Is tower levy the reason for poor internet quality?

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The 2018 budget speech introduced a new form of tax, implemented with effect from 1 January 2019, which was one of the reasons why children in rural areas had to climb trees and mountains to get better connectivity to engage in their online learning.

The Cellular Tower Levy was brought in by the previous Government where the telecommunication companies in the country were asked to pay Rs. 200,000 for each tower they own per year.

This was brought forward despite many concerns from the industry, as it would discourage the telecommunications companies from providing quality service by putting up more towers. Hence, the children and their parents had to pay the price of it, as the Covid-19 pandemic moved everything to the internet.

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According to government statistics, Sri Lanka has some 7,000 towers in the country while the government, in 2020, earned Rs. 1.43 billion for the tower levy. Only some 40% of the four million students in the country could participate in online education.

Anti-tower attitude

Speaking to us, LIRNEasia Chairman and former Information and Communication Technology Agency (ICTA) Chairman Prof. Rohan Samarajiva said that several successive governments that administered the country had the thought that there were too many towers in the country.

“So they were trying all kinds of things; in one of the previous budgets, they had some sort of proposal to set up a unified tower agency that the government would run, but none of those things happened because they were too complicated,” he said.

Prof. Samarajiva said that since the day telecommunication towers were put up in the country, there were groups of people who objected to it, claiming health issues and saying the towers were “ugly”.

He added that this thinking later sank to the Ministry of Finance in the previous Government, where former Minister of Finance Ravi Karunanayake displayed an anti-tower attitude in his budget speeches.

But he said that when the late Mangala Samaraweera became the Finance Minister, the Ministry showed their anti-tower attitude more intelligently by taxing through the 2018 budget speech.

“I was hoping, given the fact that 50% of budget proposals were not enacted, they would not go with it, and then I saw recently that they were collecting billions from this particular tax,” he added.

He also pointed out that putting a tower out is not easy for telecommunication companies, as they have to go through a whole gauntlet of objectors, various people with their palms out asking for handouts, bribes, and people petitioning and complaining.

According to him, it cost roughly about Rs. 50,000 in the city to rent the space for a telecommunication tower with the addition of construction cost, electricity, etc.

So he said with all these costs, if the telecommunication companies have to pay the government four times (Rs. 200,000) as tax for the tower, that would generally discourage the companies from setting up more towers.

Given all this, Prof. Samarajiva said that he had noted, at the time the tax was introduced, that there will be no incentive to put less lucrative towers in the outlying areas while there will be even an incentive to pull back on towers that are already in those areas.

He added what he said at that time had appeared to have happened because people in remote areas are finding it hard to access the internet with the pandemic.

Moreover, Prof. Samarajiva said he had warned the previous administration that telecommunication companies would not pull back their towers in the city as they are good income-generators, but will stop adding capacity to the towers, resulting in congestion problems.

“Again we saw that happen during the pandemic. Of course, the use of the internet went up, but when the use goes up, you have to build more towers – you have to put in more capacity. There was a kind of break put on that because of this tax,” Prof. Samarajiva said.

“I think it was the attitude that is creating all these kinds of problems because when you put such kinds of taxes, it would either result in lower quality of services or an increase in prices,” he explained.

2021 Budget pro-tower attitude

However, Prof. Samarajiva said the 2021 Budget had some good provisions in a way to encourage the telecommunication companies to put up towers by providing them government-owned lands for the same purpose.

He said that it was a progressive move as quite a lot of land in the country is government-owned and every time the government tries to give sites for towers, there are all kinds of allegations of malpractice and lack of proper tendering.

According to the 2021 budget speech, a proposal was brought under the vision “Technology-based society and digitally inclusive Sri Lanka” to launch the project named “Gamata Sanniwedanaya” (Communication for the Village) to ensure 100% 4G/fibre broadband coverage.

The project is expected to cover the entire country by investing Rs. 15,000 million from the Telecom Development Fund during the period from 2021-2022 in order to expand the availability of mobile and fixed broadband services.

It was planned to provide the required infrastructure, including communication towers and fibre installations, to telecom service providers to establish broadband services covering all grama niladhari (GN) divisions of the island, while priority will be given for the utilisation of local labour and products in constructing and installing the communication towers, the related appliances, and the provision of technical services.

Under this programme, identified state lands will be vested with the Telecommunication Regulatory Commission of Sri Lanka (TRCSL) to successfully implement the installation of communication towers. To ensure the optimum utilisation of the available resources, the TRCSL and Ceylon Electricity Board (CEB) are expected to collaborate.

It was also proposed to grant a five-year tax concession that will be made available from 1 January 2021 to domestic industrialists.

Under the project, SLT-Mobitel and Dialog Axiata have already put up towers in areas in the Ratnapura and Hambantota Districts and plans to cover the Kurunegala, Matara, Anuradhapura and Badulla Districts as the next phase of the project.

Tower-sharing

Prof. Samarajiva said the assumption the bureaucrats in the previous Government had for bringing this tax was that the telecommunication companies were big-headed and were not sharing their towers, and so they created an incentive to share towers by introducing the taxes. He said that telecommunication companies have been doing tower-sharing for 15 years already.

“The point was that the companies were already sharing. Each tower at the point of its construction has got a certain capacity to hold; the Base Transceiver Station (BTS) facilities are where most of the energy is stored and they have got heavier. So you can’t randomly take a tower and hang six antennas on it – if it is designed for four, then you have to hang four,” he pointed out.

However, he said the major dilemma a telecommunication company has when it comes to tower sharing is whether to decide to hold onto the capacity of the tower for future spikes in usage or to share it with some other telecommunication company.

He said that if the company shares it with another company when there’s a need to increase the capacity, they would simply have to build another tower to supplement it, which would result in more taxes.

Also, he said that maybe there could also be some competitive consideration as well, as one company might wonder why it should make life easier for its competitor.

Further speaking to us, an official of the telecommunication industry, who wished to remain anonymous, said the reason the previous Government brought in the Cellular Tower Levy was that they wanted to bring consolidation within the telecommunication sector.

The official said the previous Government wanted to push telecommunication companies more towards the concept of tower-sharing, but also said that currently, infrastructure sharing is not at an optimum level and the consolidation which the government wanted to take place did not happen due to the issues that came up with the Covid-19 pandemic.

“The government introduced the levy to bring down the overall towers in the country while the Treasury will be making a lot of money on the taxation in the short run,” the official added.

Giving an example on how the tower-sharing concept works, the official said that recently, a tower was opened in Monaragala, following online education difficulties experienced in the relevant area, and that the tower was shared between two major telecommunication companies in Sri Lanka, where one company put up the tower while the other company is doing the maintenance.

However, he said that since it is a deterrent tax, in the short run, it does not help the companies and there are instances where they will have to pay even though the infrastructure is closed down.

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