1

TELECOMMUNICATIONS REGULATORY COMMISSION

OF SRI LANKA

PUBLIC CONSULTATION ON PLANNING AND

IMPLEMENTATION OF A NATIONAL BACKBONE NETWORK
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TABLE OF CONTENT

Overview of the Consultation Document 3

1 Introduction 4
1.1 Background to the Requirement for a Nationwide
Backbone Network 4
1.2 Key oObjectives for the Proposed Nationwide
Backbone Network 5
1.3 Scope of Consultation 6

2 PPP -Based Backbone Telecoms Networks 7

2.1 Introduction to Public Private Partnerships 7
2.2 Case studies of PPP Projects in the Communications Sector 9
3 Regulatory Issues 12
3.1 Impact of Existing Regulation on the Proposed Project 12
3.2 Modifications to Existing Regulation 14
3.3 Introduction of New Regulation 15
4 Technical Issues 17
4.1 Technology Options for the Backbone Network 17
5 Business Model Options and Governance Issues 22
5.1 Business models for the B ackbone Network 22
5.2 Governance Issues 22
6 Implementation Issues 24
6.1 Implementation Principles and Plan 24
7 Submissionof Views and Comments 26
8 Appendix A – Proposed Route for the National Backbone Network 27
9 Appendix B – Network Architecture Overview 28
10 Appendix C – International Case S tudies 30
10.1 Uganda 30
10.2 South Korea 31
10.3 Philippines 32
10.4 Japan 33
10.5 Australia 34
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Overview of the Consultation Document

This consultation document provides an introduction on the deployment of the proposed

Sri Lankan national backbone network. In this consultation document, some of the
technical, economic and regulatory issues that may need to be addressed prior to the
deployment of national backbone network in Sri Lanka are presented . The
Telecommunications Regulatory Commission of Sri Lanka (TRCSL) would like to seek
views and comments from members of the public, the industry and equipment
manufacturing sectors, on any or all issues outlined in this document, or any other matter
pertaining to the national backbone project. Contributions to this consultation document
may be submitted in any of three Official languages.

Views and comments of interested parties will be taken into account when formulating
the regulatory framework for the deployment of the national backbone network in Sri
Lanka.
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1 Introduction

This chapter will introduce the purpose and objectives of the consultation exe rcise

1.1 Background to the Requirement for a Nationwide Backbone Network

Cost-effective and reliable high-speed Internet connectivity is currently not widespread in
Sri Lanka. Access is limited to a few main cities and towns where ADSL -enabled switches
allow broadband services to be offered over telephone lines to near-by customers. Some
operators have also recently started offering wireless broadband services. However, the
rate of expansion of ADSL and wireless broadband services has been lower than expected.
In addition, actual access speeds of Internet services experienced by customers are lower
than the speeds advertised by service providers, due to limited bandwidth availability.
The limited availability of broadband services not only impacts customers in urban areas
but also prevents the Government from achieving its policy objectives. The Government
wants to have physical connectivity in place for broadband applications at the electorate
levels in order to implement the e-Sri Lanka Initiative and promote ICT applications
among the rural communities for their socio-economic development. Therefore, the
Government requires that connectivity be provided throughout the country by the year
2013 to accomplish the Government policy objectives.
Thus, there is a pressing need for improved ICT broadband facilities in Sri Lanka, in both
urban and rural areas. In the urban areas, demand for ICT services including e-
commerce, Internet and communications services such as VoIP is increasing rapidly. In
the rural areas, ICT services availability is critical for education, health and poverty
alleviation.
Although demand for ICT services is growing significantly, the existing combined
backbone infrastructure of incumbent operators in Sri Lanka is inadequate to meet this
demand. The lack of a national, comprehensive backbone network is also impacting
mobile operators. Most incumbent operators rely on point-to-point microwave links, thus
increasing the level of required investments considerably. Mobile operators have had to
construct their own transmission networks (which have limited coverage) and/or lease
capacity on the backbone network of another operator; however, rates for such leased
capacities are high and therefore leasing is not always a cost-effective option. A new,
national backbone network can reduce the cost of transmission as well as help to
overcome circuit capacity constraints, thus significantly reducing congestion.
A national backbone system can also extend the benefit to Sri Lankan consumers of
international, long -haul bandwidth derived from the SEAMEWE submarine cable systems
that land in Sri Lanka. Two submarine cables land in Sri Lanka: SEAMEWE II and
SEAMEWE III (IV planned) where Sri Lanka Telecom is a signatory to the MoU. Access is
available through these submarine systems to major cities and nodes in SE Asia, Mid East
and Western Europe and through these nodes to major cities in the US. However,
operators other than Sri Lanka Telecom (SLT) do not have ready access to SEAMEWE
systems on commercially favourable terms.
But with a national transmission backbone, operators can send their outgoing
international traffic more cost-effectively over the national backbone network which is in
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turn connected to the SEAMEWE system, thus extending the benefit of the international
long-haul bandwidth deriv ed from the SEAMEWE cable to end-customers of operators
other than SLT.
As discussed above, the demand for broadband connectivity in Sri Lanka and the inability
of existing infrastructure to meet this demand imply that a new, comprehensive, national
backbone network is required.
Issues to be discussed in this section include:
• Background to the requirement for a national communications backbone network
• Details of support from the TRCSL / government for the backbone initiative

• Reasons why a Public Private Partnership (PPP) approach is suitable for this project
• Details of parties involved in this initiative (e.g. World Bank / PPIAF) and their role

