Telecommunication & ICT Sector Performance Indicators

Transcription

1 Telecommunication & ICT Sector Performance Indicators A Handbook for National Regulatory Authorities Compiled by <Manual Last Updated: 5 th December 2007>

2 Introduction Over the past two decades telecommunications have grown to be of paramount importance, both at a national and international level. Having identified this phenomenon, local governments are increasingly enacting legislation and policies that would further facilitate the adoption of emerging technologies. Most nations have opted to change their telecom sectors to more liberalized or deregulated market structures, in order to survive the pace of globalization that is being driven by new ICT technologies. Due to this rapid move towards a more integrated Information Society, the availability of internationally competitive telecommunication services is vital. Importance of Standardized Data As the telecommunication sector is now considered a key component of economic growth, there is immense value in the data collected on different telecom indicators. Standardized data highlights ICT development and access both in a national and regional context. Time comparisons of country data provide insights into the effects of regulatory actions and market changes on a nation s ICT growth. Specific data, such as an operator s market share based on its subscriber base, can be used to formulate policy or to determine regulation. As such, comparable, standardized data on a series of ICT indicators is of utmost importance to regulators, policy makers and operators in any country. s by International Organizations Many countries, especially those that are members of the International Telecommunications Union (ITU) regularly collect and report (often to the ITU) data against a number of ICT indicators. However, proper data comparisons are made difficult at times, due to the dearth of commonly accepted standards and definitions for each indicator. Having recognized the need for comparable data, the ITU is continuously engaged in establishing standards and definitions for each indicator. The ITU though, is not the only international organization that collects, reports, uses and disseminates indicator data. While the ITU s focus is predominantly telecommunication indicators, the ongoing interest in ICT for development has led to an increased demand for a broader range of ICT indicators. Therefore, a number of organizations (ITU, OECD, UNCTAD, UNESCO Institute for Statistics, UN ICT Task Force, the World Bank, and UNESCAP among others) have formed the Partnership for Measuring ICT for Development, and are undertaking an on-going initiative to develop a series of ICT indicators, while simultaneously preparing standardized definitions for these indicators. The Basis for the Handbook This handbook is the outcome of an IDRC funded research project undertaken by LIRNEasia. The handbook is a result of the recognition that regional policy development and regional comparisons can only be undertaken, if standardized and comparable indicators are available at a regional level. While standardization at an international level is difficult, a regional attempt, especially amongst similar countries could facilitate the effort. Moreover, a regional agreement may even be necessary in cases where a global definition is not applicable to a particular region. In light of this, LIRNEasia brought together South Asian and South East Asian National Regulatory Agencies (NRAs), National Statistical Organizations (NSOs) and Operators at two workshops in 2006 (in Delhi, India) and 2007 (in Singapore), to deliberate on, and establish a list of indicators as well as definitions for each indicator. This handbook presents the indicators and definitions that were discussed at the regional meetings. The handbook is intended to be a working document, which is regularly improved and updated based on new information, and new technologies that emerge in the marketplace. 2

3 The handbook provides a basic list of indicators that regulatory agencies should strive to collect and disseminate. s are included to assist telecommunications analysts, as well as the growing number of non-specialists interested in telecommunications. Guidelines are also provided for those responsible for collecting and disseminating data on ICT indicators. The objectives of this handbook are as follows: - To identify a minimal set of indicators necessary for inter and intra country comparison in Asia - To define as clearly as possible each indicator (and where differences exist across countries to identify the differences), thereby establishing a reliable dataset that would be compiled on an annual basis. The indicators in this document are classified into five groups, for ease of presentation and discussion. They are as follows: - Connectivity - Industry structure and industry impact - Price and affordability - Revenue - Quality of Service The selected indicators in the groups listed above broadly cover the telecom sector. However, there are many more indicators that are available. The ITU itself collects data against a long list of indicators. Other organizations attempt to define many others. The intention of this publication is not to present every possible indicator that can be collected, but to provide a minimal set of indicators that are useful for Asian economies. Moreover, in the fast evolving field of ICT, the basic set of indicators (and their definitions) needs to be regularly revisited and revised in order to keep up with changes in technology. All attempts are made to not develop new definitions, and add to the confusion that already exists globally on definitions. Wherever possible, the ITU or Partnership definitions are used. However, some existing definitions have significant problems that inhibit inter or intra country comparisons. These issues are discussed, so that data collectors and data users can be aware of potential hazards. General principles in indicator data collection and reporting Listed below are a basic set of guidelines that need to be followed when reporting indicator data. These rules should be adhered to when publishing data in order to facilitate the process of crosscountry comparisons. - All indicators should be provided in US dollars (USD). In the event that dollar values are unavailable, the local currency should be converted to USD. The conversion rate and date should be clearly presented in the footnotes for future clarification. - Units should always be indicated (e.g. millions/billions). - Time period should be stated. It is recommended that the indicators listed in this handbook are collected on a quarterly basis. This is indeed what a number of countries in the region are doing already (e.g. India). If that is not possible, in the first instance the data can be reported on an annual basis. When reporting on an annual basis, the Year should be defined i.e. whether it is a colander year (Jan Dec) or the specific Financial Year (which varies from country to country: e.g. July June or April-Mar) - Data authority should be specified. Often more than one organization will collect/estimate and report data against the same indicators. For example, in India both the National Census Bureau and the World Bank report population data. The 3

