart) and “ADSL subscriptions� reported by SLT for December 2010 (right chart). Bhutan refers to “3G subscriber� (left chart) and “Broadband subscriber� (right chart) reported by Bhutan InfoComm and Media Authority for October 2010. Pakistan refers to EV-DO subscriptions (left) and “Broadband subscriptions� (right) reported by Pakistan Telecommunication Authority for June 2010. India refers to “Mobile Broadband Connections� reported by GSMA in 2010 Q1 and “Fixed Broadband Subscriptions� reported by Telecom Regulatory Authority of India for December 2010. Nepal refers to WCDMA subscriptions of Nepal Telecom in 2009. Bangladesh has not launched WCDMA; fixed broadband refers to “ADSL Connections� of Bangladesh Telecom Company Ltd. at November 2010. price per Mbps, mobile broadband is theoretically Low prices relative to other countries or a better buy. According to the plans tracked by downward movement of prices over time are both TRCSL, the cheapest monthly rental is LKR 5.32 good indicators of competitiveness in a sector. Sri for mobile broadband. Pay per use packages for Lanka’s broadband offerings have been doing mobile broadband are available so that consumers both – particularly in mobile broadband. Nokia can match usage to their purchasing power. For (2009) calculated the mobile data TCO for over 70 example Dialog Axiata provides time-based pay emerging economies in the world, and found Sri per use ranging from 30 minutes to 24 hours; a Lanka to be the 21st least expensive in absolute half hour of mobile broadband Internet access terms and 8th most affordable (affordability being costs LKR 20 (USD 0.18).41 defined as TCO as a share of GDP per capita, lower being better, with the best performing Sri Lanka has the cheapest 3G entry-level prices in countries having TCOs less than 5% of GDP per South Asia (Table 7). Its prices are also the best capita). By 2010, Sri Lanka had become the least value in terms of price per Mbps and price per GB expensive in absolute terms (Nokia 2011). of usage. 41 http://www.dialog.lk/personal/broadband/hspa/packages/p repaid-broadband/ 16 | Broadband in Sri Lanka: A Case Study Monthly Price Price Monthly Speed data per per Operator Technology rental (Mbps) volume Mbps GB (USD) (GB) (USD) (USD) DIALOG WiMAX 0.512 unlimited 15.51 30.30 LANKA BELL WiMAX 0.512 unlimited 17.73 34.63 SLT ADSL 0.512 unlimited 14.18 27.70 SUNTEL WiMAX 0.512 unlimited 17.73 34.63 DIALOG WiMAX 2 unlimited 44.33 22.16 LANKA BELL WiMAX 2 unlimited 48.76 24.38 SLT ADSL 2 unlimited 48.76 24.38 SUNTEL WiMAX 2 unlimited 39.90 19.95 AIRTEL HSDPA 3.6 3 5.32 1.48 1.77 DIALOG HSPA 7.2 15 26.51 3.68 1.77 MOBITEL HSPA 3.6 8 11.44 3.18 1.43 Table 6: Monthly broadband packages, Sri Lanka, US$, February 2011 (Source: TRCSL) Note: Converted to US$ at 2010 annual average exchange rate. Price Monthly Price per Monthly per Speed data theoretical Country Operator Technology rental GB (Mbps) volume Mbps (USD) usage (GB) (USD) (USD) Bangladesh Grameen EDGE 0.2368 1 4.39 18.54 4.39 Bhutan BT HSDPA 7.2 1.2 8.74 1.21 7.28 India Airtel HSDPA 7.2 1.25 14.77 2.05 11.81 Maldives Dhiraagu HSDPA 7.2 1 12.68 1.76 12.68 Nepal NTC WCDMA 0.384 1 69.51 181.01 69.51 Pakistan Telenor EDGE 0.2368 2 5.92 25.01 2.96 Sri Lanka Dialog HSDPA 7.2 2 4.34 0.60 2.17 SOUTH ASIA 17.19 32.88 15.83 Table 7: Entry level 3G prices, South Asia, March 2011, US$ (Source: Adapted from tariff information on operator web sites) Further, from August 2007 to February 2010, fixed broadband packages of 2 Mbps have reduced 27% while fixed broadband packages of 256 kbps have reduced by 31%42. EmergingAsia-Feb-2010.pdf ) and Broadband Benchmarks 42Calculated, based on Broadband Benchmarks Emerging South Asia, Aug 2007 (http://lirneasia.net/wp- Asia, Feb 2010 (http://lirneasia.net/wp- content/uploads/2010/03/LIRNEasia-Broadband-prices- content/uploads/2010/03/LIRNEasia-Broadband-prices- EmergingAsia-Feb-2010.pdf) 17 | Broadband in Sri Lanka: A Case Study 5. Driving the Demand for Broadband Sri Lanka has made extensive progress in Some are spearheaded by the government, in introducing a competitive broadband market with partnership with the private sector and civil a wide array of options and prices. Despite this society. Others are classic competitive responses advance, usage remains less than expected. For by operators who want to attract new customers example the Network Readiness Index, which and keep them. measures a country’s ICT environment along three broad dimensions, finds that Sri Lanka lags 5.1 Public access in usage compared to other components (Figure Not everyone can afford home broadband access. 8). Therefore it is critical to provide other options Enviro such as public facilities with broadband access. nment These can also serve as venues to provide training. Compo Environment Component 3.53 nent 5 Nenasala program: Nenasala (or ―knowledge center‖) is the name given to a series of telecenters 4 that are being installed as a part of the e-Sri Lanka 3 initiative and represents the government’s primary 2 public access initiative. According to 1 http://www.nanasala.lk/, the 605th Nenasala 0 opened in March 2011. The initial design for Readin these telecenters was based on a business model Usage ess that included a government subsidy (anything Compo from 25 – 100% of costs) that would be scaled Compo nent Usage Readiness nent down to 0% over 4 years, which was the time Component 2.94 Component 4.49 estimated to reach financial self-sustainability. Later a new type of telecenter (―community model‖ based telecenters, as opposed to the ―business model‖ based or entrepreneurial telecenters initially envisioned) was introduced, Figure 8: Sri Lanka's network readiness, 2009 where financial sustainability was traded for other (Source: The Global Information Technology development objectives. Over-time, several other Report 2009-2010) community access initiatives (such as e-libraries and distance-learning centers) have also been According to the Sri Lanka Department of Census brought under the Nenasala project, and the and Statistics Computer Literacy Survey, 13.1% of program has deviated from the exclusive focus on the population aged 5-69 used the Internet in 2009 rural areas, and currently includes telecenters even or some 2.3 million people.43 This is a significant in areas that are well served by other alternatives improvement over the 3% reported in 2004 and such as commercial ―communication shops‖ - for there is noticeable rise since the previous survey example, the Colombo district (the most carried out in 2007 (Figure 9, left). Nevertheless, urbanized district that is the financial hub of the current Internet penetration is insufficient country which has numerous commercial particularly when compared to other lower ―internet cafes‖) reported 12 Nenasalas 44 . middle-income nations that carry out similar Irrespective of location or model, the expected surveys (Figure 9, right). benefits of the Nenasala program are to: increase A number of demand stimulation policies are ICT literacy, provide affordable access to citizen being pursued to raise Internet usage in Sri Lanka. services, provide access to e-commerce and ICT services leading to job growth in rural areas and 43Department of Census and Statistics Sri Lanka. (2009). 