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Workshop on ICT Indicators Benchmarking
Comparative Indicators What is available? What
are the problems?
Maldives 6 Dec 2007
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Table Of Contents

• Whats 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?

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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 ITUs ICTeye
  website.

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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
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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)

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Table of Contents

• Whats 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?

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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)

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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 yearetc.
• 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

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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
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That problems exist is recognized. Significant
international attention being given to this.

• UN Partnership on measuring ICTs for Development
• ITU regular updates

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Table of Contents

• Whats 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?

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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
  theres 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

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Table Of Contents

• Whats 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

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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

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A basic list could include

• 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

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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 101 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

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Change in Active SIM definition in the
Philippines shows them in a negative light in
comparative graphs
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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

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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

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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

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Taxes vary significantly by country. Care is
needed in comparing
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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
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Investment is useful for benchmarking efficiency
against other companies and countries
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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
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Price and Affordability Indicators
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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 operators most popular
  plan

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ALL prices always need to be reported in a pure
terms
Cheapest prepaid
Cheapest postpaid
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..as well as Purchasing Power Parity adjusted
terms to understand relative affordability across
countries
Cheapest prepaid
Cheapest postpaid
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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.
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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

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A basic list could include

• 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

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Telecom sector revenue as a of a countrys 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
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ARPU (or ARPS) together with Utilization indicate
clear trends and useful once again for proving
the sector is doing well
Source TRAI
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Why EBITDA and not pure E (Earnings) for
cross-country comparisons?

• EBITDA Earnings before Interest, Tax,
  Depreciation and Amortization
• Its 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

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Quality of Service
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A basic list could include

• 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 )

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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)

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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-Partnerships list as starting point (page
  4 of document)
• Location of internet access of individuals on the
  last 12 months
• See UN-Partnerships list as starting point (page
  4)
• Similar list of Use of ICT by businesses (see
  UN-ESCAP manual)

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General Definitions

• The basic data on demographics and the economy
• Needed to analyze many of the previously stated
  indicators

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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

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Workshop on ICT Indicators Benchmarking
Which Indicators for the Maldives? Picking a core
list
Maldives 6 Dec 2007
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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