1.2 Key Objectives for the Proposed Nationwide Backbone Network

According to the TRCSL, the main aim of the National Backbone project is to “promote
social and economic development by providing cost effective, reliable and high speed
connectivity to the citizens of Sri Lanka irrespective of their location”.
The TRCSL’s stated objectives and required features for a National Backbone network
include1:
• High speed network
– symmetrical 2Mbps or more per end-user connection
– adequate bandwidth to be achieved using Dense Wavelength Division
Multiplexing Technology (DWDM)
• Island-wide network
– district coverage may be sufficient in initial phase but coverage will be extended to
electorate level progressively (see next point)
– Govt. ICT policy requires that connectivity for broadband applications should be
eventually provided at the electorate levels in order to implement e-Sri Lanka
Initiative and promote ICT applications among the rural communities therefore,
the National Backbone network should cover the entire country (electorate level)
by 2013
– network to utilise rights of way of Ceylon Electricity Board (CEB) primarily
• Open access to the backbone network

1
TRCSL’s requirements for the proposed National Backbone network are stated in its document titled “Country Requirements for the
deployment of the Proposed Optical Fibre National Backbone Network”
 6

– open access implies that the Backbone Network must be made available to all
operators under the same terms and conditions and the network owner must not
interfere with traffic over the Backbone Network
– open access to the network is critical to ensuring that all stakeholders can utilise
the Backbone Network to meet their connectivity needs
– open access is also critical for the viability of the National Backbone
– it will be important to specify how and at what levels open access can be achieved
• Next-Generation Network and Services (NGN)
– the backbone network must support the deployment of a next -generation network
in the future and associated services
– NGN network can be easily laid over a DWDM / fibre network

1.3 Scope of Consultation

This section will identify all pertinent issues that need to be addressed in the consultation
including
The objective of the consultation process is to inform stakeholders formally about
TRCSL’s plans for the proposed national backbone network and to seek the stakeholders’
views on different aspects of the proposed backbone network including options for
ownership and operations, coverage level, etc. The consultation process is important as it
will allow TRCSL to set the parameters for the proposed backbone network such as
coverage, technologies, ownership, etc. In this document, the following areas will be
covered:
• Regulatory issues related to the proposed project
• Network -related technical issues
• Alternative business models for a PPP project
• Network ownership and management issues
• Implementation planning issues and timelines

For comments:

• Does Sri Lanka need a national infrastructure project?

• Is the existing situation with respect to provision of backbone network in the
country sustainable?
• Can a comprehensive and open nationwide backbone network be achieved by
existing operators thus eliminating the need for a new, national backbone
development initiative?

• What would be the consequences on other telecommunications networks as a

result of deploying the national infrastructure project?
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2 PPP -based Backbone Telecoms Networks

This chapter will provide an introduction to the different types of relevant PPP arrangements as
well as provide international case studies of similar projects
This consultation document provides an introduction on deployment of national
backbone network and considers some of the technical, economic and regulatory issues
that may need to be addressed prior to the deployment of national backbone network in
Sri Lanka. Telecommunications Regulatory Commission of Sri Lanka (TRCSL) would like
to seek views and comments from members of the public, industry and equipment
manufacturing industry any or all issues outlined in this document or any other matter
relating to pertaining to the national backbone project.
Views and comments of the interested parties will be taken into account when
formulating the regulatory framework for the deployment of national backbone network
in Sri Lanka.

2.1 Introduction to Public Private Partnerships

A survey of a number of relevant international markets has identified a number of
alternative PPP ownership / construction models. These alternative models include:
• A Universal Service Obligation (USO) style funding scheme
– in this model, the regulator allocates money from a common fund to encourage
rollout of backbone networks
– in the Sri Lankan context, the TRCSL will apportion some funding to any network
provider who fulfils a pre-determined set of criteria to rollout a partial backbone
network
. to avoid duplication, Sri Lanka could be carved into a number of geographical
districts for which different operators would bid for funding to provide
backbone coverage on an open access basis

. bidding would be open to existing operators as well as other interested parties

e.g. vendors

• A traditional Build-Operate-Transfer model

– the backbone network is built by a qualified private contractor (contract awarded
by tender) that operates the network in initial years
– subsequent transfer of ownership of the backbone network could be to a single
party like the TRCSL or to multiple parties (operators) or to a consortium
• Split by network layer / geographical region
– separate contracts can be awarded to different operators to build and subsequently
operate different parts of the backbone network (e.g. separate contracts for the
physical layer, transmission layer, etc.)
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– therefore, instead of contracting with only one entity to build, own and operate
(BOO) the national backbone network, the TRCSL could elect best of breed
contractors for construction and ownership of different parts of the backbone
network as well as the subsequent operational management of the national
backbone
– alternatively, the network could be split by the various ring s (5 rings proposed;
note that the five proposed rings are not concurrent rings but offer two -span
connectivity)

• A multi-party consortium
– in this model, a consortium comprising of various parties (e.g. operators,
regulator, rights of way owners, etc.) would have joint ownership of the backbone
network and would therefore be jointly responsible for constructing and operating
the backbone network
– consortia can have different ownership structures
. for example, in an egalitarian consortium, all members have equal ownership
(an equal share joint venture arrangement)

. in another consortium, there may be a clear and strong leader (in terms of both
ownership and control) i.e. a leader with a clear mandate supported by a
majority asset share that would be able to maintain sufficient control over the
consortium

The advantages and disadvantages of the above models are shown in the exhibit below.
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Exhibit 1: Comparison of alternative models

PPP option Advantages Disadvantages

USO style funding
Build-Operate-Transfer (BOT)
Auction for network layers
Consortium of operators
• Can be launched relatively
quickly
• Multi-operator role
• Procurement efficiencies
• Can delay long-term option
decision till when market
structure becomes clear
• Well understood PPP
structure
• Multi-operator participation
• Smaller funding gap
• Possibility of existing asset
transfer
• Conceptually a strong
option if there are several
instances of cooperation
within the industry
• Equitable distribution of
funds and allocation of
areas for construction of
backbone network to
different operators may be
problematic
• Risk of dominance by
private contractor,
especially in initial years
• Relatively longer time
required and greater
complexity involved to
implement this option
• Risk of dominance by
incumbent
• Relatively longer time
required and greater
complexity involved to
implement this option
• Members may have
competing objectives
• Risk of a member joining to
“kill” the consortium