44 According to http://www.nanasala.lk, 25 March 2011. Computer Literacy Survey 2009. Retrieved 25 March 2011 from Almost half of Nenasala users felt there were other locations http://www.statistics.gov.lk/CLS/BuletinComputerLiteracy_ in the vicinity providing similar services, according to a 2008 2009.pdf. survey by the ICT Agency. 18 | Broadband in Sri Lanka: A Case Study promote knowledge sharing. Provision of various then the better solution is to provide a targeted training programs is a primary source of revenue subsidy to the desired user group. This was in fact for Nenasalas with only 9% reporting they do not the design of a pilot ―voucher‖ scheme which was engage in training. 45 Use of computers, use of given to school children in rural areas so that they Internet, and facilities to obtain print-outs were could get a specified number of hours at a the other services offered across the board, while telecenter. This scheme how was not scaled up. a smaller percentage of Nenasalas provided fax, Easy Seva centers: Starting in 2007, mobile Internet users, Sri Lanka Internet users (% of surveyed population), 2009 2,500 Internet users 13.1% 14% Moldova 29.7 12% 2,000 Internet users (% of survey 9.2% 11.5% China 28.9 10% Thousands population) 1,500 Internet users (per 100 people) 8% Thailand† 18.2 8.1% 5.2% 6% 1,000 4.3% Paraguay† 15.1 3.6% 3.0% 4% 4.6% ,500 Senegal 14.5 3.8% 3.2% 2% 2.6% 511 619 751 911 1628 2345 Sri Lanka 13.1 - 0% 2004 2005 2006 2007 2008 2009 0 10 20 30 40 Figure 9: Internet users, Sri Lanka, 2004-2009 and selected lower middle-income economies, 2009. Source: Adapted from national statistical offices except China (CNNIC) and Moldova (IPP). Note: In the left chart, data for non-survey years have been estimated based on inter-survey growth. † = 2008 data. Methodology: Sri Lanka: Age 5-69 used in last year; Senegal: Age 12+; Paraguay: Age 10+; Thailand: Age 6+; China: Age 6+ used in last six months reported as % of total population; Moldova: Age 18+ using at least once in last three months. and telephone (local and international call) operator Dialog has been working with a number services. Secondary school students represented of development partners (e.g., USAid, Qualcomm) the biggest user group (63%). ―Basic learning‖, to establish 55 Easy Seva Centers based on a ―gathering of information‖ and reading of franchise model. Promoted as a ―telecenter-in-a- ―newspapers‖ were listed as the top purposes for box‖, the Easy Seva centers operate on a which the Internet was accessed at the telecenters standardized model: four computers, headsets and (the survey does not further define these a 3G modem and everything else (access to categories). 88% of users claimed that Nenasala finance, training, technical support) needed for a prices were lower than other centers in the local entrepreneur to set up an Internet café with neighborhood that offered similar services. This ease is provided. 46 While rural implementations of course points to the market distortions created were planned, the initial 50+ Easy Seva centers by the Nenasalas: government offering lower- were set up in town centers, even in semi-rural priced services when the commercial providers regions. Prices are around US$ 0.60 per hour of may be already providing the service at a higher internet use. Internet and email were the services (market) price. If the government’s aim is to most used. According to Dialog Telekom, Easy encourage internet use by those who are otherwise unable to afford the commercial/market prices, 46USAID (n.d.). Alliances in Action: Easy Seva Sri Lanka. Retrieved 25 March 2011 from 45ICTA (2008). Nenasala Interim Survey, Final Report. http://www.usaid.gov/our_work/global_partnerships/gda/r http://www.icta.lk/index.php/get/category/3-p esources/Easy_Seva.pdf 19 | Broadband in Sri Lanka: A Case Study Seva centers became the largest users of training, with over 2,000 more in the broadband outside the capital city of Colombo.47 pipeline.50 The program is being scaled up. c) Targeting the private sector, over 5,000 5.2 Digital literacy non-ICT sector employees had received According to the Sri Lanka Department of Census training by 2010. and Statistics, ―… computer literacy has become the fourth pillar to the traditional three tenets of d) The e-Sri Lanka PC program provided easy education: reading, writing, and arithmetic, and financing for citizens to purchase a computer that a failure to acquire the now requisite technical e) A weekly program broadcast on a popular knowledge will prevent large segments of television channel covered a broad range of population from realizing the fruits of the topics related to basic computer literacy I Information Age…"48 In a 2009 survey, the DCS including the use of simple software packages found that one fifth of the Sri Lankan population and simple hardware maintenance. aged 5-69 was computer literate, defined as a person being able to use a computer on their The Ministry of Education also worked in parallel own.49 Although this is a 25% increase from the to increase digital literacy through several previous survey in 2006, more effort is needed to initiatives starting with the launching of the raise digital literacy if Sri Lanka is to develop wide National ICT Education drive in 2005. participation in the information society. The computer illiterate fall along familiar socio- f) Through various ICT-capacity building economic classes and tend to be disproportionally initiatives of the Ministry, it is estimated that older, less educated and non-English speaking. at least 74,000 teachers had received one or more types of ICT-related training.51 e-Sri Lanka has launched multiple activities aimed at increasing ICT literacy: g) ICT was introduced into the school curriculum and General Information a) Targeting ordinary citizens, the e-driving Technology (GIT) as a subject was introduced license certification was launched, enabling for the G.C.E Advanced Level students. The people to receive low cost, basic ICT training first GIT exams were conducted in 2005.52 through a network of pre-approved private sector training partners. h) In 2006, SchoolNet53, a wide area network connecting schools and other institutions that b) Targeting government employees, a are engaged in education (such as zonal comprehensive program to develop the ICT education offices, the Ministry of Education skills has been launched, covering basic (MoE), the National Institute of Education computer literacy to highly technical skills. By (NIE), etc.) was launched with funding from Q1 2009 around 3,125 government employees the Asian Development Bank. Implemented were given the basic ICT Certification in various stages (and still ongoing), schools were initially provided with a computer lab and an Internet connection under this program. Today, any school that has a 47 SSG Advisors, 2009. Best Practices and Lessons in 50 ICTA. http://www.icta.lk/en/programmes/hrc- Delivering Broadband to Rural Communities suing Micro- building/117-government-training/510-ict-certification.html Franchising. http://www.ssg- 51 Dissanayake, A. (n.d.), ICT Education in Sri Lanka. advisors.com/files/SLLessonslearned.pdf Retrieved 15 March 2011 from 48 Department of Census and Statistics Sri Lanka. (2009). http://info.worldbank.org/etools/docs/library/243154/day1 