4 Census Bureau reports the total population in 2006 to be 1,114.2 million ( population.aspx) while the World Bank reports 1,109.8 million ( ~menuPK: ~pagePK: ~piPK: ~theSitePK:239419, 00.html) for the same year. When the data reported by two organizations do not tally, it is important to use the figure provided by the National Statistical Organization. However, the figure given by the alternative organization should be stated in a footnote drawing attention to the difference between the two. - For more comprehensive comparisons to be made the indicators listed in this manual should be converted from US $ to be reflective of Purchasing Power Parity (PPP). Reporting the figures in PPP will make them more realistic that total US $ numbers as they represent the local cost of a basket of goods that can be compared at an international level. This means that the indicator will need to be converted using the PPP adjusted exchange rate. PPP needs to be calculated on an annual basis and the methodology can be found at : Also the World Bank reports the PPP adjusted exchange rates. The latest figures can be found at Demand Side Data vs. Supply Side This handbook is a guide for regulators who are in a position to collect data from suppliers of telecom services. However, to measure the state of the information society, a host of other indicators on usage and access to telecom and ICT services are needed. Data on these indicators can only be obtained by national statistical organizations (NSO) through household or business surveys. These indicators and methodologies are not covered in this manual. 4

5 Table of Contents 1 Connectivity Indicators Number of fixed lines Number of fixed wireline phones Number of fixed wireless phones Total fixed line subscribers per 100 inhabitants Number of mobile SIM cards Number of mobile SIM cards prepaid Number of mobile SIM cards postpaid Total mobile subscribers per 100 inhabitants Number of telephone connections per 100 inhabitants Number of urban telephone connections per 100 inhabitants Number of rural telephone connections per 100 inhabitants Total number of Internet connections Number of broadband Internet connections Broadband Internet connection charge Backbone map for a country Mobile coverage map per operator Base station map per operator 22 2 Industry Structure and Industry Impact 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 Market concentration 29 3 Price and Affordability Leased line and Broadband pricing Domestic Private Leased Circuit km link km link International Private Leased Circuit Price of a business broadband connection of 2Mbps Price of a business broadband connection of 256kbps Price of a residential broadband offering of 256kbps Fixed and Mobile pricing Taxes for fixed line phone subscriptions Taxes for mobile line subscriptions Lowest price of a fixed phone handset Lowest price of a mobile phone handset Tax as a percentage of total mobile service cost (TMSC) Monthly rental charges for a fixed phone line Monthly rental charges for a mobile phone Price of a mobile prepaid connection Price of a mobile postpaid connection Price of a 1-minute fixed phone local call Price of a 1-minute fixed phone national call Price of a 1-minute fixed phone international call Price of a 1-minute on-net call (within subscriber network) Price of a 1-minute off-net call (outside of subscriber network) 53 5

6 Price of a 1-minute peak time call Price of a 1-minute off-peak time call Number of voice minutes Price of a SMS Utilization MOU made by one subscriber to local (fixed) numbers MOU to national (fixed) numbers MOU to on-net numbers (within the subscriber s network) MOU to off-net numbers (outside the subscriber s network) International MOU for fixed traffic outgoing International MOU for fixed traffic incoming International MOU for mobile traffic outgoing International MOU for mobile traffic incoming 65 4 Revenue Average Revenue per User (ARPU) 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 77 5 Quality of Service Indicators Telephony indicators 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 indicators 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 %) 89 6 General s 6.1 Total Population of a country Number of households in a country GDP Gross National Income Urban population as a % of urban population Number of urban households as a percentage of rural households 92 6

