Workshop on ICT Indicators & Benchmarking Comparative Indicators What is available? What are the problems? Maldives 6 Dec 2007 Client Logo
Table Of Contents What’s available and what to use What are some of the problems in comparative benchmarking? Indicators are important not just to the regulator What indicators should you focus on?
There is a “lot” of data available from various official sources • Example: ITU data • collected from member countries annually • Available to anyone who purchases the database • Some data available free via ITU’s ICTeye website.
A small subset is reported on the TAM web-site. No historical data (growth) or comparative data (benchmarks) against other countries • Fixed Telephone lines • Separate by region (large islands vs. other inhabited islands vs. resorts vs. un-inhabited islands etc) • Total number of mobile subscribers • Post-paid vs. Pre-paid • Teledensity • Fixed Only, Overall Fixed + mobile) • Internet subscription customers • ISDN lines, ADSL lines6, Leased lines • Public (card) phones: by region • Other: Paging customers, Telex Numbers From www.tam.gov.mv ; Nov 29 2007 data as reported on website
Value of indicator data is to compare and benchmark: but need to use the RIGHT INDICATORS against COMPARABLE COUNTRIES • The Maldives needs to • Pick the right indicators • Track and benchmark yourselves against these • Set targets (to beat the benchmark, perhaps) • Report these benchmarks regularly (e.g. Pakistan PTA) • Regulate based on the key indicators • What are the SUITABLE INDICATORS ? • E.g. Does “market concentration” or HHI (which are measures of market power) make sense in micro-states like Bhutan? • “Only” 2 mobile operators. • But with around ½ Million people can the market support more than 2 mobile operators? • What are COMPARABLE COUNTRIES ? • Who are comparable countries? What criteria do you use to select them? • E.g. Indonesia? YES large number of dispersed islands). NO (much larger population)
Table of Contents What’s available and what to use What are some of the problems in comparative benchmarking? Indicators are important not just to the regulator What indicators should you focus on?
Definitions that leave room for interpretation – and errors • What is does Number of Mobile Subscribers mean? • Most operators reporting SIM cards. Not # of human subscribers/users • Many users own more than one SIM cards • Some operators simply reporting all SIMs issued (irrespective of whether they are “active” or not). • Stop referring to subscribers and talk about “# of mobile SIMs”. • Should have a cut-off (i.e. SIM cards that have used a fee-paying service in the past 3 months)? • What is does Number of Fixed Lines/Phones mean? • Is Fixed Wireless (e.g. CDMA) included? • ITU includes CDMA on the fixed side • India included CDMA under fixed till about 3 years ago, but now counts it under mobile (so historical graphs have a sudden “bump”)
Different reporting time periods making comparisons difficult • Majority of countries on a Jan – Dec financial yea and the same reporting period. E.g. Sri Lanka • India on April – March financial year, and reporting period • Pakistan July – June financial year…etc. • Comparing annual data need the same “year” • One way to avoid the problem is to have countries report quarterly • Pick the right quarters when comparing
Lack of definitive authority for a particular indicator different data for the same indicator being reported by multiple sources Note: Based on Financial Year – e.g. “2000” refers to April 1999 – Mar 2000 Source: NASSCOM Strategic Review 2005; TRAI; Ministry of Statistics and Program Implementation, Govt. of India
That problems exist is recognized. Significant international attention being given to this. • UN Partnership on measuring ICTs for Development • ITU regular updates
Table of Contents What’s available and what to use What are some of the problems in comparative benchmarking? Indicators are important - not just for the regulator What indicators should you focus on?