Census Department Measures ICT Penetration into Households. Session%202_Sri%20Lanka.pdf http://www.statistics.gov.lk/special/index.htm 52 Ministry of Education (2005). Education for Economic 49 Department of Census and Statistics Sri Lanka. (2009). Development and Prosperity. Computer Literacy Survey 2009. http://planipolis.iiep.unesco.org/upload/Sri%20Lanka/Sri% http://www.statistics.gov.lk/CLS/BuletinComputerLiteracy_ 20Lanka%20MOE_Profile_English.pdf 2009.pdf 53 http://www.schoolnet.lk/ 20 | Broadband in Sri Lanka: A Case Study computer lab with a LAN can apply for high capacity Internet to research and connectivity via SchoolNet. At present education institutions in the Asia Pacific around 1,800 institutions (about 1,500 schools region (45 Mbps).55 LEARN operates as a and 300 other institutions) are linked up via non -profit entity owned by the members and SchoolNet. Of these around 1,100 have has a small staff operating the network ADSL Internet connectivity, about 400 have operating center. The majority of traffic CDMA based connections and the rest are generated by the network is international. connected via WiMAX, though at present the majority are being converted to ADSL. Most 5.3 Converged and bundled have 128Kbps connectivity, while bigger or offerings central schools have 256-512 Kbps. The Operators are taking a classic approach of product MoE and the NIE have higher bandwidth of bundling in order attract consumers, increase 6 Mbps and 4 Mbps respectively. Sri Lanka revenues and decrease churn. Some of these are Telecom and Dialog Telekom are the primary helping drive the adoption of broadband. For providers of connectivity. Conversations with example: the Network Operations Center for SchoolNet revealed that the majority of traffic  Dialog’s broadband and voice bundle generated is for web browsing, though there is products (SmartHome and BoxOffice) evidence of provincial level use of the various demonstrated significant growth in 2009 (with collaboration tools that are offered as part of 162 and 64 percent customer growth for each the SchoolNet. Web hosting (of web pages product, respectively), despite broadband-only for schools) and domain name assignment for subscriptions growing only marginally.56 schools are also widely requested services. Revenue contribution from customers of Actual usage of facilities (the lab, or Internet) these two products grew from 35 to 41 is governed by the policies of each individual percent between Q3 2009 to Q4 2009 school, and therefore highly variable: some whereas revenue contribution from allow relatively easy access while others have broadband-only consumers fell from 65 to more restrictive opening hours and policies 59%. on which students can use the facilities.  LankaBell offers free narrowband Internet services to its 1.2 million subscribers.57 In July While internet access at primary and secondary 2009, the company announced that its schools is still emerging, the universities and customer base for high-speed Internet had research institutions have traditionally had better grown by over 300 percent in less than 18 access. months.58 i) Internet connectivity for universities and  SLT launched its IP based television service research institutions is through the Lanka PEO TV and reported over 26,000 Education and Research Network subscriptions in 2010. While pricing for TV (LEARN).54 The majority of national and channels offered on PEO TV is less regional level universities and some private competitive than alternatives, it is an attractive ones are connected to the Internet through option for consumers who have access to LEARN. Operating funding comes from the copper connectivity (within a short distance government (via the University Grants Commission), while capital investment (e.g., for increased network capacity) has been 55 See funded through international donors in the http://www.tein3.net/upload/pdf/TEIN3_Topology_04.10 past. International connectivity is through _low_res.pdf for TEIN3 56 Dialog. 2010. Annual Report 2009. two paths: the incumbent SLT (120 Mbps) http://www.dialog.lk/content/uploads/pdfs/annual_reports and also via the Trans-Eurasia Information /2009_annual_report_en.pdf Network (TIEN 3) which provides dedicated 57 http://www.lankabell.net/lanka_bell_one_step.htm 58 ‖Submarine Links.‖ Lanka Business Online. July 9, 2009. http://www.lankabusinessonline.com/fullstory.php?nid=658 54 www.ac.lk 627048 21 | Broadband in Sri Lanka: A Case Study Rank Name Site Comment 1 Google google.lk Search A social utility that connects people, to keep 2 Facebook facebook.com up with friends, upload photos, share links and videos 3 Google google.com Search YouTube is a way to get your videos to the 4 YouTube youtube.com people who matter to you. Upload, tag and share A major internet portal and service provider 5 Yahoo! yahoo.com offering search results, customizable content, etc. 6 Blogger blogspot.com Free, automated weblog publishing tool 7 ESPN cricinfo espncricinfo.com ESPN Cricket portal A free encyclopedia built collaboratively 8 Wikipedia wikipedia.org using wiki software Largest Online Community and Media Portal 9 ElaKiri elakiri.com for Sri Lanka Gossip Lanka 10 gossiplankanews.com News from Sri Lanka News A premier breaking news web site offering 11 Ada Derana adaderana.lk news from Sri Lanka in English, Sinhala and Tamil 12 Daily Mirror dailymirror.lk Sri Lanka 24 Hours Online Breaking News Social networking and micro blogging 13 Twitter twitter.com service utilizing instant messaging, SMS or a web interface. 14 Windows Live live.com Search engine from Microsoft 15 WordPress wordpress.com Free blogs 16 eBay ebay.com International person to person auction site English Sinhala & Tamil Latest news updates 17 Lankaenews lankaenews.com from Sri Lanka 18 Bing bing.com Search engine developed by Microsoft 19 bp.blogspot.com 20 lankadeepa www.lankadeepa.lk Portal site of Wijeya Newspapers Table 8: Top 20 web sites in Sri Lanka, March 2011 (Source: Alexa http://www.alexa.com/topsites/ countries/LK) of the exchange, in order experience high bundled voice+broadband offering to quality) and do not want the hassle of consumers. maintaining a separate satellite TV subscription. 5.4 Content and applications  At the time of writing, new broadband Access to content that is relevant to users helps to operator Sky Networks was in talks with one drive broadband uptake. This includes access to of the CDMA fixed line operators to offer a popular global sites as well as the development of local content including e-government applications. 