7 6.7 Average number of people per household EBITDA 93 7

8 1.1 Number of Fixed Lines 1. CONNECTIVITY INDICATORS Number of fixed phone lines = Number of fixed wireline phone lines + Number of fixed wireless phone lines. UN Partnership A fixed line is a telephone line connecting a customer s terminal equipment (e.g. telephone set, facsimile machine) to the public switched telephone network (PSTN), and which has a dedicated port on a telephone exchange. ITU A fixed line is a telephone line connecting the subscriber's terminal equipment to the public switched network and which has a dedicated port in the telephone exchange equipment. This term is synonymous with the term main station or Direct Exchange Line (DEL) that is commonly used in telecommunication documents. It may not be the same as an access line or a subscriber. The number of ISDN channels should be included. Fixed wireless subscribers should also be included. If fixed wireless subscribers are not included, specify so in a note. Installed v Subscribed Lines Under normal circumstances subscribed lines (i.e. lines in use) should be reported. However, in some instances installed capacity differs from the number of lines in use. For example, the Philippines and Thailand have higher numbers of installed lines than the number of subscribed lines (due to unused installed lines lying under condominiums). In such situations countries could report both numbers. Lines or Subscribers Data on the number of fixed lines refers to the number of active lines, and not the number of subscribers. The distinction is important since one subscriber may have multiple lines and thereby skew figures for data on fixed lines per 100 people. However, in a regional context, it could be argued whether differentiation between subscribers and lines is at present necessary. Counting Fixed Wireless (Often CDMA) as a Fixed Phone Fixed wireless phones often offer limited mobility (e.g. within a particular region of a country) or even full mobility (works anywhere within the country). As such the argument can be made to count fixed wireless as part of total mobile. For example, the Telecom Regulatory Authority of India (TRAI) counts fixed wireless as part of the mobile phone segment. The ITU however counts the fixed wireless component as being part of the fixed phone segment. Due to the discrepancy in the indicator s definition, the data reported by the two agencies will be significantly different. In any case, when reporting this indicator (Number of Fixed Lines) it is important to state (in a footnote at least) whether or not fixed wireless is included. This could prevent confusion and enable cross-country comparisons. Ideally, the number of fixed wireless phones should be specified in the footnote as well, for ease of calculation. 8

9 1.2 Number of Fixed Wireline Phones The number of phones in use that are fixed to a specific location and can support fixed wireline services. These telecom services should be provided using either a line made of copper or fiber. 1 Phones and Subscribers Should Tally This does not prove to be very useful, as this indicator should match the one that counts the number of fixed line subscribers present in the market. More Phones than Subscriber Lines The data required for this indicator should be available with the fixed operators. Often the phones for fixed lines are provided by the operator of the fixed line service. However, in some cases offices and homes may have more than one phone supported by a single line. For accurate data a household survey maybe needed. 9

10 D 1.3 Number of Fixed Wireless Phones The number of phones in use that are restricted to a particular area and can support point-topoint signal transmissions that occur through the air over a terrestrial microwave platform rather 2 than through copper or fiber cables.d Categorizing Fixed Wireless (Often CDMA) Under Fixed v Mobile As CDMA technology is embraced across the region its classification becomes vital. At present there is no consensus on whether CDMA falls into the fixed or the mobile category. For example CDMA is considered a fixed line in Sri Lanka, while in India, as of March 2006, it is counted under mobile. To avoid any confusion it is best that data on the number of fixed lines includes a footnote indicating if fixed wireless is included or not. This indicator allows us to measure the growth in the number of phones, and thereby estimate the demand for fixed wireless technologies. 10

11 1.4 Total Fixed Lines per 100 Inhabitants UN Partnership This is calculated by dividing the number of fixed telephone lines by the population and multiplying by 100. The Total Fixed Lines per 100 Inhabitants = No of fixed lines Population X 100 Active Only Differentiating between all fixed line subscribers and active fixed line subscribers (those that have used the service at least once over a specified period) is necessary in order to avoid over or undercounting the subscriber base. Defining the term active first requires agreement on the time period during which a fixed line has been used. Initial inquiries from regional operators indicate that they have the capability to count lines that have been used within a given period of time. It is therefore suggested, that fixed lines that have been used in the past 3 months be considered when calculating this indicator. Further discussion is required to ensure that the collection of such detailed data does not pose undue costs on the operator, since the gathering of such comprehensive information could prove to be prohibitive in terms of cost. In the absence of an accepted time-limit or types of services that define the term active, it is suggested that the data be footnoted to provide as much clarity as possible (e.g. a footnote might state all fixed lines that have been used in the past 12 months to make or receive a call are reported ). 11