Market share matters to investors (therefore operators). But market share based on what? • Often the subscriber with the most subscribers (i.e. market share based on # of subscribers) is used • Why not Market Share based on Revenue or Minutes (traffic)? • In early 2007 , market analysts’ claim that “largest” mobile operator is “losing market share” to competition. Viewed negatively • But according to CEO, • “observed trends of consumer behavior show that if SIM is given free (or with pre-loaded value), customer uses the value, discards SIM, gets a new one….” • [His company] “never does this” (i.e. always charges for the SIM). But competitors DO. • The “competitors count all SIMs when reporting subscriber base” (including discarded ones) so there’s significant over counting • CEO “waiting” for regulator to “publish market share/growth by MINUTES, to prove that it is the largest and growing • Method of calculating Market share even more important when Significant Market Power regulation is involved
Table Of Contents What’s available and what to use What are some of the problems in comparative benchmarking? Indicators are important not just to the regulator What indicators should you focus on? Connectivity Industry structure, impact Price/affordability Revenue, profitability Quality of Service ICTs General
Connectivity Indicators Connectivity is perhaps the most important indicator of the sector Equitable access, affordability and even quality are all reflected in growth (or lack of) the connectivity indicators
FIXED Number of fixed lines Number of fixed wireline phones Number of fixed wireless phones Total fixed line subscribers per 100 inhabitants MOBILE Number of mobile SIM cards Number of mobile SIM cards – prepaid Number of mobile SIM cards – postpaid Total mobile subscribers per 100 inhabitants Total mobile subscribers per 100 inhabitants Number of telephone connections per 100 inhabitants DIGITAL DIVIDE Number of urban telephone connections per 100 inhabitants ICT Number of rural telephone connections per 100 inhabitants Total number of Internet connections Number of broadband Internet connections IN-COUNTRY ACCESS GROWTH Backbone map for a country Mobile coverage map per operator Base station map per operator A basic list could include:
Problems • Subscriber/user vs. SIMs • Admit we are reporting SIMs. • Only a survey can reveal Subscribers (or average # of SIMSs per user) • Include CDMA in Fixed numbers? • Installed capacity or actual lines? • Philippines reports both: result of USO policy where new entrants were required to install lines with 10:1 urban to rural ratio • Thailand: measures/reports installed, has large number of unused lines under condominiums while having long waiting lists in rural areas • How is an “active” mobile user (SIM) defined? • Indonesia: Indonesia uses a 1 year cut-off period • Sri Lanka: Mobitel uses 3 months. Dialog varies by value of top-up-card. • Philippines: previously 4 months. In June 2004 changed to 1 month. Suddenly growth rate graphs “slow” down due to definition/methodology change
Change in “Active SIM” definition in the Philippines shows them in a negative light in comparative graphs
Industry Structure and Industry Impact Indicators Structure: monitoring for significant market power is important for regulators Impact: telecom sectors often biggest contributor to GDP growth and biggest revenue generator to the government. Knowing this makes the sector more visible, less likely to be faced with negative policies (e.g. taxes that may slow growth). Important to Operators as well as regulators
A basic list could include: • Total annual investment in the telecom sector • Foreign Direct Investment into the sector • Total tax paid by the sector • Total employment in the telecom sector • Market share • Using the HHI (Herfindhal-Hershman Index) • Market shares • In 3 ways: based on subscribers, based on minutes, based on revenue
Investment should only include funds that improve network coverage and quality. Taxes should be disaggregated • Total Investment • Only count investment made for acquiring property and network • Only for services available to the public (not for private use) • Sum of Foreign Direct Investment (FDI) + locally originated investment • Foreign Direct investment • should relate to investments in physical infrastructure, such as investments in property, equipment and networks. • Does not refer to (and should not include) monies injected from a foreign firm that acquires a lasting management interest in a firm or enterprise (because such funds do not go toward improving network coverage or costs or telecommunication services through other means). • Total tax paid by the sector • Differentiate between that paid by company vs. taxes passed onto consumer • Separate into: Corporate Income Tax, Sales Tax & levies, License Fees & Spectrum Tax
But can be a very useful tool for operators (to ask for lower taxes) and for policy makers (to ask for higher taxes?) Source: GSM Association
Investment is useful for benchmarking efficiency against other companies and countries
Market share based on subscribers vs. minutes vs. revenue varies. All 3 needed before decisions (e.g. merger approvals) are made Source: Wilson, Joseph, LIRNEasia 6 Country Study - Pakistan
Price Baskets are a good way to compare prices • ITU reports many micro-measures • E.g. “price of a 3 minute on-net call” • But in selecting an operator, consumers are likely to think about ALL costs • Connection charge • Monthly charge • What you get “free” (i.e. X SMSs per month and Y minutes per month included in package) • Cost of additional SMS or Cost of Minute • Their own consumption patterns (e.g. total minutes of calling per month, more friends on the same network therefore…) • The OECD basket captures all the above and MORE • Proposed method for benchmarking prices across operators and countries • For benchmarking countries, need a representative price basket per country • Rule: chose the largest operator’s most popular plan
ALL prices always need to be reported in a pure $ terms…… Cheapest prepaid Cheapest postpaid
…..as well as Purchasing Power Parity adjusted terms to understand relative affordability across countries Cheapest prepaid Cheapest postpaid
Price of broadband services are key to larger ICT and ITeS sector growth and should be monitored. Further details on Benchmarks and sources are available at : http://www.lirneasia.net/wp-content/uploads/2007/09/bbenchmarks-page1-v4.pdf.