22 | Broadband in Sri Lanka: A Case Study 5.4.1 Browsing habits of users forums on Elakiri.com claimed to have over 9 A ranking of the top twenty web sites in Sri Lanka million posts under 874,000 different threads with shows that global applications such as search over 348,000 users.60 portals (e.g., Google, Yahoo!, Bing) and social networking and peer to peer applications (e.g., 5.4.2 E-government applications Facebook, YouTube, Twitter, Blogger, eBay) are Government can be a driver of increased popular (Table 8). Local content, particularly news broadband penetration through its own ICT sites, rank in the top twenty as do sites of activities including the development of online particular interest to many Sri Lankans such as applications to facilitate citizen interaction. One of cricket (ESPN cricinfo at #7). Like everywhere the main components of the e-Sri Lanka program around the world, Sri Lanka has joined the social was the development of e-government services. networking revolution with over 900,000 According to an evaluation of the program, Sri Facebook users in March 201159 or some 4.4% of Lanka has progressed in e-government since 2004 the population and around 40% of Internet users when there were no Internet-enabled services and (based on the DC&S Computer Literacy Survey). only a single central government portal providing Elakiri.com is a popular website that allows users static information.61 By 2010, 290 agencies had a 100% 90% 87% 78% 80% 69% 70% 65% 60% 50% 38% 39% 40% 31% 30% 27% 19% 20% 15% 15% 15% 12% 9% 10% 7% 8% 10% 3% 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% Ministries Departments Statutory Ministries Departments DS DvS Boards (PG) (PG) Information Only Application Forms Downloads Interactive Citizen Services Web Portal Figure 10: Services provided by various types of government organizations (Source: ICTA) to upload (and download from other users) popular content such as music videos, pictures 60Statistics reported on http://www.elakiri.com/forum/ and mobile ring tones. It provides a facility for 61The World Bank. (2010). Implementation Status and Results E- hosting blogs and contains several forums that are Lanka Development (P081771) (Rep. No. ISR2333). http://www- popular. At the time of writing, the various wds.worldbank.org/external/default/WDSContentServer/W DSP/SAR/2010/12/25/0D9887F3F94C315385257804003D 75E0/1_0/Rendered/PDF/P0817710ISR0Di0225201012932 59 www.ictDATA.org 75514930.pdf 23 | Broadband in Sri Lanka: A Case Study web site and there were 112 online services for the center65), traditional counter-services (in the case private sector. More detailed analysis reveals that of certified copies of birth, death and marriage the even though many government offices had a certificates being available under 30 minutes by web presence, only 10% provided some kind of walking-into the relevant government office, interactive service. 62 The others provided achieved through a huge document digitization information and at most allowed the download of initiative) or ―drive-through‖ services (in the case forms (Figure 10). Yet the download of of the payment of motor vehicle road tax in a few government forms should not to be under- minutes thanks to backend computerization of the estimated. Simply having information about how process). According to the UN e-government to access government services and providing the survey, Sri Lanka ranks third in the Southern Asia necessary application forms online provides a region. However its rank dropped ten points huge benefit to users who otherwise may have to between 2009 and 2010 and the country’s overall travel several hours just to obtain these (and travel e-government index has remained stagnant. again to actually obtain the service). 5.4.3 Content offerings from operators and A separate survey of citizens who walked into emergence of “App Store� models selected government offices revealed their most- Private sector is also entering the mobile- used e-government service. Top ranked was application market. The models adopted by the obtaining information from government websites operators vary. Some are creating educational (47.3%), with making inquiries from the content from scratch, hoping people will be Government Information Center (GIC) ranking willing to pay for useful content in a culture where next (46.6%), making inquiries via e-mail from education of children is the primary goal of most government organizations (7.5%) and online families, and majority of secondary schoolers (or applications for government services (6.0%). 63 their parents) pay for ―private tuition‖ that helps Indeed the availability of government information with additional coaching on top of what they learn and forms appears to be a driver of Internet at school. Operators have also started online services, at least for those citizens that access the application stores, inspired by the iPhone App Internet at the Nenasalas (the government’s Store or Nokia’s Ovi. However the difference is telecenters). A 2008 surveys reveal that 70% of that the applications are within a walled garden of users of Nenasalas had accessed government the operator, and operator-centric ((unlike the websites for information and services and that phone-centric models such as the iPhone app 24% of them said access to government services store which are accessible from any operator as through the Nenasala’s had contributed positively long as the phone is an iPhone). At the time of towards their life.64 writing Etisalat was offering application developers standardized contracts that provided There is room for improvement. As noted, more them with a development environment (to government transactions enabled online (instead develop and test the software), revenue share of of simple information) could prompt more 70% and non-exclusivity (i.e. the developer could demand. Further, some of the most widely used make the app available to other operators, but had e-government services implemented by ICTA are to do the marketing)). As with all user driven ones that use ICTs at the backend, but rely on innovation, it is hoped that a large number of citizens using simple old fashioned phones (in the applications will be generated, with a few case of the Government Information Center, becoming extremely popular due to consumer which gives information about applying for demand. However, smart phones that can run various government services through a call these apps are still only a small percentage of the market. Therefore what is required are 62 ICTA (2008). Survey on ICT Usage in Government Sector. http://www.icta.lk/index.php/get/category/3-p) 65The GIC information is both available online at 63 ICTA (2008). Government Organizations Visitor Survey. www.gic.gov.lk and via phone by dialing 1919. However the http://www.icta.lk/index.php/get/category/3-p). GIC 2009 Annual Report states that between 2007 – 2009 a 64 ICTA (2008). Nenasala Interim Survey. total of 1.719 million calls were answered while the website http://www.icta.lk/index.php/get/category/3-p). only recorded a total of 635,928 visits as at March 2011. 