2.2 Case Studies of PPP Projects in the Communications Sector

This section will provide brief case studies of similar projects from other countries.
Worldwide, all of the above types of models have been employed for various backbone
projects. Thus, there is no single model that is dominant and the choice of model depends
on the particular situation and circumstances of a project and the country that it is being
implemented in. Some examples of international backbone deployments using different
models include:
• Consortium with dominant stakeholders in the US
– for a broadband PPP fibre project in Utah state in the US, a separate company was
established to own and operate the network called the Utah Telecommunication
Open Infrastructure Agency (UTOPIA)
– the operating company consisted of 14 member municipalities but of these the four
largest municipalities control 67% of the total votes
– all consortium members of UTOPIA displayed a strong commitment to provide
sufficient funds for deploying the network and founding members were
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incentivised through a share of royalty payments from UTOPIA and return of

excessive revenues
– although UTOPIA is one of the most successful PPP arrangements, the
international precedence of such partnerships appears to be limited and it is likely
that the smaller members of a consortium may not be willing to be constrained as
minority shareholders
• USO style funding for broadband network rollout in Australia
– ‘Broadband Connect’ is an example of a USO -style fund that all operators can dip
into for rollout of broadband access network
– funding is on a per customer connected basis, wherein funding can be claimed by
both resellers and wholesale service providers by splitting the allocated funding in
a pre-agreed proportion.
– in this case, funding was not limited to a single service provider or consortium,
but is available to any serv ice provider that is able to bring up broadband
penetration
• Build-Operate-Transfer arrangement in Canada for provision of broadband access primarily to
public facilities but also to commercial and residential addresses by selling wholesale
bandwidth to ISPs
– Alberta Government contracted with Bell Canada in 2001 to construct:
. Base Network of 27 cities; Bell-funded (C$102m)
. Extended Area Network (EAN) for another 402 settlements; government-funded
(C$193m)

– Bell Canada finished and now owns and maintains both the Base Network and the
EAN 20-year contract with four 5-year renewal terms
– ownership of the EAN will transfer to the Alberta Government at the end of 30
years or it can assume EAN ownership earlier in case of Bell default on revenue
sharing agreement

• Split by network layer chosen in Singapore for the NG-NBN project

– the regulator, iDA has split the network by channel/ duct, by fibre network
operations and by management/ sales processes. This has been done to maximize
use of existing infrastructure (e.g. SingTel ducts) and thus lower costs and reduce
implementation time while maintaining open access/ equivalence (e.g. fibre
operation and sales to either non SingTel players or new entrants)
• Forced cross operator consortia through ex-ante regulation/ licensing in Sweden and Australia
– this model was adopted for 3G rollouts in Sweden including Svenska UMTS
(successful rollout)and 3GIS (hit by exit of one member)
– in Australia, the consortium of 3 and Telstra used this model and it has worked
reasonably well so far as objectives of the members are complementary
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Worldwide, all of the above types of models have been employed for various backbone
projects. Thus, there is no single model that is dominant and the choice of model depends
on the particular situation and circumstances of a project and the country that it is being
implemented in.

For comments:

• Definition of PPP projects

• Rationale for PPP projects
• Different types of PPP models
• Roles of the public and private sectors in typical PPP projects
• Key factors that impact the success of PPP projects
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3 Regulatory Issues
This chapter will discuss regulatory issues that are pertinent to the proposed project. The chapter
will specify questions / issues on which stak eholders’ views are sought.

3.1 Impact of Existing Regulation on the Proposed Project

Regulation can play an important role in the development of a backbone network. There
are no evident policies or regulations in Sri Lanka currently that directly inhibit the
development of a national backbone network.
The TRCSL’s stated objectives and required features for a National Backbone network
include:
• High speed network (symmetrical 2Mbps or more per end -user connection)
• Island-wide network (electorate level coverage eventually)
• Network to utilise rights of way of CEB / SLGR
• Promotion of ICT and achievement of key ICT objectives through the deployment of
the National Backbone network
• Backbone network should be cost effective
• Open access to the backbone network
• Deployment of NGN network and services
In addition, it is also clear that there should be no stranded assets. That is, the proposed
national backbone network should not directly compete with private sector operators as
that does not benefit anyone and the stranded operator will only work towards the
detriment of the national backbone project
The following exhibit shows the current policies and regulations in Sri Lanka that impact
the above objectives.
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Exhibit 2: Current regulation impacting the objectives for the national backbone
network

Objective Impact on objective due to existing regulation / policy

• National backbone network • Sri Lanka does not appear to have a national broadband policy
should offer high speeds of at • This may hinder delivering higher broadband speeds and the take-
least 2Mbps per end-user up of services that need these higher speeds

• National backbone network
must be an island-wide
network
• Licensing guidelines issued by TRC state that applicants should
provide proposed infra sharing arrangements so that the service
coverage area can be increased
• The National Communications Policy recognises the need to
extend telecommunications facilities to rural parts of Sri Lanka
• Sri Lanka’s membership of the WTO implies that there must be a
focus on providing telecom services to rural areas

• National backbone network
should utilise existing rights of
way of CEB and SLGR
• National backbone network
should promote development
of ICT
• National backbone network
should be cost effective for
operators
• Section 12 of the Ceylon Electricity Board Act allows CEB to enter
into contracts to enable other parties to utilize its transmission and
distribution network
• The Railways Ordinance does not specifically set out any provision
under which the SLGR may acquire or use rights of way for the
purposes of its rail network
• Information and Communication Technology Agency (ICTA) has an
Information Infrastructure programme
- ICTA promoted the installation of backbones (Rural Telecom
Network) but this initiative has been stalled
- ICTA also has a backbone initiative called the Lanka
Government Network (LGN)
• ICTA is not playing any direct policy or regulatory role in the
proposed national backbone project
- but its policies that aim to increase the utilisation of ICT will
help to create demand for the proposed national backbone
• The incumbent’s high prices for leasing its network has been
subject to some regulatory scrutiny so far, but more scrutiny is
needed
• In theory, prices for telecoms services including access charges for
backbone capacity leasing are regulated
- TRC must approve charges of all operators

