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Economic Freedom & Consumer Rights: Lessons from Sri Lankan Experience
Rohan SamarajivaSeminar on Economic Freedom in South Asia:
A springboard for socio-economic developmentColombo, 16 October 2008
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Agenda
What economic freedom has achieved in the telecom industry
Lessons for other infrastructure sectors/countries . . .
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Surprising facts about Sri Lanka from H’hold Income & Expenditure Survey, 2006
Homes with mains electricity 79.9%
Homes with fixed/mobile/both 46.5%
Safe source of drinking water 85%
Cooking with LPG 17.1%
Household non-shared toilet 89.1%
Almost half, should be higher now
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Household Access, 1981-02 (Consumer Finance Survey adjusted)
0
10
20
30
40
50
60
70
80
1981/82 1986/87 1991/92 1996/97 2001/02
Perc
enta
ge
Ow n w ell/piped w ater
Electricity
LP Gas for cooking
Radio
TV
Telephone (f ixed/mobile)
Motorized transport
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Supported by TRC data; high growth occurs in period not covered by Central Bank data (2002-)
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fixed Mobile
Source: Telecom Regulatory Commission of Sri Lanka
Fixed and mobile telephone growth in Sri Lanka, 1992-2007
8 million mobiles + close to 3 million “fixed”
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72% of Sri Lanka BOP households will have access in 2008 (projected) higher for country as a whole
36%
19%
41%
62%
77%
70%
50%
72%78%
86%
0
25
50
75
100
125
150
Pakistan India Sri Lanka Philippines Thailand
Con
nect
ion
s at
BO
P (
mill
ions
)
0%
20%
40%
60%
80%
100%
% o
f ho
useh
olds
at
BO
P w
ith a
tel
epho
ne
Already own something Don't own but plan to buy
Current ownership at BOP (%) Penetration at BOP by mid 2008
Source: LIRNEasia
Unless the government succeeds in slowing down growth
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Some of the lowest prices in the world, based on comparing basket of services (Feb 2008; low-user basket)
Average monthly prepaid mobile cost for a Low User
Average monthly prepaid mobile charge for a low user
8.33
5.25
2.46
3.343.72
5.46
3.83
5.48
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Afghanistan Nepal Bangladesh Pakistan India Bhutan Sri Lanka Maldives
US
$
SMS
Usage
Rental
Connection
Nokia TCO study says Sri Lanka is lowest out of 77 emerging economies
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Pretty good performance
Half the population connected for sure; possibly 70% households with some kind of phone access Calling opportunities in 1992 = 100,000; now = 12,000,000
Some of lowest prices in the world; only industry with decreasing prices when everything is increasing in price
Quality of service not the greatest, but Choice is relatively good One of the biggest contributors to the Treasury One of the drivers of economic growth
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Other benefits to consumers
Disappearance of petty bribes needed for connections and maintenance
Consumer orientation among operators with service being brought to consumers electronically and otherwise
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Compared to . . . .
2001 data is latest; slower or faster today?
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Time-line of policy/regulatory actions that led to good performance
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fixed Mobile
Fixed licensesissued
Incumbent partiallyprivatized; management contract given
Regulatory agency strengthened
4th mobileoperator enters market
Rate rebalancingbegins
Fixed-fixedinterconnection
Fixed-mobileinterconnection
Internationalmonopolyended
Government ownershipof incumbentreduced <50%through IPO. Fixed incumbent allowed to manage and fully own mobile operator
GSM 1800frequenciesrefarmed/auctioned
CDMA 800frequenciesrefarmed/assigned
5th mobileoperatorlicensed
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Right actions conducive to economic freedom Allowing market entry
Clean entry > dirty entry > no entry Market entry without spectrum is meaningless
Refarming and assigning as needed Adequate capital essential
Even the acquisition of a mobile operator by the fixed incumbent with potential for anti-competitive behavior helped drive the industry by creating a disruptive competitor
Enough space for companies to develop new business model (no “command-and-control” regulation)
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Lessons for other sectors/ other countries
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The guiding principle
Competition wherever possible; regulation where necessaryWhat is possible and what is necessary
will change depending on sector, country and time
Reform is not one-size-fits-all But that does not mean that the principle is
not of general applicability
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Good government
Is needed for effective provision of infrastructure services Where the best that can be achieved are
workable marketsGood government is unlikely when
government is doing too many conflicting things Supplying services Regulating Making profit Serving those not served by the market
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The solution includes
Separating the functions Do a few things well, not many things badly
Ensuring enough information comes out for regulation to be effective
Aligning incentives for efficiency and lawful behavior
Creating the conditions for as much participation as possible in infrastructure industries = maximizing economic freedom
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For more informationwww.lirneasia.netColumn:
http://www.lbo.lk/showsubcategory.php?cc=24&t=s&nm=Choices (www.lbo.lk, choices)