24 | Broadband in Sri Lanka: A Case Study applications that can run on basic (feature) phones facilitate the formation of contracts, the and deliver utility to the masses. creation and exchange of data messages and other communications in electronic 5.4.4. Online Payments form in Sri Lanka and to provide for the appointment of a certification authority As with many developing nations, the use and and accreditation of certification service availability of credit cards is low. Therefore, providers‖. The law was brought into online payments via credit card for the purchase operation in October 2007 and is based of goods and services is only possible for a small on the United Nations Commission on percentage of the population. However, an International Trade Law (UNCITRAL) alternate payment mechanism exists through Model Law on e-Commerce (1996) and mobile telecom companies – for example, citizens Model Law on e-Signature (2001). make appointments with doctors at various  Payment and Settlement Systems Act No. hospitals by dialing a 225 from their telephones 28 of 2005: This legislation was and speaking to an operator. The doctors’ charges introduced to enable transaction of (and hospital charges) plus a fee for the checks and negotiable instruments in appointment booking service are added to the digital form. consumers bill at the end of the month (in the case of post-paid mobile users) or deducted  Computer Crimes Act No. 24 of 2007: immediately from the users available credit (in the This law covers two categories of case of pre-paid users, who are more than 90% of offences: a) computer related crimes, and, the market). Therefore, any vendor wanting to b) hacking offences which affect integrity, engage in ―e-commerce‖ will have to tie-up with availability and confidentiality of a phone companies for the payment mechanism if computer system or network and deals they want to go mass-market. both with unauthorized access and unauthorized modification and damage. 5.5 Regulatory measures to protect This law was brought into operation in July 2008. the consumer In addition to the above, other laws related to 5.5.1 Online security Data Protection (and approaches other than laws, Proper security and other assurances are necessary such as self-regulation) are being considered. to help some citizens overcome their resistance to use broadband services. This includes, for Apart from the legal framework, simple awareness example, legislation that legitimizes electronic and perceptions with regards to security on the transactions and makes computer crimes illegal. It Internet has a direct impact on demand. In also includes initiatives to raise awareness about particular, access to unsuitable material by how users can limit access to sites they consider children can impact the parent’s decision to undesirable and how they can protect themselves purchase Internet access. Operators are against harmful content. addressing this. For example, at the time of writing, Etisalat was planning the sale of mobile Several key pieces of legislation have been broadband dongles that included pre-installed enacted:66 content filtering software. Dialog has also  Intellectual Property Act No. 36 of 2003: Under this law, computer programs are protected under the existing Copyright Regime  The Electronic Transactions Act No. 19 of 2006: It aims to ―recognize and 66Fernando, J. (n.d.). Impact of Recent IT Related Legislation. Retrieved 25 May 2011 from http://www.icta.lk/en/e-laws- project.html 25 | Broadband in Sri Lanka: A Case Study launched a ―Child Safe Internet‖ account that were therefore ordered to monitor and filter such filters access to inappropriate web sites.67 content. In July 2009 it was reported that based on a petition by the Inspector General of Police The government’s response to pornographic the courts had ordered TRCSL to ban twelve local content online has been haphazard – with the Internet sites identified as containing topic gaining prominence at regular intervals, but pornographic material. In August 2009, it was then disappearing from the radar, without reported that the TRCSL was about to force all concrete policy or regulatory action in between. Internet cafes to register and be monitored closely Figure 11: Mobile broadband speed tests, Sri Lanka, January 2011 (Source: TRCSL) Note: Measures download speeds of various mobile broadband operators over a 16 hour period in Colombo. Tests are based on download of 10Mb file from USA. For example, in August 2008 it was reported in to ensure they do not provide access to the press that the President had ordered the pornographic content.70 But as of today, how it is TRCSL to eliminate opportunities to watch unclear how these rules/orders are being pornographic movies and videos on the Internet68 enforced. and that the National Child Protection Authority of Sri Lanka was considering banning the 5.5.2 Broadband quality receiving of pornographic text messages. 69 ISPs Consumer assurance can be enhanced through quality of service testing of broadband services. 67 Dialog. 2010. Annual Report 2009. TRCSL has commenced carrying out broadband 68 ―Unrestricted Web Access for Payment in Future, TRC.� tests to measure advertised speeds against actual The Sunday Times. August 2, 2008. 69 Wattegama, Chanuka. ―Sri Lanka: Now Internet porn banned, it is time to immobilise mobile porn.‖ LIRNEasia, August 26, 2008. http://lirneasia.net/2008/08/sri-lanka- 70―No sex please, we’re Sri Lankans‖. The Sunday Times. now-internet-porn-banned-it-is-time-to-immobilise-mobile- August 2, 2009. porn/. http://www.sundaytimes.lk/090802/News/news_04.html 26 | Broadband in Sri Lanka: A Case Study speeds. 71 It conducts tests for both fixed and countries. A January 2011 test for mobile mobile broadband, for all operators, for different broadband found that speeds were above the advertised speeds. The tests are based on 1 Mbps threshold and generally above a 1.5 Mbps download results from servers in different threshold (Figure 11). 71Telecommunications Regulatory Commission of Sri Lanka. January 2011. TRCSL Releases 3G Mobile Broadband Speed Test Results. http://www.trc.gov.lk/broadband/184-trcsl-releases- 3g-mobile-broadband-speed-test-results.html 27 | Broadband in Sri Lanka: A Case Study 6. Assessing Performance: Glass Half Full or Half Empty? On one hand, Sri Lanka’s fixed broadband available), operators were quick to invest. Dialog penetration leaves much to be desired, with only a launched South Asia’s first commercial 3G small portion households being served by fixed network in 2006 72 and other Sri Lankan mobile copper broadband, and an even smaller portion of operators have followed suit. Availability of 3G the served households adopting ADSL. Whether spectrum and 3G services is in sharp contrast to fixed wireless (especially newly emerging 16.e the situation in many of Sri Lanka’s neighbors, WiMAX) will prove successful is unclear because most notably India which did not allocate it till these technologies/services are only just entering until 2010. the market. However mobile broadband has stepped in to fill the void – Sri Lanka has the Sri Lanka is keeping up this track record, and has second highest level of mobile broadband made spectrum available for LTE networks, which penetration in South Asia (only behind Maldives, a are currently being tested by two operators. much richer country) and it has the lowest prices. Though overall adoption is still low, mobile 6.1.2 Innovations by operators broadband is experiencing phenomenal growth. The second key driver of mobile broadband stems Many factors contributed to this success, as from dynamics of an extremely competitive discussed below. mobile industry in Sri Lanka. Market entry has been liberal with a relatively high number of However, the path for continued growth for mobile operators. Once the market got beyond the broadband is far from certain, given the socio- duopoly situation, and disruptive third and fourth economic conditions of the country and operators entered, serious competition set in, competitive dynamics between operators. driving down prices. In order to maintain