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Payphones: a dying industry in SL?
By Suren Gnanaraj
With the recent closure of several payphone companies, doubts have arisen about the viability of the industry, especially considering the competition from the rapidly increasing number of mobile phones.

TRC returns call
Following claims made by payphone operators about being charged higher tariff rates than the average consumer, TRC officials said that the market had been liberalised, allowing licensed operators such as SLT, Suntel and Lanka Bell to levy their own rates for their services provided to payphone companies.

"We have allowed the prices to be decided according to market fluctuations based on demand and supply." However, the TRC said that no licensed operator could harass a non-licensed operator such as payphone companies, by charging unreasonable prices. The TRC has the right to intervene if such incidents were reported.

"So far we haven't received any complaints from payphone companies stating such allegations," an official said.Payphone companies were given a boost with the introduction of its subsidy scheme in 1999 where Rs. 50,000 is given for every payphone booth installed outside both Urban and Municipal areas, TRC officials said.
The TRC is also considering a proposal to further increase the subsidy amount in a bid to popularise the payphone industry.

"This measure has been taken by the Minister of Mass Communication Imtiaz Bakeer Markar to increase the connectivity of rural areas and encourage more payphone operators to come in to the market." A Pakistan-based company, WORLD CALL, and Lanka Payphones had expressed their desire to enter this scheme, which is being currently used by Tritel. TRC officials also said that Tritel was maintaining good profitability in the market.

However, the TRC was unaware as to why payphone booths were not lit up in the night, and blamed it on vandalism. TRC officials were shocked to hear that the CEB had requested Rs. 50,000 per booth to install a single light bulb. "We haven't been informed about such a claim, and that's in fact, news to us."

According to Asoka Gunasekera, an expert in the industry, across the world payphones have become outdated due to the rapidly expanding cellular phone industry. "Every payment hawker and fish monger has a cellular phone, and there is clearly no future for this industry," he said. The industry was labour intensive and the income generated from payphone cards was insufficient to meet the increasing costs.

When asked as to how some companies remained in the market, Gunasekera said, "They're just marking time, trying desperately to cling on to a dying industry."
However, Managing Director of Tritel Services Ltd, Robert Schuster dismissed claims that the payphone industry was dying due to the technological overlap of cellular phones in the market. "In Sri Lanka there are approximately only 500,000 cellular phone users out of a total of 18 million people. So how do the rest of them communicate?"

Schuster said that cellular phone penetration in the market was much slower in Sri Lanka in comparison to other countries like Vietnam, Malaysia and Taiwan, and that it would take at least 20 years for mobile phones to be popular with the middle and lower income groups. "In Malaysia the penetration of cellular phones is higher than in Sri Lanka, but it still maintains around 150,000 pay phone booths, in comparison to Sri Lanka which maintains only 5,000."

The difference between Sri Lanka and all other countries is that pay phone booths overseas are considered as part of a country's infrastructure; a utility service. Whereas in Sri Lanka it's treated as just another service, Schuster said. "Payphone companies in Sri Lanka have collapsed not because of cellular phones, but because of the lack of support we have received from the government." Explaining the role the industry expected the government to play, Schuster said, "Tariffs are not regularised in this country. Payphone companies fall under the category of non-licensed operators, which means our phones are operated through telephone lines of regular licensed phone operators such as SLT, Suntel or Lanka Bell."

Until 1999, in which year most payphone operators closed down, the islandwide industry was charged a higher rate per minute than the consumer who used these phone lines direct. "The losses that kept accumulating made these companies insolvent," said Schuster. Following the closure of these companies, the TRC categorised the industry as low user, which meant that they would be charged Rs.1.10 per minute. "There's a contradiction, because though the regulator has categorised us as a low user, we keep getting priced at different rates, and then the TRC tells us that it is because the market has been liberalised. So then what is the TRC regulating?"

Added to that Tritel has to pay 20 percent VAT plus a further rental fee to the local authorities or the Road Development Authority if its phone booth is just near the road.

Sorry, wrong number
Sri Lanka's first payphone company, Lanka Payphones Ltd., which was bought by an American company TSG Network Services Ltd., prominently advertised in a daily newspaper that it had requested the court to wrap up both it and its local owning firm, TSG Lanka Ltd.

Sources say that the American firm may have become bankrupt and thus a closure was imminent. Under the usual procedure, the court will now appoint a liquidator who will decide whether to sell the company, continue to run it or liquidate its assets and pay off all its creditors. The liquidator will notify all those who have purchased payphone cards as to how they could reclaim their money.

However, conflicting reports emerged when Telecom Regulatory Commission sources said that they had been informed of a structural change within the ranks of Lanka Payphones Company, with a new chairman being appointed recently.

An official who did not wish to be named said the TRC had been kept informed of a re-entry to the market, and a request by the company to be brought under the TRC payphone subsidy scheme had also been made. However, he declined to say who the new chairman was or which company had taken over Lanka Payphones.

Schuster goes on to ask, "Does anyone know the reason why most of our phone booths are not lit at night? Do you know the CEB has requested us (Tritel) to pay Rs. 50,000 per phone booth to install a single light bulb, due to their policy in charging commercial rates for all company services, and since the power lines in Colombo are underground?" Furthermore, he said the CEB has a policy where re-selling electricity is illegal. "So we can't even get a connection from a nearby shop, to light a single bulb, because if the CEB finds out they would disconnect their services to the shopowners. So we can't light up our phone booths for anyone who needs to dial a number in an emergency." Schuster said that despite constant appeals to all the relevant ministries and the Telecom Regulatory Commission, none of the authorities had taken any interest in addressing their concerns. "Each person we approach, says it is not their concern, and they keep directing us to someone else. The problem still remains unsolved"

When asked about the company's profits, Schuster laughs. "We've been incurring losses for the past five years." Sri Lanka is a very tough market for any type of telecom operator because the profit margins are so low. "We are basically strapped when it comes to cost, because our industry is labour intensive and when we are constantly slapped with taxes, we find it hard to pass it down to the customer, because if our rates go up, that would not be healthy for the industry."

Schuster was, however, optimistic about his company's performance this year. "I think we have turned a new curve and despite numerous obstacles we have managed to find our place in the market, and so we have good potential for growth."
He called on the government to make the relevant changes in the regulatory framework so that an equal playing field would be created for non-licensed operators such as payphone companies. "If you have an inter-connect agreement, then everyone would be tariffed at the same rate and priced equally."

The same principle should also be brought in to help Internet Service Provider outlets (Internet Cafes), which have also suffered a similar fate. "We are compelled to use the services of the key operators like SLT and they charge us a rate that is 20 percent higher than that which is charged to a normal customer using the same Internet connection. We have to resell those services so our prices inevitably increase."

Almost all payphone companies have been subject to such unfair prices, and they have been out priced from the market after experiencing heavy losses, year after year. Tritel was in doubt as to whether it would add more capital investment for the development of the industry in the light of such unfair treatment and the blind eye turned by the authorities. Schuster said dejectedly, "I leave it to you, you decide whether this is discrimination!"

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