• National backbone network
should be built in a cost-
effective manner
• Operators should have open
access to the national
backbone network
• There is no regulation governing the fee for wayleaves that can be
charged by SLGR / CEB
• BOI status can help to reduce costs of kit significantly
• Interconnection rules of 2003 state that operators have an
obligation to provide interconnection to other operators
• Licenses stipulate that anti-competitive practices are not allowed in
connecting other operators to an operator’s network

One key issue that emerges from the regulatory analysis is that although there is existing
regulation in some areas (e.g. regulation on infrastructure sharing, regulation on
interconnection, regulation on pricing, etc.), such regulation may need to be strengthened
further. For example, the licensing guidelines ask operators to provide details of
infrastructure sharing arrangements but instances of infrastructure sharing remain
limited. This has implications for the proposed national backbone project; if operators are
not under regulatory pressure to share infrastructure, then operators might build out their
separate backbone networks in the same areas, leading to unnecessary duplication.
 14

Instead, some of these investments could have been diverted towards the proposed
national backbone project.

For comments:

• Existing regulations and policies that directly or indirectly impact the

proposed project
• Steps to mitigate the adverse impact of any existing regulation
• Key factors that impact the success of PPP projects

3.2 Modifications to Existing Regulation

This section will discuss proposed modifications to existing regulations and policies that
are required in order to encourage the development of a national backbone network.
Such modifications include for example extension of BOI incentives, development of an
effective dispute resolution mechanism, etc. Stakeholders’ views will be sought on each
of the proposed modifications.
The following exhibit shows key regulatory and policy changes that could be required in
order to improve the viability of the project:
 15

Exhibit 3: Required changes in regulation to test in the consultation process

Objective Suggested changes in regulation (to test in consulation)

• National backbone network
should offer high speeds of at
least 2Mbps per end-user
• National backbone network
must be an island-wide
network
• National backbone network
should utilise existing rights of
way of CEB and SLGR2
• Develop a national broadband policy
• Provide incentives to ISPs to upgrade their networks
• Provide access to USO funds for ISPs and for creating a schools
network which will spur demand for backbone capacity in
electorates
• Provide incentives for operators to extend their network to rural
areas (what more over and beyond current regulation)1
• Extend USO funds for service creation in rural areas
• Implement universal service obligations and principles to the full
extent that these are specified in Sri Lanka’s schedule of WTO
commitments
• Ensure easy access to assets of CEB and SLGR at reasonable
rate of return by developing a clear policy on rights of way usage
and charges

• National backbone network • Provide regulatory emphasis on development of ICT services

should promote development • Provide funds for creating a services ecosystem and encouraging
of ICT third-party services developers

• National backbone network • Determine fair interconnection rate by LRIC interconnection

should be cost effective for calculation and by benchmarking with other relevant countries
operators • Introduce provision for periodic monitoring and review of rates

• National backbone network • Extend BOI incentives

should be built in a cost-
effective manner

• Operators should have open • Clarify interconnection conditions

access to the national • Develop and communicate approach on resolution of
backbone network interconnection disputes

Note: (1) With respect to exact incentives that can be offered to operator s to upgrade their data networks and
rollout in rural areas, these can be discussed during the consultation process (2) Note that feasibility of the
proposed national backbone network depends critically on the lea sing costs of rights-of-way

3.3 Introduction of New Regulation

This section will discuss new regulation that could be introduced to encourage and
facilitate the development of a backbone network (e.g. national broadband policy, rights
of way policy, etc.). Stakeholders’ views will be sought on the need for such new
regulation and the shape and form of the proposed regulation.
New regulation and policy is needed in different areas to provide greater emphasis to the
development of backbone networks. For example, a comprehensive broadband policy is
required; currently, broadband initiatives in Sri Lanka (including in rural areas) are
mainly undertaken by private parties independently or in partnership with each other
(e.g. various broadband projects in Sri Lanka are supported through the Agency for
International Development's (USAID's) Last Mile Initiative).
Also, a policy on rights of way usage and charges is needed. In addition to the need for
new regulation in different areas, stricter enforcement of existing regulation (e.g. price
 16

regulation, interconnection regulation) may be necessary to ensure the smooth

operationalisation of the proposed national backbone network.
Rights of way regulation is perhaps one of the most critical requirements. In the UK and
India, the Railways hived off their telecoms operations and these had significant
autonomy to negotiate rights of way fee with third parties. However, in Sri Lanka, the
Railways (SLGR) and the Power utility (CEB) may not be as forward looking or
commercially minded. In addition, SLGR and CEB may not be able to negotiate rights of
way fees with third parties quickly because of objections from the employees unions.
Thus, it is important in the Sri Lankan context that law be enacted for accessing rights-of-
way by various operators. Also, it is important that a govt. representative (e.g. Director
General of TRCSL) who is also a good negotiator lead the discussions on rights of way
with the CEB and SLGR. Another issue related to rights-of-way is future access for
maintenance purposes. Gaining access may not be easy, especially in Sri Lanka, due to
security concerns. But this issue is relatively a smaller problem in the case of the power
grid network (compared to the rail network) as access to the power grid network by
unwanted third parties is not easy.