margins and grow the market, operators could not These factors are discussed in the following continue to ―cream skim‖ (service the rich or section. those at the top of the socio-economic pyramid who have high ability to pay) but had instead to 6.1 What worked reach the masses and the poor. The operators innovated by moving towards a high volume, low 6.1.1 Early availability of 3G spectrum cost network business model characterized by, a) The Sri Lankan regulator was one of the first in outsourcing of network operations, leading to the Asian region to make 3G spectrum available significant reduction in network costs, b) sharing back in 2004 when it authorized its use for testing. of passive and active infrastructure, without By 2006, this spectrum was allocated for regulatory obligation, further reducing operational commercial use to all operators at a charge of costs, c) eliminating credit risk and cost of printing around USD 5 million. Not only was 3G invoices by offering pre-paid service, d) catering spectrum made available at the time, but was to variable incomes of the poor by enabling thereafter available to any operator who paid the extremely small re-charge amounts on pre-paid same price. This eliminated ―land-grab‖ type services (as low as USD 0.50 top-ups) and e) even behavior that would have been otherwise created eliminating scratch cards used for topping-up pre- by a one-off spectrum auction and enabled paid services by moving to electronic re-charge, operators to enter the 3G market when it made saving more costs. This business model is most sense to them – based on their assessment characterized by extremely high network of trade-offs between early entry vs. waiting for utilization and low Average Revenue per User the right time in their capital investment cycle. (ARPU) and has enabled those at the bottom of Though the government arguably lost potential income through this allocation method, it did make spectrum available on a non-discriminatory 72 ―New Generation: Sri Lanka’s Dialog Telekom launches basis to all operators, and at a relatively low price. first commercial 3G service in South Asia.‖ Lanka Business Once the primary barrier to mobile broadband Online. August, 15, 2006 investment was removed (i.e. spectrum was made http://www.lankabusinessonline.com/fullstory.php?newsID =628473154&no_view=1&SEARCH_TERM=5 28 | Broadband in Sri Lanka: A Case Study the socio-economic pyramid to become mobile of e-Sri Lanka is not in the individual pieces, but voice and SMS users.73 rather the holistic eco-system it envisioned, and that even activities that are as-yet-completed The same model is now being extended to mobile contribute to that eco-system and general sense of broadband. Faced with high competition in voice, ―excitement‖ about ICTs created by the program. operators are moving to other services, and data is the first target. While many rich or some middle 6.1.4 Tax relief classes households may have access to copper Sri Lankan consumers have been plagued with wire (and therefore ability to get ADSL high taxes on their telephone bills. Given the ease connections), most other do households do not. of collecting taxes through the telecom operators, Therefore wireless is the only option for many. it was common for the government to impose a Operators are meeting the demand with variety of taxes, and sometimes taxes on taxes, on reasonably priced HSDPA dongles (at under USD phone services, both mobile and fixed (besides 50 per dongle) and data plans (unlimited plans VAT, a Nation Building Tax, an Environment ranging from USD 4 to USD 27 per month). By Levy, etc.). As a result, Sri Lankan consumers enabling pre-paid top-ups, operators are were paying roughly 31% tax on their phone bills. eliminating the need for a monthly contract, This is in addition to the corporate taxes (and further removing barriers to entry by those on low other levies such as spectrum fees) paid by the or irregular incomes. And by targeting students operators themselves. In November 201074, the (e.g. Dialog offered them HSPA dongle and government made drastic changes to the tax package discounts of up to 50% in the early days) structure and, effective from 2011 imposed a they have managed to capture early adopters. reduced, flat tax of around 20% on phone consumers. This was a laudatory action – now Sri Lanka has also traditionally been a leader in instead of only getting browsing-time of 70 rupees mobile telephony in South Asia and often the first on every 100 spent, consumers get 80 rupees of to launch innovative new networks and browsing-time (operators do not think the applications. Dialog was the first 3G operator in reduced taxes would result in the consumers South Asia and Mobitel the first 3.5G. This trend reducing the total amount they spend each continues today – HSPA was first launched in month). It is hoped that this will increase South Asia by Dialog and Mobitel was first with consumption of mobile services including mobile HSDPA and HSUPA. At least 2 operators are broadband. running LTE trials at the time of writing, with plans to invest and launch LTE within 1 – 2 years. 6.2 Challenges The mobile operators are on a constant innovative Though Sri Lanka has achieved much and looks cycle, by matching each other’s investments into poised to continue its growth, operators face faster, more cost-efficient technologies in each major competitive challenges and there are several iteration. areas of regulatory concern. 6.1.3 Creating the ecosystem: e-Sri Lanka 6.2.1 Reaching the mass market We highlighted earlier the e-Sri Lanka initiative Compared to fixed, mobile broadband is enjoying funded by the World Bank, Government of Sri high growth in Sri Lanka. However, unlike mobile Lanka and several other agencies. As an voice (which enjoys 82% SIM penetration), integrated, cross-sector ICT-enabled development mobile broadband reaches far less than 10% program, e-Sri Lanka created extremely high penetration (counting all types of terminal devices expectations in the country. Seven years after it – phones (―small screens‖) to computers (―big started, a number of the projects are still being screens‖)75). LIRNEasia (200876) shows that over implemented and others have been abandoned. However, most stakeholders agree that the impact 74 2011 budget speech at http://www.news.lk/category- 73Samarajiva, R. Leveraging the budget telecom network table/16732-salient-features-of-the-budget-2011 business model to bring broadband to the people, Information 75 The distinction is important because big screen users Technology and International Development, 6, special issue: 93-97. generate higher revenue for operator through higher http://itidjournal.org/itid/article/viewFile/630/270 consumption. 29 | Broadband in Sri Lanka: A Case Study 88% of Sri Lanka’s poorest citizens (those at the were so drastic that operators requested regulatory bottom of socio-economic Pyramid (BoP)) in intervention (in the form of floor prices for both urban and rural areas are telephone users interconnection), claiming that their viability was (primarily mobile phone). 