Revenue & Profitability Measures the financial health of the sector Gives an indication of how consumption is changing (e.g. comparing data vs. voice ARPU over time) To be used with caution – operators express concerned that monitoring EBTIDA (or other profitability) margins may to “regulation” of profits
Average Revenue per User (ARPU) [subscriber] Fixed (wireline and wireless) ARPU per operator Fixed (wireline and wireless) ARPU for industry Mobile prepaid ARPU per operator Mobile postpaid ARPU per operator Mobile prepaid ARPU for industry (weighted by revenue) Mobile postpaid ARPU for industry (weighted by revenue Mobile data revenue Roaming revenue earned per SIM Industry revenue Industry revenue as a % of GDP EBITDA margin per operator A basic list could include:
Telecom sector revenue as a % of a country’s GDP is a powerful indicator of the importance of the sector Sector Revenue as % of DGD by Country Source: India- TRAI, Indonesia- calculated, Philippines: WDI online; Sri Lanka: TRC and CBSL AR
ARPU (or ARPS) together with Utilization indicate clear trends – and useful once again for proving the sector is doing well Source: TRAI
Why EBITDA and not pure E (Earnings) for cross-country comparisons? • EBITDA = Earnings before Interest, Tax, Depreciation and Amortization • It’s the final list in the income statement that can effectively compare across countries because • Taxes vary by country and distortionary • Interest varies by company/country • Accounting standards vary, therefore rules for Depreciation will vary by country
Telephony Quality Waiting list for main fixed lines Faults per 100 main (fixed lines) per year Percentage of telephone faults cleared by the next working day Call drop rates Percentage of connections with good voice clarity Call success rate Broadband Quality Broadband download speed (kbps/Mbps) Broadband upload speed (kbps/Mbps) RTT (milli-second)- Round Trip Delay Jitter (milli-second) Packet- Loss (as a percentage) Broadband availability (as a percentage %) Many of these indicators are reported regularly already (through ITU etc A basic list could include
ICT access and usage Great interest to almost all countries Specially in light of e-Government, telecenter and similar initiatives Gets to the heart of the DEMAND side (previous indicators were largely on the supply side)
Possible list of indicators, proposed international organizations • Percentage of population covered by mobile cellular telephony • Percentage of localities with public Internet access • Urban vs. Rural • Percentage of households with: • a fixed telephone, a mobile phone, a computer, internet access at home • Internet activities undertaken by individuals in the past 12 months • See UN-Partnership’s list as starting point (page 4 of document) • Location of internet access of individuals on the last 12 months • See UN-Partnership’s list as starting point (page 4) • Similar list of Use of ICT by businesses (see UN-ESCAP manual)
General Definitions The basic data on demographics and the economy Needed to analyze many of the previously stated indicators
The basic list should include: • Total Population of a country (from the NSO, preferably) • Number of households in a country • Number of Urban vs. Rural Households • Number of Urban vs. Rural population • Average number of people per household • GDP (from central bank or authoritative source) • Gross National Income
Workshop on ICT Indicators & Benchmarking Which Indicators for the Maldives? Picking a core list Maldives 6 Dec 2007 Client Logo
YOU decide. Keep in mind... • The need is for indicators that: : • Have definitions, collection frequencies, methodologies that can be agreed upon by everyone (operators, TAM, international standards) • Give a comprehensive picture of the telecom/ICT sector in Maldives • Enables meaningful comparison with chosen countries (no Maldives-only indicators) • Using benchmarks for regulation works with a list that is not too long. • Track the key indicators regularly and benchmark • Do collect a “longer” list for other purposes (e.g. the ITU list) • Strike the balance between getting perfect data vs. Imposing an overly heavy burden (cost) on collection • Most likely the operators bear the cost of data collection/reporting • When reporting – use footnotes liberally