For comments:

• If a new national backbone network is needed, what enabling regulation would

you consider to be necessary?
• How important is rights-of-way regulation for the success of a national backbone
project?
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4 Technical Issues
This chapter presents different options for technical aspects of a backbone network. The preferred
option for each technical aspect is highlighted and stakeholders’ views are sought on the same.

4.1 Technology Options for the Backbone Network

The national backbone network will be a fibre network with nationwide coverage,
equipped with wave division multiplexing transmission equipment. The fibre and the
transmission equipment will be dedicated exclusively to the national backbone network.
The network will be organized around a number of key switching locations where traffic
will be switched between the core backbone network and the independent networks of
existing operators. Traffic will also be switched between the core backbone network and
its external links (e.g. to the SEAMEWE submarine networks). Detailed case studies of
international backbone deployments, focusing on the technical approach adopted for each
deployment, can be found in Appendix A of this consultation paper.
In addition, the network configuration will be hierarchical with built-in reliability. The
nation-wide core network will be connected in a ring configuration at the first level of
hierarchy. The next level of the backbone network will consist of an Aggregation or
Distribution network level which ag ain will be in a ring (but not mesh) configuration.
The following exhibit shows a diagrammatic representation of the high-level architecture
for the proposed national backbone network2.

2The traffic from various subscribers and LANs has to be aggregated at a location and the aggregated traffic is then taken to one of the
nodes of the Core network. Typically an aggregation network is like a Metro Area Network (MAN) and in some cases it can be a Wide
Area Network (WAN). This network is usually an order of magnitude less in capacity than a Core network. In some unusual
circumstances, an Aggregation network may get connected to another Aggregation Network but it can be done if several small
Aggregation Networks exist quite far from a node of the Core Network. A Core Network consists of interconnected nodes at the highest
level in the hierarchy and has mesh interconnectivity between nodes. The number of nodes is usually quite small. This network has the
highest capacity and consists of only a few nodes.
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Exhibit 4: High-level Architecture for Proposed National Backbone Network

Core Network

Scope of the
National Backbone
Network

Aggregation
Network

Access links

User User User

The existing backbone network of the incumbent operator, Sri Lanka Telecom (SLT), is not
a comprehensive, nationwide network. The following exhibit shows the current extent of
SLT’s backbone network.

Exhibit 5: Sri Lanka Telecom’s Fibre Backbone Network

 19

As the above exhibit shows, the fibre backbone network of SLT is largely confined to the
west of the country; there is only one western ring covering major cities like Colombo,
Kalutara, Nuwara Eliya, Kandy, etc. with smaller towns en-route.
SLT has plans to expand its backbone network; it claims that it will complete four fibre
rings by end -2007. However, only the Southern ring is near completion and other rings
like the North East Central Ring and East Uva Central Ring are still being built. SLT is
targeting that 60% -70% of electorates will eventually be covered by its fibre network but it
is expected that it will take a few years before this level of coverage is achieved.
Dialog Telekom is planning a new core backbone fibre network but the construction of
this has not started. Proposed coverage maps for Dialog’s planned network are not
available but it is expected that Dialog will focus on the Colombo region, at least initially.
The following exhibit shows the extent of existing fibre networks in the various districts.
 20

Exhibit 6: District L evel Fibre Connectivity

District Fibre connectivity

Colombo Fibre networks from operators incl SLT, Dialog
Gampaha SLT network to Colombo/ Negombo
Kalutara SLT network to Colombo and Galle
Kandy SLT network to Matale
Matale SLT network to Kandy
Nuwara Eliya SLT network to Kandy and Badula
Galle SLT network and Dialog network
Matara SLT network to Galle and Hambantota
Hambantota SLT network to Galle
Jaffna No network
Mannar No network
Vavuniya No network
Mullaitivu No network
Killinochchi No network
Batticaloa No network
Ampara No network
Trincomalee No network
Kurunegala No network
Puttalam No network
Anuradhapura SLT network to Galgamuwa, Horowpathana
Polonnaruwa No network
Badulla SLT network from Nuwara Eliya
Moneragala No network
Rathnapura SLT network to Kalutara and Awissawella
Kegalle SLT network to Matale

Source: SLT, Spectrum analysis

With the liberalisation of the telecoms sector in Sri Lanka and the significant increases in
demand for telecoms services, the existing backbone networks of incumbents have
become inadequate. Therefore, there is a need to develop an expanded backbone network
that covers not just the western part of the country but other under-served regions
especially the north and the east.
The following exhibit shows the different technical aspects of the backbone network that
must be finalised and the various options for each of these aspects. We would like the
stakeholders to comment on these issues.
 21

Exhibit 7: Technology Issues and Options for the National Backbone Network

Technology aspect Key technology options

• Transmission technology (Trunk) • Fibre + DWDM
• Fibre + SDH
• Transmission technology (Non-Trunk) • Fibre
• Copper
• Wireless (WiMAX)
• Microwave
• Satellite
• Unshielded Twisted Pair (UTP)
• Coaxial cable
• Infrared
• Fibre installation on Trunk routes • Power Grid (OPGW / Lashed cable / ADSS)
• Railway network (Armoured cable)
• Road

• Interconnection • At one central point (e.g. Colombo)

• At limited points (e.g. Colombo, Galle, Anuradhapura,
Gampaha)
• At all districts
• At all electorates
• IP layer • Only at ATM level
• At IP transmission

• Service layer • Don’t provide service creation platform

• Provide services creation platform and ecosystem
• Provision of IMS/ SDP/ IP telephony platform, LBS
platform etc.

For comments:

• What is the optimum level of coverage of the backbone network?

• What are the optimum transmission technologies and media for trunk and
non-trunk routes?
• What is the preferred approach for fibre installation?

• Should the scope of the backbone network be confined to the core network?
• How should scalability and future-proofing be ensured?
• How will backbone deployment plans of existing operators impact the
choice of various technical parameters?

• How many interconnection points should be provided?