73% of the BoP also threatened. Even if this does not happen, owned a phone (again, primarily a mobile phone). EBITDA margins for mobile broadband is already However the same survey shows that only 3.2% of low, making it harder to justify the investment the BoP had used the Internet, that 74% had needed to move to 4G island-wide. heard of the internet but never used it and worse yet that 23% had never heard of the internet. Even if the operators can continue with these margins and invest, the bigger question of Mobile broadband has a long way to become a reaching untapped markets or having to ―create‖ mass-market technology in Sri Lanka. The the market (of those as yet unconvinced about the industry claims that 10% – 15% penetration of big utility of broadband) is the true challenge for the screen mobile broadband – i.e. a mobile internet sector. According to some operators, not only is dongle connected to a computer- is possible at the utility something users need be educated current prices without too much effort. Up to about, but fear of the negative impacts of the that point the mobile operators are still serving Internet is also a barrier that has to be crossed. mostly early adopters, or those who do not need much convincing about the utility of high speed It appears that operators are already acting. For Internet access (i.e., those that are already aware of example, the days of ―unlimited‖ data packages the Internet, use it at the office, probably have the are gone. Now the operators are clearly funds to even get an ADSL connection to their advertising FUPs or publishing the additional home, and need a mobile dongle for convenience charges when the monthly data limit is reached. or personal use). But after that market is saturated Others are offering ―minute-based‖ plans – i.e., (which will happen soon), a truly ―new‖ market, pre-paid plans where the users buy credit and are of users who are not convinced about the utility of then able to use the Internet for a certain number broadband has to be reached. This will eventually of hours or minutes. This is because it has been include those at the BoP with low ability to pay. shown that for an average pre-paid user, the But with prices already relatively low (―unlimited‖ minutes spent online is easier to keep track of and packages range from USD 4.50 – 2777, depending make more ―sense‖ of than how much data was on when the Fair Usage Policy (FUP) becomes downloaded. Some operators are willing to active 78 with majority of users spending around engage in rural awareness building, and to offer USD 10 per month; or limited pre-paid broadband mobile broadband dongles that come pre-loaded is about USD 3 per GB79), there is likely not too with content-screening software (with parental much room for prices to continue dropping. controls for what content is viewable, for Operators worry that increased mobile broadband example) and they think this will help bring some competition will result in behavior similar to that reluctant users into the market. in the mobile voice space where price reductions 6.2.2 The language barrier Sri Lanka uses three languages – Sinhalese, Tamil 76 Published reference to LIRNEasia’s T@BOP data that and English. The majority of Internet traffic is for contains these data points, if possible. If not reference to slide-set online. content hosted overseas, in the English language. 77 February 2011 prices for Dialog Axiata, largest mobile Except for government websites and several operator newspapers, there isn’t sufficient local content in (http://www.dialog.lk/personal/broadband/hspa/packages/ local languages; certainly not content that is unlimited-postpaid-broadband/ ) 78 Unlimited packages have a Fair User Policy (FUP). Once a dynamic and varied, in the way English content is. user reaches a certain download/upload limit per month, the Tamil content (though not Sri Lanka specific service quality downgrades (speeds slows down), but no extra content) is at least widely accessible on the amount is changed. This is differentiated from packages that Internet thanks to the presence of the large Tamil- charge additional fees for additional downloading. speaking population in South India. There is of 79 LIRNEasia (20xx). Broadband Benchmarks Emerging Asia, February 2010. http://lirneasia.net/wp- course a blossoming Sinhala language blogosphere content/uploads/2010/03/LIRNEasia-Broadband-prices- in Sri Lanka – however the readers and bloggers EmergingAsia-Feb-2010.pdf 30 | Broadband in Sri Lanka: A Case Study International: Download speeds (kbps) per dollar 100 Download speed (kbps) per dollar 80 60 40 20 0 800 1100 1500 1800 2000 2300 Sirius (256 kbps) Dhaka, BD Dialog (2 Mbps) Colombo, LK SLT (2 Mbps) Colombo, LK SLT (512 kbps) Colombo, LK Bell (6 Mbps) Ottawa, CA Rogers (10 Mbps) Ottawa, CA Verizon (3 Mbps) Buffalo, US Comcast (6 Mbps) Denver, US Figure 12: Actual download speeds (kbps) per US$, 2009 (Source: LIRNEasia) are often the young and educated and many could 6.2.3 Regulating broadband quality read English content anyway. There are few The budget telecom business model yields exactly websites other than newspaper sites for a Sinhala- what the name implies – low prices, but also low only speaker, or a Tamil-only speaker who wants quality. Actual throughput delivered to the user is locally relevant content. As a result, the non- less than what is promised. Compared to users in English-speaking citizenry appear to be kept out North America, Sri Lankan broadband users of the Internet. receive less value for their money (as measured by actual experienced throughput per USD spent) as This key challenge has to be addressed if the seen in Figure 12. operators are to move beyond the low penetration levels they currently have in mobile broadband. The quality of service issue has caught the The technical groundwork has been laid with the attention of the TRCSL since 2010. It now carries adoption Unicode Sinhala fonts. out its own tests and is about to enact regulation regarding minimum quality standards. One form On the other hand, one could argue that the the regulation may take is setting a minimum speed language barrier is increasingly insignificant – even that must be met at all times at all locations. This children of some non-English speaking parents is technically possible on a mobile network – the are conducting their basic education in English as operator has to add extra capacity so that the a result of the government introducing the option required speed is experienced at all times, of English medium education. This is the irrespective of whether 1 user or 500 users are generation that will drive Internet adoption (by connected. However the result would be an convincing their parents to purchase Internet expensive network that provides optimum subscriptions). Therefore perhaps over time the performance. This is not feasible for networks importance of local language sites may become that are run to optimize network load factors and less important. keep costs to a minimum. Alternatives are needed. One possibility would be to require 31 | Broadband in Sri Lanka: A Case Study average speeds (for the country or a particular 6.3 Has Sri Lanka achieved enough, geographic area) allowing operators to make the given favorable conditions? decisions on where to increase capacity to meet Sri Lanka has an adult literacy rate of over 90%, the average target. Light regulation could also be and has benefitted