12 1.5 Number of Mobile SIM Cards Number of mobile SIMs = Number of mobile SIMs prepaid + Number of mobile SIMs postpaid UN Partnership Users of portable telephones subscribing to an automatic public mobile telephone service using cellular technology, which provides access to the PSTN. Users of both postpaid subscriptions and prepaid accounts are included. ITU Refers to the use of portable telephones subscribing to a public mobile telephone service and provides access to Public Switched Telephone Network (PSTN) using cellular technology. This can include analogue and digital cellular systems. This should also include subscribers to IMT (Third Generation, 3G). Subscribers to public mobile data services or radio paging services should not be included. If this service has a name, please indicate in a note, as well as the year the service commenced operation. Subscribers (Users) v SIMs It is increasingly clear that data can be collected (at best) on the number of active SIM cards. Counting the number of mobile subscribers (users) is almost impossible as even users at the bottom of the pyramid own multiple SIM cards. Active Only Differentiating between all SIM card subscribers (i.e. counting all SIM cards ever issued by an operator) and active subscribers (those who have used a service at least once over a specified period) is necessary in order to avoid over or undercounting the subscriber base. Defining the term active first requires agreement on the time period during which a SIM card has been used. Initial inquiries from regional operators indicate that they have the capability to count SIMs that have been used within a given period of time. It is therefore suggested, that SIMs that have been used in the past 3 months be considered when computing this indicator. However, defining the term active also requires agreement on the type of services are SIMs that use any service within the defined time period counted as active, or is it only SIMs that use a fee-paying service within the defined period that count as active. While this question may not have significance in CPP (Calling Party Pays) regimes, it may be important in RPP (Receiving Party Pays) countries or for certain types of plans (e.g. life-time SIM cards issued by certain operators). Clearly however, further discussion is required to ensure that the collection of such detailed data does not pose undue expenses on the operator since gathering such comprehensive information could prove to be prohibitive in terms of cost. In the absence of an accepted time-limit or types of services that define the term active, it is suggested that the data be footnoted to give as much clarity as possible (e.g. footnote might say all SIMs that have been used in the past 12 months to make or receive a call or SMS are reported ), 12

13 1.6 Number of Mobile SIM Cards Prepaid ITU The total number of mobile cellular subscribers using prepaid (also known as pay as you go ) cards. These are subscribers that rather than paying a fixed monthly subscription fee, choose to purchase blocks of usage time. Only active prepaid subscribers that have used the system within a reasonable period of time should be included. This period (e.g., 3 months) should be indicated in a note. Focus on Active This definition emphasizes the need to collect data only on active prepaid subscribers, and therefore circumvents the issue regarding inactive SIM card users. As already noted, problems arise when defining an active SIM card. Debates exist with regard to whether the definition should include any SIM that has been used within a defined period, or any SIM that has used a fee-paying service in the defined period. 13

14 1.7 Number of Mobile SIM Cards Postpaid The total number of mobile cellular subscribers who have entered a binding contract with an operator for the provision of a particular service based on a fixed monthly or annual subscription fee. 14

15 1.8 Total Mobile Subscribers per 100 Inhabitants s UN Partnership This is obtained by dividing the number of mobile cellular subscribers by the population and multiplying by 100. Mobile SIMs per 100 inhabitants = Total number of Mobile SIMs in use Total population X 100 Variations in Mobile Density Values Multiple data sources in a single country tend to provide differing values on the number of mobiles per 100. This data discrepancy is often a result of the use of varying population figures. For example in Pakistan the population figure listed by the Pakistan Telecom Authority (PTA) in 2005 is million, while the World Bank lists a higher figure of million. Although this 2.7% difference may seem negligible, it can have a significant impact when calculating the number of phones per 100. NRA s (or other parties reporting data on this indicator) should therefore state exact annual population figures (or at least include the source of the population data) in order to facilitate accurate reporting. 15

16 1.9 The Number of Telephone Connections per 100 Inhabitants The Number of Urban Telephone Connections per 100 Inhabitants The number of telephone connections available for every 100 inhabitants living within an urban area. The number of urban telephone connections per 100 inhabitants = Total number of connections (fixed and mobile) within the urban area Total number of inhabitants within the urban area X The Number of Rural Telephone Connections per 100 Inhabitants The number of telephone connections available for every 100 inhabitants living within a rural area. The number of rural telephone connections per 100 inhabitants = Total number of connections (fixed and mobile) within the rural area Total number of inhabitants within the rural area X 100 Importance of Indicator Data on the number of telephone connections per 100 people provides a very good representation of telephone penetration in a country, and is therefore a useful indicator for multicountry comparisons. Subscriber Focus This indicator places a higher emphasis on the number of subscribers in a country, rather than the number of actual users. Differentiating between active subscribers (those who have used a service at least once over a specified period) and idle ones is useful in order to avoid over or undercounting the subscriber base. Accuracy of the subscriber base is essential to obtaining realistic figures for this indicator. However, the definition of an active subscriber is unclear. Sections 1.1, 1.4 and 1.5 discuss active subscribers in greater detail. 16

