Chapter 20 Statistics for Regulators1 Michael Minges 2 1.0
Why Statistics?3
The collection, processing and dissemination of statistics is often overlooked by nascent telecom regulatory authorities. This is unfortunate because reliable statistics provide one of the few objective ways of measuring the extent to which license conditions imposed on Public Telecommunication Operators (PTO) are met.4 Second, telecom statistics are usually not collected by any other government agency. If regulators do not obligate PTOs to furnish statistics there may be no primary source of data with which to gauge developments in a country’s telecom sector.5 Third, regulators can use statistical targets as a powerful tool to influence the development of infrastructure, quality and tariffs. In many cases PTOs develop their networks at almost exactly the level specified by the statistical targets. This survey provides an overview of the type of statistics useful for regulatory authorities. 6 The survey offers examples of applying statistics based on country experiences and provides some pointers for maintaining and disseminating the information. 2.0
Monitoring License Conditions
One task for regulators is to monitor whether infrastructure development, tariff levels and quality of service targets specified in license conditions are being fulfilled. For example, are tariffs in conformance with the level specified in the operating license? Are quality of service targets being met? Table 1 outlines some of the areas that may have license conditions attached and for which statistics might be collected.
277
Public service obligations Obligations to service specific groups or areas Quality of service targets Tariff controls Treatment of customers Competitive behaviour Obligation to publish information Table 1 – Typical obligations imposed on telecommunication licensees Source: World Bank.
2.1 Public Service Obligations Public service obligations include requirements on the part of the licensee to enhance access to the network. Access provision goals often depend on a country’s level of economic development. In developed countries, access might be defined as providing telephone service on demand. In other countries, access might be defined as providing a certain level of coverage of working payphones. The kinds of specific statistics that are of interest here are those that measure expansion of the network. These include the percent of localities with telephone service and the penetration of pay telephones. If there is an obligation to provide all potential subscribers with telephone service, then waiting times may be of interest. The annual growth in telephone lines, is another measurement for tracking expansion of the network. Mexico provides a good example of various statistical targets imposed on the licensee. When the wireline telecom operator, Teléfonos de México (Telmex), was privatised in 1990, it was required to increase the number of lines in service at a minimum annual rate of 12 percent through 1994. It was also required to increase the density of public telephones to two per one thousand inhabitants by 31 December 1994 (see Figure 1). 7
278
Annual growth in main lines Concession requirement: Annual average of 12% for 1990-1994 13%
13% 12%
12% 11%
1991
1992
1993
1994
1990-94 average
Pay phones per 1'000 people Concession requirement: 2 per 1'000 by 1994
2.05 1.02
1.14
1990
1991
2.36
1.47
1992
1993
1994
Figure 1 – Public service targets Teléfonos de México (Telmex) license obligations Source: ITU World Telecommunication Indicators database.
2.2 Obligations to Serve Specific Groups and Areas Related to public service obligations is the requirement to provide service to specific groups or areas. This might cover for example, people with low incomes or inhabitants of rural areas. The absence of telephone service in certain areas is generally due to a lack of infrastructure. This is typically the situation in rural areas where the costs of network installation tend to be higher because of few users and large distances. In that case, obligations might be imposed on operators to improve network coverage in rural areas. Statistically this might be measured by the percent of telephone lines in rural areas compared to the percent of rural inhabitants or by the percent of villages with telephone service. The problem of poor rural access to telephones is endemic in developing countries. In Peru, some 60 percent of all telephone lines are in the capital, Lima, even though it has only about 30 percent of the population. In 1994, the two fixed-link operators in the country were combined and partly privatised. As part of the license conditions, the new company, CPT-Telefónica, must install 473’000 telephone lines outside Lima between 1994-1998 (see Figure 2).8
279
Per cent distribution of population and main telephone lines, 1994 100% Lima 75% 50%
Rest of country
25% 0%
Population
Main lines
Annual lines to install (000s) Lima
140 120 100 80 60 40 20 0
Rest of country
1995
1996
1997
1998
Figure 2 – Services to specific areas Rural telephone distribution and expansion plans in Peru Source: ITU World Telecommunication Indicators database, Telefónica del Perú.
2.3 Quality of Service Quality of service indicators attempt to measure the reliability and efficiency of telecom networks. There are a number of areas for measuring quality of service (see Table 2).
280
Delivery Precision
This measures the ability of the licensee to meet customer requests for service. It can be measured by the percentage of customer requests for installation that are met on time. For developing countries with long waiting lists, average waiting time for connection may be a more meaningful indicator
Call Failure
Measures the percentage of calls which fail for technical reasons (e.g. network congestion). Can be broken down by local, national and international calls.
Fault Reports
Measures the number of technical main line faults. It is usually calculated in terms of the number of faults for the year per 100 main lines.
Fault Clearance
Measures the percentage of faults which are cleared within a certain period of time, usually by the end of the next working day.
Operator Assistance
Measures the number of seconds from completion of dialling of call until the operator answers for operator-assisted calls, directory enquiries and other services. Table 2 – Quality of service indicators
Source: ITU adapted from Organisation for Economic Co-operation and Development (OECD). 1990. Performance Indicators for Public Telecommunications Operators. Paris.
In Argentina, two new companies, Telecom Argentina and TelefĂłnica de Argentina were created out of the former state-owned telecom operator in November 1990. The two new operators were obligated to meet a number of targets relating to the efficiency and quality of service provided such as fault clearance. Progress in improving quality of service is shown in Figure 3.