• How should open access be ensured?
• Should a services creation platform be provided?
 22

5 Business Model Options and Governance Issues

This chapter presents different business models for ownership and operations of a national
backbone network and seeks stakeholders’ views on the same. This chapter also discusses
governance issues and procedures.

5.1 Business Models for the Backbone Network

This chapter discusses different business models for construction and ownership of the
proposed national backbone network. Specifically, it examines the applicability of the
potential models in the Sri Lankan context and compares each of them based on their
financial viability to then determine the preferred business model for the proposed
backbone network. The governance framework required to ensure that any PPP model is
executed smoothly is also discussed. Finally, this chapter highlights key issues and risks
that affect the potential for success of a PPP project.
We have surveyed a number of relevant international markets and have identified and
evaluated a number of alternative ownership / construction models. These alternative
models include:
• A multi-party consortium
• A Universal Service Obligation (USO) style funding scheme
• A traditional Build-Operate-Transfer model
• Split by network layer / geographical region
Worldwide, all of the above types of models have been employed for various backbone
projects. Thus, there is no single model that is dominant and the choice of model depends
on the particular situation and circumstances of a project and the country that it is being
implemented in.

For comments:

• Degree of applicability of each of the main business models in the Sri Lankan
context
• Government ownership of the network
• Appropriate pricing level for capacity on the proposed network

5.2 Governance Issues

Issues related to the governance framework must be addressed in order to ensure the
smooth execution of the PPP model that is eventually selected. Note that detailed
governance procedures can be finalised once a PPP model is selected and its modalities
worked out in consultation with stakeholders.
 23

Whichever PPP model is ultimately selected, assurances in transparency, equivalence and

open access of wholesale services can be provided by the current regulatory framework or
via enhancements thereto, for example, through accounting separation, wholesale tariff
filing and review processes, etc.
Key governance principles and their implications are discussed below:
• The governance framework will depend partly on the business model adopted
The governance framework and procedures will vary based on which PPP model is
adopted. For example, if a PPP model that involves multiple operators is chosen, then
procedures for coordination between all parties will have to be defined. On the other
hand, if a model is chosen wherein a single party has ownership, then such
coordination procedures do not have to be defined; instead, the governance
procedures in this case would focus on defining the procedures for monitoring of the
party that wins the contract. Although the detailed governance framework will be
drafted after a PPP model is selected, at this stage, it is possible to specify a broad
governance framework
• Whichever PPP model is selected, the operators must be involved as direct stakeholders in the
national backbone network
It is important that as many operators as possible have a direct ownership stake in the
national backbone network – in the BOT model, operators can be made stakeholders
by transferring collective ownership of the national backbone network to them after
the initial build and o perations. By involving operators as stakeholders, the likelihood
of success of the national backbone network increases.
• The TRCSL need not have ownership of the backbone network in the long term but it is
important that it maintain regulatory control over all aspects of the national backbone network
The TRCSL would prefer not to take an ownership stake in the national backbone
network. However, the TRCSL is agreeable to taking an ownership stake for a short
period after the operations of the national backbone network have commenced as this
would lend greater confidence to operators (especially smaller operators) that the
Government is committed to making the national backbone network a success.
However, the TRCSL need not retain its stake in the national backbone network in the
long term and instead should let the operators co-own the network, thus allowing
market forces to function effectively. TRCSL should focus on its role as regulator and
maintain strict regulatory control on all aspects of the national backbone network such
as wholesale pricing, interconnection, etc.

For comments:

• Role of existing Operators as direct stakeholders in this project

• Role of the government in this project
• Optimal governance structure under each business model
• What role should the government play in this project?
 24

6 Implementation Issues
This chapter discusses implementation and governance issues and procedures.

6.1 Implementation Principles and Plan

The following key requirements / principles should be followed for the procurement and
implementation processes.
Transparent procurement process: The procurement process for the national backbone
network should be conducted in accordance with public procurement regulations in Sri
Lanka, if any . The procurement process can be managed by the TRCSL which can form a
procurement panel. Each of the stakeholders in the project including all the operators can
nominate qualified representatives to the panel. These qualified representatives will
contribute their time and expertise to the procurement process. Since TRCSL does not
have prior experience of procurement processes, it should therefore be advised by a group
comprising of procurement experts from the Government and possibly external
consultants from the private sector. As part of a transparent procurement process, it is
also vital that the TRCSL publicise an explicit, objective and transparent evaluation
criteria on which it will base the selection of the national backbone network provider(s) at
the RFP stage
Quick implementation: The national backbone network design and rollout schedule should
not only be cost effective but should also minimise time to deploy. Thus it is vital that the
organisational and operational structure of the national backbone network be kept as
simple as possible. The more complexity imposed, the more likely it is that the project
will suffer lengthy delays in setting up the national backbone network vehicle and in
deploying the national backbone network itself.
Maximise public interests: The nature of the public private partnership (PPP) aims to
benefit the public by leveraging on competitive advantages from the private sector. As
such, guidelines and regulatory compliance requirements must be spelled out clearly
from the onset to ensure that the PPP could make a reasonable profit whilst holding
public interests as a priority through commitment on delivery timeline, service quality,
open access and regulated pricings. This can be achieved by including the required
compliance as contractor selection criteria. Experience can be drawn from governments
that have implemented similar PPP initiatives or external consultants from the private
sector.
Exploit implementation synergies with existing network/businesses of operators: Some of the
existing local operators have already deployed fibre backbone infrastructure in the west
and south of the country. If these operators that have significant infrastructure assets are
given responsibility of national backbone rollout, they can leverage on their existing
infrastructure and hence minimise the incremental build-out required in terms of cost and
time
The implementation process consists of two main activities including contractor selection
and network rollout. The selection pro cess can be divided into different stages, starting
with a pre-qualification stage wherein contractors with past experience and a
 25

demonstrated track record of similar projects are identified. Network rollout involves the
phased network rollout plan, and the actual monitoring of the rollout to ensure that
objectives are achieved.