17 1.10 Total Number of Internet Connections This is the total number of Internet connections in use within the country and is the sum of all the Internet connections issued by each operator. This indicator is not technology specific and would include all Internet connections such as dial-up, ADSL and wireless. Information Societies The concept of creating a global information society is now of paramount importance. As people are empowered with the necessary knowledge, they are able to engage better in debates pertaining to social, economic, political and academic issues amongst others. Better access to the Internet enables and facilitates this process. 17

18 1.11 Number of Broadband Internet Connections This is the total number of broadband connections in operation within the entire country. This would be the sum of all broadband connections provided by all the operators. A broadband connection is a high-speed Internet connection using DSL, cable, wireless, fiber optic or satellite means of transmitting data with connection speeds in excess of 256 kilobits per second. Not specific This data does not indicate the type of technology used to provide the broadband service. However, this indicator can be used to calculate the percentage of broadband connections within the total number of Internet connections. 18

19 1.12 Broadband Internet Connection Charge ITU definition The initial, one- time charge for a new broadband internet connection. Refundable deposits should not be counted. A note should indicate whether taxes are included or not. Unclear The ITU definition proves to be inadequate as there are many crucial areas that are not addressed. The definition does not specify the speed of a broadband connection. ITU states that a broadband connection is an always-on facility that offers speeds over 256kbps. Also merely stating if taxes are included or not will not be useful. A footnote should indicate the additional cost due to tax. Bundled Offerings Some broadband offerings may not have a connection charge as the charge will be bundled into the monthly rental or the modem charges. This will make comparisons difficult. 19

20 1.13 Backbone Map for a Country This is a visual representation of the backbone layout installed within a country at the present time. The map should indicate the percentage of towns (or villages) covered. = Number of towns/ villages covered Total number of towns/ villages X 100 Usefulness of Map This map is useful when making comparisons over different time spans, as it details the progress with regard to backbone rollouts. This indicator is also pertinent in the determination of broadband penetration. The map provides a visual image of a country s present ICT position and what needs to be accomplished in the future thereby making target setting easier. 20

21 1.14 Mobile Coverage Map per Operator This is a visual map of each operator s network coverage, denoting the areas in which the operator is represented. The operator should also indicate the area covered as a percentage of total area. = Area covered per square meter X 100 Total geographical area of the country Importance of Map The map provides a graphic representation of the extent to which operators are expanding their coverage. This is especially pertinent in solving the urban/rural divide. However, it is necessary to be mindful that while coverage extends to different areas, the signal present should also be strong enough for the proper execution of a voice call. The map makes the setting of targets easier for both government and for operators. 21

22 1.15 Base Station Map per Operator This is a visual map of the base stations owned and/or used by each operator. Importance of the Map The map may cause confusion in countries where operators choose to share base station facilities. However, the map is useful as it highlights the expansion of infrastructure over time. 22

23 2. INDUSTRY STRUCTURE AND INDUSTRY IMPACT 2.1 Total Annual Investment in the Telecom Sector ITU Total Sector Investment is also referred to as annual capital expenditure. This is the gross annual investment in telecom (including fixed, mobile and other services) for acquiring property and network. The term investment means the expenditure associated with acquiring the ownership of property (including intellectual and non-tangible property such as computer software) and plant. This includes expenditure on initial installations and on additions to existing installations where the usage is expected to be over an extended period of time. Note that this applies to telecom services that are available to the public, and excludes investment in Ctelecom software Cor equipment for private use. Comment: This can help public get better bills, for example. Actual Funds vs. Promised Funds Data on the total investment into the sector should comprise only of the actual investment received and not promised figures. Often the amount that is promised as investment maybe more or less than the actual amount that is received. Company and Industry Level Data This indicator is to be reported by each company providing telecom services in a country. The sum of investment figures from each firm are to be added up to obtain the industry investment number. Investments in Telecom Services Only Data should only consist of funds that go into increasing network quality or coverage. Other forms of investments should not be counted. Foreign and Local Investments Investment originating within the country and from outside of the country should be included. Total Investment = Foreign Direct Investment + local investment Reporting Incremental Investment (Not Cumulative) Investment into the telecom sector should be reported as an incremental investment for a particular year, and not as a cumulative investment over a period of years. Cumulative figures can be easily calculated by anyone, once they have the incremental investment data. Importance of Investment Information 23

