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DE RUEHLM #1142/01 1931152
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R 121152Z JUL 06
FM AMEMBASSY COLOMBO
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RUEHGV/USMISSION GENEVA 1249
RUEHNE/AMEMBASSY NEW DELHI 9784
RUEHKA/AMEMBASSY DHAKA 9311
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RUEHLMC/MILLENNIUM CHALLENGE CORP

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