from a strongly supported pursued where operators offer quality- ICT4D program over the past seven years (e-Sri differentiated pricing. There is sufficient Lanka). Both Internet supply (through competition in the market to encourage operators telecenters, national backbone networks, mobile to differentiate themselves in such ways. broadband) and demand (through the 6.2.4 Special dispensation for the telecom development of e-government and other sector applications, creating awareness, capacity building) As noted, the government of Sri Lanka reduced have been addressed as part of the e-Sri Lanka the tax consumers pay on mobile services recently. program. Therefore, it is reasonable to expect that At the same time, the government exempted the Sri Lanka should achieve more in ICT telecom operators from Value Added Tax (VAT). connectivity and adoption than other developing When this announcement was made suddenly, countries that did not receive such targeted ICT operators who had just ordered multi-million funding and attention. dollars worth of equipment were faced with a Vietnam provides a sharp contrast. In 2002, Sri situation of not being able to claim back the VAT Lanka and Vietnam had similar internet on their purchase. This is perhaps a one-time penetration rates. But between 2002 and 2009, occurrence. However the broader question is why Vietnam increased its Internet penetration by a the telecom sector should be specially targeted factor of 14, while Sri Lanka only did so by 7. By (even in this ―helpful‖ way, as deemed by the 2009 Vietnam’s intent penetration was more than government). It seems that instead of giving the twice as much as Sri Lanka’s. In the World sector special favorable (or unfavorable) treatment Economic Forum Network Readiness Index in relation to other sectors, what’s more (NRI)80, Vietnam’s ranking was 17 spots below Sri appropriate is to provide a stable and predictable Lanka in 2002; by 2009 Vietnam was 18 positions regulatory and policy regime. Given the high level ahead. One would have also expected Sri Lanka of competition, most other issues would then be to gain on its neighbors. But in 2009, Sri Lanka’s taken care of by the market. NRI was behind India and just ahead of Pakistan. Viewed in this light, it appears Sri Lanka should have been performing better, even with the toll of the 30-year ethnic war. 80 http://www.networkedreadiness.com 32 | Broadband in Sri Lanka: A Case Study 7. Lessons Learned Sri Lanka has some ways to go to before it can be enabled development. This creates an eco- declared a broadband success story. It should be system of innovation and even energized the further ahead of the broadband adoption curve private sector into action (due to the threat of than it is today, given the favorable conditions it the government becoming a major player in faced – a highly literate populace and a national the sector). Therefore if funds are limited, level e-development program. However, it has they are better spent on awareness building made significant achievements, under less than and promotion at the nationwide level, than ideal regulatory conditions and under less than on individual projects, which may or may not stable socio-economic conditions including a succeed. prolonged ethnic conflict. And its mobile  The need for “Light touch regulation� in broadband has compensated for the somewhat the early stages: The approach to broadband lackluster fixed broadband performance - it is the QoS regulation that appears to be emerging in best performer in mobile broadband compared to Sri Lanka is an example of the regulator all its South Asian neighbors, many of who have attempting to do the right thing by the more advantages in terms of larger markets consumer (delivering good quality) at the (economies of scale) and better regulatory expense of creating un-achievable targets for regimes. And the growth of mobile broadband operators (regulation based on a guaranteed doesn’t appear to be slowing down anytime soon. minimum speed per connection, instead of average speeds across the network or even Best practice can be identified from Sri Lanka’s average speeds for a local region. The former successes and cautionary tales drawn from its is achievable in the long term, of course. But failures. These are summarized as follows: in the in the immediate term, it’s only achievable at great expense and the risk of not  If nothing else, enable competition in the serving the poor). market by facilitating entry: Sri Lanka is a poster child for what a competitive telecom  Race to the bottom with prices, without market can achieve, even under less than ideal growing the market is dangerous: The market-entry conditions. When enough natural response of Sri Lankan operators players enter a country (certainly more than when faced with stagnant market-share has two, ideally more than three), disruptive often been to slash prices. While this is good competition takes place yielding business for consumers in the short term, lower prices models that enable affordable mobile that lead to lower profits that don’t allow for broadband, especially when voice revenues investment hurts them in the long term. This are declining. is likely in the mobile broadband space, where  Ensure that availability of spectrum is not penetration in the early adaptor and the top- a barrier: Spectrum is the primary resource of-the-pyramid consumer segments will reach required for mobile broadband that is not saturation soon. Unless operators growth the within the control of the operators. The market by breaking barriers and reaching the regulators should make this available early, lower income groups (by creating local and on a non-discriminatory basis, regardless language content, addressing fears of safety of the allocation method. This is doubly on the Internet, providing more services important for developing nations, because through broadband connections and by most don’t have wide-spread copper networks increasing the perceived utility of a broadband (or copper connections of sufficiently high connection), the industry could stagnate. The quality to run xDSL). balance between lower prices and market  Creating “the buzz� is as important as growth has to be found by operators. specific ICT4D projects: e-Sri Lanka’s biggest contribution is arguably the enthusiasm and energy it created for ICT- 33 | Broadband in Sri Lanka: A Case Study About infoDev infoDev is a global development financing program among international development agencies, coordinated and served by an expert Secretariat housed at the World Bank Group, one of its key donors and founders. It acts as a neutral convener of dialogue—and as a coordinator of joint action among bilateral and multilateral donors—supporting global sharing of information on ICT for development (ICT4D), and helping to reduce duplication of efforts and investments. infoDev also forms partnerships with public and private sector organizations who are innovators in the field of ICT4D. infoDev is housed in the Financial and Private Sector Development (FPD) Vice Presidency of the World Bank Group. For additional information about this study or more general information on infoDev, please visit www.infodev.org/publications. 34 | Broadband in Sri Lanka: A Case Study