24 The telecom sector s long term growth is directly driven by investments in the sector. Therefore, investment information is a good indicator of the perception of financial attractiveness and the long term potential of a country s telecom sector. Declining investment over time can indicate to the government/regulator if they need to intervene to improve investment prospects. 24

25 2.2 Foreign Direct Investment into the Telecom Sector ITU Annual investment in telecom coming from foreign sources also referred to as Foreign Direct Investment (FDI). What to Include in FDI FDI that is counted as investment into the telecom sector should relate to investments in physical infrastructure, such as investments in property, equipment and networks. It 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). Reporting Incremental Investment (Not Cumulative) FDI should be reported as incremental investment for the year in consideration, and not as a cumulative investment. Company and Industry Level Data The FDI received from each company providing telecom services should be obtained. The sum of FDI obtained by the companies should be reported as the total FDI to the sector. Importance of FDI to the telecom sector FDI plays a key role in improving the telecom services in a country. This makes it a crucial indicator in measuring the success of the telecom sector. FDI is now recognized as being vital for the development of the sector and the national economy as a whole. However, countries such as India seem to attract significant local investment as well. Policy makers, regulators, investors and other interested parties will therefore need FDI figures to be disaggregated from total investment, to study the trends and patterns of investment into the sector. 25

26 2.3 Total Tax Paid by the Sector This should entail all monies that have been paid by operators for taxes levied for the previous financial year. This can be calculated by obtaining the tax revenue remitted to the State by the telecom operators. This data should be available in Central Bank reports. Tax Components The definition of tax includes corporate income tax, sales tax and levies such as service tax, license fees, and spectrum taxes. These components could also be reported separately by firms wherever possible. Many countries have very different tax regimes. Component-wise reporting enables more meaningful comparisons. Importance of Tax Information The total tax collected indicates the sector s contribution towards government revenues, and therefore the importance of the sector vis-à-vis the total economy. Tax data also flags areas that are being excessively taxed. However, in order to do so the various tax components would have to be calculated separately. Company Level and Industry (Sector) Level Data The total tax paid by each company providing telecom services should be obtained. The sum of the total tax reported by each company would be the total tax paid by the telecom sector. Reporting in a Useful Format Tax data is most useful if it is stated as a percentage of total government revenue, or as a percentage of total industry revenue. Therefore, along with the absolute figure for tax paid for the year, it is almost always useful to report at least one of the above mentioned percentages. Problems Associated with Accounting Structures Cross-country comparisons are made difficult as various countries have different financial years, with some ending in December while others in May/June. Most countries have varying tax regimes making country comparisons difficult, unless a breakdown of the various tax components are given. 26

27 2.4 Total Employment in the Telecom Sector The total number of people, both direct and indirect, who are employed in the telecom sector. UN Partnership Total business workforce represents all persons engaged in domestic production in the business sector. In a national accounts framework, employment can be measured in terms of headcounts, jobs, full-time equivalents or hours worked. Currently, total headcounts or jobs are used for most countries. ITU Total Full-Time Staff (Direct Employees) Total full-time staff employed by telecommunication network operators in the country for the provision of public telecommunication services, including mobile services. Part-time staff should be expressed in terms of the full-time staff equivalent. Estimating Indirect Employees While data on direct employees is reasonably easy to collate, indirect employment is much more difficult to measure. Indirect employment includes (full-time equivalents) of employment created to provide telecommunication related services. This would consist of retailers selling prepaid mobile cards, companies involved in the installation of telecom towers and so on. Data on indirect employment could be estimated, but in such instances the assumptions on which the information is based should be specified. Some resellers of telecom services may not be registered as doing so, but will provide services from his/her residential line. Invariably this indicator will always be reported below the real level. 27

28 2.5 Market Share Individual operators market share should be computed in terms of subscribers, revenue and minutes of usage. Market share is calculated in 3 ways Share of Subscribers, Share of Revenue and/or Share of Minutes as: Subscribers of Firm X Total Subscribers of all firms or X 100 Revenue of Firm X Total Revenue of all firms X 100 or Minutes of Use of Firm X Total Minutes of Use of all firms X 100 The following indicators should be reported: Fixed (wireline + wireless) market share by number of subscribers Fixed (wireline + wireless) market share by revenue Fixed (wireline + wireless) market share by minutes of usage Mobile market share by number of subscribers Mobile market share by revenue Mobile market share by minutes of usage Market Share and the SIM Issue Market share of mobile firms can be over or understated when computations are based on the number of SIM cards issued by an operator. Confusion arises when operators offer free SIM cards to customers. These free cards are used until their value runs out, after which customers tend to throw the card away. Operators who include these free SIM cards in their market share calculations tend to indicate an inflated market share. Therefore, for a more comprehensive representation of market share for the mobile sector, Share of Revenue or Share of Minutes seem to be better indicators. 28

