SRI LANKA SHUTS DOWN MAIN PAY TV OPERATORS

UNCLAS SECTION 01 OF 02 COLOMBO 001142

SIPDIS

MCC FOR D NASSIRY AND E BURKE

STATE PLEASE PASS TO USTR

GENEVA FOR USTR

SIPDIS

SENSITIVE

E.O 12958: N/A
TAGS: ECON EFIN ETRD ECPS SCVL CE
SUBJECT: SRI LANKA SHUTS DOWN MAIN PAY TV OPERATORS



1. (U) Summary: A sudden clampdown on two of the biggest companies
offering pay TV services in Sri Lanka has caused distress to
investors and thousands of subscribers. The initial reason for the
closure of the first operator was an alleged but still unproven
connection to the Liberation Tigers of Tamil Eelam (LTTE),a
US-designated foreign terrorist organization. Later it was revealed
that only one of the satellite and cable operatorshad proper
licenses. This led to a court order to close all such operators,
but resulted in only one additional company being closed down. The
President has since ordered the regulators to take action to license
the operators and regulate the industry, but pay TV services to
thousands remain dark. End Summary.

LTTE CONNECTIONS ALLEGED


2. (U) The clampdown on pay TV operators started on June 6, with
the closure of CBN, a leading satellite TV operator, by the Criminal
Investigation Department of the Police (CID) which was investigating
allegations of aiding LTTE transmissions. While the CID has yet to
prove that CBN was aiding LTTE transmissions, it now appears these
allegations may have arisen because both the CBN and LTTE using the
same satellite (Panamasat 12) for their operations.

"PROPER" LICENSES


3. During a court proceeding in mid-June, it was revealed that of
the four large cable or satellite operators in Sri Lanka (CBN, LBN,
SAT net and Multivision),only Multivision, had "proper"
authorization to operate these services. As a result, these
operators were ordered to cease operations. The CID has not been
able to stop the services of SAT net as it is broadcasting directly
from India to customers. Multivision, which uses microwave
frequencies issued by the Telecommunications Regulatory Commission
of Sri Lanka (TRCSL) and not via satellite or cable, had already
obtained the required licenses. Affected operators have sought
legal intervention to restart operations. Their cases are in
progress in the Court of Appeal and lower courts.

THE RUMORS: OTHER REASONS FOR THE SHUTDOWN?


4. (U) The rumors that have emerged around the sudden suspension of
satellite/cable services include business rivalries and the
intention to give unfair advantage to a politically connected
operator or operators. However, the official line remains the
allegations over CBN aiding the LTTE and the absence of licenses.


5. (U) According to the TRCSL, the operators who download from
satellites and distribute via cable or satellite, have been
operating on external gateway operator licenses provided by the
TRCSL for international telephony purposes. But in order to
distribute media via satellite or cable service, they are also
required to obtain separate licenses from the TRCSL and the Media
Ministry.

FOREIGN INVESTMENTS LEFT IN THE DARK


6. (U) If there were problems regarding the licences, it is
surprising that authorities took so long to act against these
pre-approved foreign investments. CBN has been in operation for
about one year and LBN for several years. Both appeared to be
operating as legitimate, well established businesses. They have
publicly advertised their services and re-broadcast government-owned
channels on their networks.


7. (SBU) Both companies are also approved by the Board of
Investment (BOI),the investment promotion agency of the Government.
The companies say they had provided details of their operations to
the BOI prior to approval. Nevertheless, BOI has remained silent,
not appearing interested in assisting their "BOI companies." During
the July 4 Embassy event, EconOff asked Lakshman Watawala, Chairman
of the BOI about BOI's interest in such matters. He dismissed the
question, noting that the closures were caused by a different
ministry.

DISREGARD FOR LOSS TO CONSUMERS


8. (U) The satellite/cable operators provide access to more than 50

COLOMBO 00001142 002 OF 002


foreign channels including BBC, CNN, HBO, Star plus and National
Geography covering a range of subjects including foreign news,
movies, sports, children's programs, educational programs, music and
fashion. The sudden suspense of these services has deprived over
30,000 subscribers access to these paid services - with no apparent
concern about consumers' loss.


9. (U) Meanwhile, the President ordered in late June that the TRCSL
take required steps to register all operators and regulate the
industry. In response, the TRCSL has recently invited cable and
satellite networks to apply for licenses. However, it is difficult
to predict how soon the required licenses would be issued, when
court cases may be resolved and whether operators will be allowed to
resume business.


10. (SBU) Comment: The unraveling of the pay TV licensing issue is
exemplary of the mismanagement and lack of foresight found in Sri
Lankan regulatory offices. It also illuminates how the Sri Lankan
regulatory environment is severely affected by the lack of published
and available policies. Sri Lanka needs to establish effective,
transparent, and fair governance institutions that will facilitate
investment and ensure a fair deal for customers. Further, these
closures might reflect the power wielded by the current political
regime and its allies, calling into question their regard for
consumer interests and investor confidence.

ENTWISTLE