The timetable for the implementation of the National Backbone will depend significantly
on the type of organisation which wins the PPP contract and the PPP model that is
selected. If one of the contractors already owns significant backbone infrastructure (e.g.
SLT) and is proposing to incorporate this into the operating company, then the roll-out
timescales will be significantly shorter. Rollout timescales will also depend on how
quickly access to rights of way can be secured.

For comments:

• Is the proposed phased implementation of the backbone network acceptable?

• Are the proposed implementation timelines and milestones acceptable?
• How can speedy implementation of the backbone network be ensured?
• What key targets and measurements should be specified for monitoring rollout
coverage, cost and service quality?
 26

7 Submission of Comments and Views

Written comments and views will be posted on the TRCSL’s web site, except where
parties indicate that their submissions, or parts of it, are confidential. Respondents are
kindly requested to submit such confidential information separately, with the relevant
part provided under separate cover and clearly marked.

TRCSL welcomes further views on deployment of the National B ackbone Network that
are not addressed in this consultation document.

All views and comments should be submitted in writing, and in electronic form in
Microsoft Word 2000 version. Please submit your responses by 04th May 2008.

Submissions should be addressed to:

Director General of Telecommunications

Telecommunications Regulatory Commission of Sri Lanka
276, Elvitigala Mawatha ,
Colombo 08.
E mail : hpkaru@trc.gov.lk

A soft copy of the submission may be e-mailed to the address indicated above.
 27

8 Appendix A – Proposed Route for the National

Backbone Network

Exhibit 8: Proposed Route for the National Backbone Network

Jaffna

Kilinocchi
Southern Ring (Phase 1)

Central Ring (Phase 1)

Mannar
Vavuniya Western Ring (Phase 1)
Eastern Ring (Phase 2)
Trincomalee Northern Ring (Phase 3)
Anuradhapura
Points of interconnection
Polonnaruwa

Matale
Puttalam Badulla Batticaloa
Karunegala

Kandy

Kegalle Ampara
Gampaha

Colombo Nuwara-Eliya

Kaluthara Monaragala

Rathanapura

Hambantota

Galle

Matara

As the above exhibit shows, the proposed national backbone network is split in to five
rings: the southern, central and western rings can be built in phase 1, the eastern ring in
phase 2 and the northern ring in phase 3. The phased buildout of the five rings reflects
the relatively greater demand for capacity in the south, centre and west of the country and
therefore the higher priority that is accorded to these areas. Also, the east and north of the
country are conflict zones and therefore the buildout will be slower in these regions; the
network rings in these regions will have to be built in separate, subsequent phases. Note
that the five proposed rings are not concurrent rings. These rings offer two -span
connectivity and so most cities are on a single ring. Therefore, any one location is covered
by a maximum of two spans ensuring 2X redundancy.
 28

9 Appendix B – Network Architecture Overview

The following exhibit shows the different layers of a communications network including
alternatives to fibre optics for the physical infrastructure layer as well as alternatives to
Wave Division Multiplexing (WDM) for the transmission layer. These are discussed in
subsequent sections of this chapter.

Exhibit 9: Communications Network S tructure

Applications and services

Voice and data switching

Multiplexing
Transmission (PDH, SDH,
WDM), IP
Backbone
network Fibre,
Physical infrastructure
microwave,
satellite

The following exhibit shows a diagrammatic representation of the high-level architecture

for the proposed national backbone network3.

3 The traffic from various subscribers and LANs has to be aggregated at a location and the aggregated traffic is then taken to one of the
nodes of the Core network. Typically an aggregation network is like a Metro Area Network (MAN) and in some cases it can be a Wide
Area Network (WAN). This network is usually an order of magnitude less in capacity than a Core network. In some unusual
circumstances, an Aggregation network may get connected to another Aggregation Network but it can be done if several small
Aggregation Networks exist quite far from a node of the Core Network. A Core Network consists of interconnected nodes at the highest
level in the hierarchy and has mesh interconnectivity between nodes. The number of nodes is usually quite small. This network has the
highest capacity and consists of only a few nodes.
 29

Exhibit 10: High-level Architecture for Proposed National Backbone Network

Core Network

Scope of the
National Backbone
Network

Aggregation
Network

Access links

User User User

 30

10 Appendix C – International Case Studies

This appendix contains case studies of international backbone deployments, focusing on
the technical approach adopted for each deployment. Where possible, details are
provided of technical aspects such as transmission technology and media used,
interconnection approach, etc.

10.1 Uganda

10.1.1 Introduction
Currently, Uganda’s national backbone is owned by UTL, the incumbent operator, and
MTN, the Second National Operator. Both UTL’s and MTN’s backbone will form part of
the East African Backhaul System (EABS). EABS is a joint venture project among
operators from Tanzania, Burundi, Rwanda, Uganda and Kenya. This backhaul system
will link all the five East African Community countries to the EASSy Submarine cable to
be laid along the Eastern African seaboard. 30 operators in Eastern and Southern Africa
are involved with this latter project.
With an understanding to share the backbone infrastructure once it has been built, UTL
and MTN have agreed to roll out backbone network in a complementary manner to avoid
duplication of infrastructure rollout. With existing fibre links to Bugiri, MTN will
complete the remaining fibre link to the Kenyan border by the end of 2008. This will link
up with the Telkom Kenya fibre that will eventually run fro m Malaba to Nairobi to
Mombasa as part of the EABS.
The Ugandan Government is planning to build a national backbone after securing a
US$106m loan from the Exim bank of China in July 2007 and Huawei is the contractor for
this project. UTL and MTN have both expressed concerns over the future use of this
backbone network, which potentially duplicates their existing backbones.