29 2.6 Market Concentration Market concentration for fixed and mobile markets is calculated using the Herfindahl Herschman Index (HHI). The HHI is calculated as follows: HHI = (M 1 ) 2 + (M 2 ) 2 + (M 3 ) (M n ) 2 where M n is the market share of a firm. As noted earlier, M n can be calculated for subscribers (or SIMs), minutes or revenue. The following indicators should be reported: HHI for fixed markets using market share by number of subscribers HHI for fixed markets using market share by revenue HHI for fixed markets using market share by minutes of use HHI for mobile markets using market share by number of subscribers HHI for mobile markets using market share by revenue HHI for mobile markets using market share by minutes of use The HHI The HHI is a widely accepted tool for measuring market concentration. It takes into account the relative size and distribution of all firms instead of just the top four or five firms in a market. It approaches zero when a market consists of a large number of firms of relatively equal size. HHI Ranges A market in which the HHI is between 1000 and 1800 is considered to be moderately concentrated. If the HHI is in excess of 1800 points it is then considered to be concentrated. Flagging Anti-trust Concerns In the United States, transactions that increase the HHI by more than 100 points in concentrated markets raise anti-trust concerns, under the Horizontal Merger Guideline issued by the US Department of Justice and the Federal Trade Commission. 29

30 3. PRICE AND AFFORDABILITY INDICATORS 3.1 LEASED LINE and BROADBAND PRICING The increasing internationalization of business activity has led to rising demand for leased lines and reliable broadband services. Business Process Outsourcing (BPO), for example, has been a significant contributor to leased line subscriber growth. The global BPO industry as of 2006 is estimated at US$ billion, of which offshore BPO constitutes approximately US$ billiond D. As the expansion of the BPO industry shows no signs of slowing, many countries are becoming motivated to provide competitive leased line charges in order to gain a slice of the BPO pie. However, this has proved to be easier in theory than in practice. Countries have tried unbundling their local loops and liberalizing their international gateways, with varying levels of success. Given the importance of reliable, fast and competitive broadband access, the indicators listed below are important, and should be made available in order to conduct cross-country comparisons, especially in Asia. The indicators in this category should be collected from all operators in the sector. In the event that this is not possible (or competitive offerings are not available), leased line rates of the incumbent should be used. As for broadband charges, the cheapest package corresponding to the requirements should be selected and reported. - The annual rental charged for a 2km leased line link at a speed of 2Mbps. - The annual rental charged for a 100km leased line link at a speed of 2Mbps. - The annual rental charged for a commercial broadband offering at a speed of 2Mbps - The annual rental charged for a commercial broadband offering at a speed of 256Kbps. - The annual rental charged for a residential broadband offering at a speed of 256Kbps. When reporting prices only the annual rental charged for provision of the service should be stated. The rates should not include any discounts, installation and modem charges. It should also be independent of any taxes. As the General Principles section in the Introduction to the Handbook indicates, all prices should be stated in terms of an international currency, such as US Dollars. When rates figures are converted from the local currency into an international currency, the exchange rate used and the date of the currency conversion should be specified. As also indicated in the General Principles section, prices should be reported in terms of the local currency as well. For ease of reporting the table format below can be used. Country X Y 2mbps, 2km DPLC 2mbps, 100 km, DPLC 2mbps broadband business connection Minimum 256kbps broadband business connection * Minimum 256kbps broadband residential connection 30

31 * Note: In the event a 256kbps offering is not available the package with the next lowest speed offering available should be used. However, it has to be lower than 2mbps. If the lowest offering is at 2mbps speed, the cell should read: N/O (No Offering). When using this table format, extensive footnotes will be required to explain pricing computations. 31

32 3.1.1 Domestic Private Leased Circuits (DPLC) A leased line connects two locations for private voice and/or data telecommunication services. A leased line is a reserved circuit between two points, and can span short or long distances. Leased lines maintain a single open circuit at all times, as opposed to traditional telephone services that reuse the same lines for many different conversations, through a process known as switching. Availability The availability of data on domestic leased line prices does not necessarily imply that the service exists across a country. For example, in Sri Lanka prices are quoted by the operator, but leased lines are not accessible in most parts of the country. No Extras The definition for DPLC should clearly indicate that discounts, taxes and installation charges have not been taken into account, as these extra costs will change the price of the link. Selecting a National Tariff Within a country, prices from various operators can be compared. However, when comparing DPLC prices across several countries, it is important to select one price as a representative price for the whole country (at least in countries where more than one provider offers DPLCs). 4 In such instances the following methodology (based on OECD methods) is proposedd D. In general though, in the Asian region, there is usually only a single operator, and the below selection is not applicable. Number of Countries being benchmarked Benchmark tariff for each country 1-5 The lowest tariff is chosen as the benchmark 6-20 The 2nd lowest tariff is chosen as the benchmark The 3rd lowest tariff is chosen as the benchmark 32

