ISSN: 1391 - 0531
Sunday February 24, 2008
Vol. 42 - No 39
Financial Times  

Experts say TRC submitted flawed information to court

Telecom experts have alleged that the Telecommunications Regulatory Commission (TRC) has breached its statutory responsibility by presenting flawed submission with regard to a May 2005 Supreme Court directive on lowering Sri Lanka Telecom (SLT) tariff charges.

In a letter sent to the TRC in January 2008, Professor Kumar David, former Dean of Engineering at Hong Kong Polytechnic University and an expert in spot pricing called for a public hearing on the matter to determine the reasonableness of the tariff, one of several individuals to have done the same. The TRC's Director of Economic Affairs Nelum Jayaweera, acknowledged receiving the letter in writing dated January 4, 2008. Jayaweera told The Sunday Times FT this week that 'the matter had been referred to the Attorney General for comment' on the day of receiving David's letter.

Jayaweera also said that others have made the same request for a public hearing to be held but when asked to comment on the allegations, denied any wrongdoing on the part of the TRC. "We have carried out the Supreme Court order and we have done nothing wrong," he said. "We have done perfectly what was directed by the Supreme Court." Jayaweera said he expects a response from the Attorney General within the course of the coming week.

In his letter to the TRC, David wrote that he studied the new tariff, in particular the start up charge and concluded that the new tariff exploits the call charge variation inherent when changing from 'pulsed metering' to 'per sec billing' to raise tariffs. He continued that instead of the guaranteed saving required by the Supreme Court there is an increase in call charges with few exceptions.

This is most pronounced for calls made during the economy and discount time bands. In these tariff bands there is little or no prospect of users gaining any saving because of the start-up charge of Rs1.50. It is also understood that the start-up charge quoted in the SLT tariff proposal put up during the negotiations directed by the Supreme Court was Rs 1.30 and that the call charges were also much lower.

David continued in his letter that the start-up charge put forward by the SLT during the negotiations ordered by the Court is understood to have been opposed by the plaintiff of the case against SLT. The new SLT tariffs particularly the unconscionably high start-up charge is perhaps based on inefficient practices. What should be done is to address optimal network capacity utilization requirements to achieve cost-effectiveness of the service.

He says the new tariff defeats the goal of the Presidential Committee of 1985 that published the White Paper recommending the liberalization of the telecom sector.

The White Paper which recommended commercialization and privatization of the SLT expected it to serve as a reference bench mark for other competitors and foster.

In view of the above reasons, David urges the TRC in his letter to make available a soft copy of the complete Supreme Court directive and also publish it in the print media, electronic media and web and convene in according with the provisions of the Telecom Act, a public hearing to determine the reasonableness or otherwise of the new SLT tariff.

Another telecom expert also alleged that the TRC submissions to the Supreme Court were flawed.

According to court documents, the Supreme Court directive states that out of the two proposals (A and B) submitted on tariff charge reductions by SLT, proposal B was found to be unacceptable after discussions with the Consumers Association of Lanka (CAL) and that the appellant should submit a further proposal C.

In this proposal C, the Supreme Court stated that it 'would in effect bring down the call unit charges from 100 to 799 more to be lying with the reduction in 1 to 99 that should be about a 20% - 25% reduction.' The expert alleges that the TRC, without fully divulging the facts in respect of the aforesaid reduction recommended to the Supreme Court that the tariff reduction of the proposal C needs to be limited to 8.72% for the period of January 2007 to October 2007 and thereafter, to 9.03%, citing that the purpose is to restrict the resulting revenue loss to conform to licensing conditions, more specifically licensing condition 20.1. The expert said that the TRC did not inform the Supreme Court that this clause is based on the globally well known price cap regulation RPI-X where RPI accounts for the changes in the overall inflation of input costs and X accounts for improvement of technology costs, economies of scale and scope. The expert further said that the TRC did not inform the court that X is not a one time set value and that its regular revision underpins its thrust on market competitiveness.

He also alleged that the TRC failed to highlight the fact that the license condition was suspended promptly in 1998 without any forewarning and publicity when the SLT license was amended at the time of entering into agreement with Japan's Nippon Telegraph and Telephone (NTT) company. Likewise, the expert is alleging that the TRC did not mention that it failed to revise X in 2002 when the suspension was withdrawn. Above al, the TRC did not inform the Supreme Court that in order to protect the market competitiveness of the sector, X should be at least adjusted prior to estimating the permissible upper most limit of the bill reduction. If the revised value of X is used, then the permissible reduction in the tariffs is around 20%, the value stated in the 2005 court directive.


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