10.1.2 Technical Aspects of Backbone Network

MTL’s national backbone network comprises of mainly fibre optics in Kampala and along
the main transmission routes. Microwave is used for smaller backbone links into the
more rural areas, feeding off the main fibre routes. Marconi is the contractor for MTN’s
fibre backbone, which is based on SDH technology implemented over a ring topology to
ensure resilience.
UTL have similar coverage with a backbone in Kampala covering all major buildings and
centres.
The government’s 2,500 km backbone network will be implemented in three phases, with
the first phase to Kampala Bombo and Entebbe Mukona. The who le project is expected to
be completed by end of 2008.
 31

10.2 South Korea

10.2.1 Introduction
KORNET is a domestic internet access infrastructure network established by Korea
Telecom. The service started in June 1994, first in the Seoul area, and currently covers 114
areas nationwide. In addition to the local transmission backbone, international internet
connections have also been established with 15 countries, including a 26Gbps link to the
US to ensure uninterrupted connections.

10.2.2 Technical Aspects of Backbone Network

The following exhibit shows a schematic representation of the backbone network in South
Korea.

Exhibit 11: Schematic Representation of KORNET

The backbone links ranges from 45Mbps between local nodes to 40Gbps between major
nodes and covers most residential areas in South Korea. The backhaul is built using a star
topology, extending links from the core nodes, through the regional nodes, to the local
nodes. Two main nodes are established in Seoul (Hyehwa Centre and Guro Centre).
 32

Each of the regional nodes are then connected to both the main nodes, providing
resilience at the core node level.
The transmission network uses Lucent’s DWDM equipment over a fibre network. The
core switches are combinations of Juniper and Cisco equipment. Riding on this backbone
network, KT offers a range of services in addition to broadband service including internet
connections for corporations at from 1Mbps to 1Gbps, local lease lines up to 2.5Gbps.

10.3 Philippines

10.3.1 Introduction
Philippines has two major backbone networks. PLDT’s DFON was the country’s only
backbone network until 1999, when a consortium formed by alternative operators built
the National Digital Transmission Network (NDTN).
NDTN is majority-owned by BayanTel, with DIGITEL, ETPI, Extelcom, GlobeTelecom,
PT&T, and Smart as co-owners. It is managed and operated by the Telecoms
Infrastructure Corporation of the Philippines (TelicPhil).

10.3.2 Technical Aspects of Backbone Network

The following exhibit shows a schematic representation of the backbone networks in the
Philippines.

Exhibit 12: Schematic Representation of Backbone Networks in the Philippines

 33

PLDT’s DFON is built based on six fibre rings linking up the major cities and regions in
the Philippines. This architecture provides natural redundancy against single point of
failure within a ring. Based on DWDM technology, DFON can transmit up to 10Gbps of
voice and data traffic. Microwave links are also used to complement coverage. Nortel is
the vendor for its latest expansion.
NDTN is also a fibre platform capable of delivering 10Gbps over DWDM using ECI’s
equipment. NDTN is composed of three segments: Microwave Radio in the Luzon,
Submarine Fiber Optic in the Visayas, and Land Cable in Mindanao.

10.4 Japan

10.4.1 Introduction
Japan’s widely-regarded leadership in terms of FTTH deployments was achieved through
the e-Japan national initiative. A combination of tax breaks, debt guarantees and partial
subsidies (without a requirement for structural separation) created the right incentives
and environment enabling self-regulation by the private sector and fulfilment of the e-
Japan objectives on schedule.
The Government used a combination of tax breaks, debt guarantees and partial subsidies.
For encouraging rollout in the urban areas, companies were allowed to offset one-third of
their development costs on first-year taxes and the Government guaranteed their debt
liabilities. For encouraging rollout in the rural areas, municipal subsidies covering
approximately one-third of the costs were given to operators that provided open access
network s. In total, US$16.7bn was allocated for the project which also included the
digitisation of Government and education services.

10.4.2 Technical Aspects of Backbone Network

Within five years (from 2000) of e-Japan idea conceptualisation, Japan has managed to
gain leadership in FTTH deployment
• the targeted 10m household reach was achieved within two years in 2002
• the number of households taking up FTTH is currently at around 5m, which
represents around 20% of total broadband subs
• resulting competition by Usen, a music distributor and electric power companies
drove down fibre connection prices to US$30~US$45/mth
Internet Initiative Japan(IIJ) is owned by NTT and is the largest commercial internet
service provider in Japan. The IIJ backbone consists of 12 network operations centres
(NOC) and 13 data centres within Japan. By using a combination of SDH/SONET and
DWDM transmission, the network is capable of carrying traffic from 150Mbps to 19Gbps.
The network uses ring configurations to provide resilience.
 34

10.5 Australia

10.5.1 Introduction
In June 2007, the Australian Government announced funding of A$958m and a legislative
initiative called Australia Connected, which will deliver broadband access for all
Australians. Australia Connected is the rollout of a new, independent, competitive and
state of the art national broadband network that will extend high speed services out to 99
per cent of the population and provide speeds of 12Mbps by mid 2009
OPEL, a joint venture between Optus and Elders, is the successful bidder this project.
Upon completion, the structurally separated OPEL will provide access to all service
providers in the market on an open and transparent basis.

10.5.2 Technical Aspects of Backbone Network

Australia Connected will deliver a mix of fibre optic, ADSL2+ and wireless broadband
platforms to rural and regional areas, serving 9.5m premises including in areas such as
Birdsville and Bedourie and the elimination of almost all broadband blackspots in areas
including outer metropolitan Adelaide, Perth and Brisbane.
15,000km of fibre optic cable backhaul will be deployed to extend the broadband
highways that link rural areas back to major cities, including two links across the Bass
Strait to Tasmania. The rollout will also include 1361 WiMAX sites and the enabling o f
426 ADSL 2+ exchanges in Australia.