33 D Price of a DPLC: 2km OECD The price per month of a 2Mbps line (minimum) for a 2 km link is the international indicator used for comparing leased line prices. This is also known as a tail link charge. Rates for 2km Not Provided All operators may not provide a standard rate for a 2km link. Often, the distance of a tail link changes from country to country. This makes comparative studies difficult. However, in the event that the rate for a 2km tail charge is not available, the rate listed as a tail charge should be used with all details specified in a footnote Price of a DPLC: 100km OECD The price per month for a 2 Mbps (minimum) line for a 100 km link is calculated by adding the 5 cost of two tail charges (i.e. 2 x - the 2 km link charge) to a 96 km link charge. D Long Distance Links A 100 km link charge is generally used to calculate the price of a long distance link. However, there is some contention on the exact distance to be considered for computations. The EU uses a 200km link charge. However, for the Asian region a 100km comparison is more appropriate as the geographical proximity within cities in Asian countries is less than those of the EU. Therefore, an indicator measuring a 200km link charge will be irrelevant in the Asian region. 33

34 3.1.2 Price of International Private Leased Circuits (IPLC) An IPLC (International Private Leased Circuit) is a point-to-point private line used by an organization to communicate across a global office network. An IPLC can be used for Internet 6 access, business data exchange, video conferencing and any other form of telecommunicationd D. IPLC are reported in the three capacities under which they are available. That is E1 (2Mbps), DS- 3 (45Mbps) and STM-1 (155Mbps) and should be reported under these categories. Half Circuits International leased line prices are often quoted as half circuit prices. However, a full circuit price cannot be computed simply by adding two half circuit prices. Therefore, the total cost of an international leased line from destination X to Y cannot be accurately ascertained. Price Variations International leased line prices are difficult to obtain. When available, these prices vary on a case-by-case basis, making comparability across different countries in a region difficult. Since the charges are distance specific, the data should focus on the benchmark destinations. No international consensus exists with regard to destinations. However, for the purpose of collecting comparable indicators the following destinations are recommended. Country*- US (West Coast), Country Singapore Country India Country UAE Country - Germany *- Should be the national country from which the IPLC originates. 34

35 D Price of a Broadband Business Connection of 2Mbps This should be the annual rental charged for a commercial broadband offering with an average upload/ download speed of 2Mbps. The cheapest unlimited download capacity package rate should be used. The price should not take into account any taxes, discounts, or modem and 7 installation charges. The price is not technology specific.d Bundled Offerings Package rentals may sometimes contain bundled offerings with other products. Packages can also entail a contract for a minimum period of time. Selecting a regional Tariff When regional comparisons are done, it becomes problematic as to which country or rate should be used to represent the region. However, when comparing broadband prices across regions, it is important to select one price as a representative price for the region (as the rate offered in countries within a region will differ). 8 In such cases the following methodology should be adoptedd D. Number of countries Benchmark 1-5 The lowest tariff is chosen as the benchmark 6-20 The 2nd lowest tariff is chosen as the benchmark The 3rd lowest tariff is chosen as the benchmark 35

36 3.1.4 Price of a Broadband Business Connection of 256kbps This should be the annual rental charged for a commercial broadband offering with an average upload/ download speed of 256kbps. The cheapest unlimited download capacity package rate should be used. The price should not include any taxes, discounts, or modem and installation charges. The price is not technology specific. 4 No Offerings of 256kbps Some countries do not offer speeds of 256kbps, and therefore this indicator becomes irrelevant for those countries. Bundled Offerings Package rentals may sometimes contain bundled offerings with other products. Packages can also entail a contract for a minimum period of time. 36

37 3.1.5 Price of a Broadband Residential Connection of 256kbps This should be the annual rental charged for a residential broadband offering with an average upload/ download speed of 256kbps. The cheapest unlimited download capacity package rate should be used. The price should not include any taxes, discounts, or modem and installation charges. The indicator is not technologically specific. 4 Bundled Offerings Package rentals may sometimes contain bundled offerings with other products. Packages can also entail a contract for a minimum period of time. 37