281
Telefónica de Argentina 6%
80
Pending faults (000s)
60
As % of main lines
4%
100
5%
3%
40
2%
20
1% 0%
0 1990
1991
1992
1993
1994
Telecom Argentina 7%
80
Pending faults (000s)
As % of main lines
5%
60
100
6% 4% 3%
40
2%
20
1% 0%
0 1990
1991
1992
1993
Figure 3 – Quality of service Pending faults in the telephone network in Argentina since privatization Source: Telefónica de Argentina, Telecom Argentina annual reports.
2.4 Tariff Controls Tariffs are a sensitive issue, both for politicians and for users, and are generally subject to some sort of regulation. There are basically three types of tariff controls: • Cost of living – The tariff is allowed to rise (or fall) in relation to the cost of living. For example, in the United Kingdom, BT’s tariffs are tied to the Retail Price Index minus “X” where X is modified at certain intervals (see Figure 4, left chart). •
Rate of return – The tariff is set to produce a target rate of return based on the value of the operator’s assets or shareholder’s equity. This method was historically applied in the United States.
•
Mandated reduction – The tariff must be reduced by a specified percentage over a period of time. This has been adopted when licenses are issued for newly privatised operators. For example, in Argentina, installation charges for residential and business users must be reduced to 250 USD by 1996 (see Figure 4, right chart).
282
Tariff changes in the UK Retail Price Index (RPI)
RPI - "X"
BT price changes
10% 5% 0% -5% -10% 1990
1991
1992
1993
1994
Telecom Argentina Connection charges (US$) Business
$ 2'000
Home
$ 1'500 $ 1'000 $ 500 $0 1991
1992
1993
1994
Figure 4 – Tariff Monitoring Tariff changes in the UK and Argentina Sources: Telecom Argentina. Office of Telecommunications (OFTEL). 1994. Annual Report 1993. London: HMSO. OFTEL also publishes a report consolidating telecommunication statistics for the different operators in the United Kingdom: OFTEL. 1995. The UK Telecommunication Industry: Market Information. London. Note: Top chart: In 1992 and 1994, BT was permitted to carry forward unused allowances from previous years. Bottom chart: Connection charges in Argentina for both home and business must be at least 250 USD by January 1996.
2.5 Treatment of Customers Measuring how operators treat customers can be viewed from different perspectives. On the one hand, quality of service statistics will cover some areas customers are likely to be sensitive about, such as billing complaints, operator response times, and fault repairs. However they do not necessarily cover less measurable aspects such as customer service or discrimination. In addition to setting quality of service targets, there are three other ways customer treatment might be handled: • Keeping track of complaints made to the regulator. For example, the Office of Telecommunications (OFTEL), the UK regulator, publishes statistics on the number of complaints it receives by category. •
Using a customer satisfaction index. A number of operators have designed indexes that measure the customer’s perception of the company. It is interesting that in
283
some cases, even though the technical quality of service of the network is low, customer’s satisfaction is high. In other cases, customers are dissatisfied even though there is high technical quality. •
Having the relevant government enforcement agency handle certain areas of customer treatment. For example, discrimination by the operator because of sex or race might be a violation of national laws.
2.6 Competitive Behaviour Statistics are important in competitive telecom environments to evaluate how the industry is developing due to competition. In a number of countries, obligations imposed on incumbent PTOs are dependent on its market share. Therefore the indicators used to determine market share are critical. The portion of telecom revenues earned by different PTOs are often used as an indicator of market share because financial information tends to be widely available whereas usage statistics may not be unless regulators ask for it. Using only revenue data can result in erroneous interpretation. For example, estimating international calling shares in the United Kingdom between BT and Mercury had been based on their reported international telephone revenues because, until recently, usage statistics had not been available. Based on revenues, Mercury had 20 percent of the market in 1993/94. However, based on usage data, Mercury’s actual share was around 24 percent. A four percent difference may not seem like much, but it results in an underestimation of Mercury’s traffic by 18 percent. This is over 125 million minutes, more traffic than three quarters of the countries in the world generate (see Figure 5).
284
Estimated UK international calling share Based on revenues 1993/94 Mercury 20%
BT 80% Actual UK international calling share Based on newly available data 1993/94 Mercury 24%
BT 76%
Figure 5 – Competition Distribution of international calling revenues and of outgoing international telephone traffic, BT and Mercury, 1993/94 Source: Annual reports, OFTEL.
2.7 Obligation to Publish Information The availability of statistical information to those outside the regulatory process is important. Customers, user groups, shareholders, analysts, the press and others require statistical information. The obligation to publish information may need to be distinguished from the obligation to provide information. In the latter case, the licensee may be required to provide information to the regulator with dissemination to the wider public not being mandatory. The obligation to publish statistical information implies that the information should be available in reports for wide dissemination and use by others. There is usually some statistical information that the licensee must publish. For example, tariff information should be available to the public, though operators in competitive markets tend to publicise only their special offers or discounts rather than their regular rates. Also, there may be national requirements for companies to release financial information such as annual revenues, profits or capital investment. However, unless specifically mandated to do so, there may be little published information on network infrastructure details, research and development expenditure or quality of service. Though some detailed statistics might be considered commercially confidential, this needs to be weighed against the utility of having the information available for policy
285
analysis. Therefore an important task for the regulator is to draw up a minimum list of statistics that are available to the general public. 3.0
Policy Monitoring
The statistics regulators collect to monitor compliance with licenses will also be useful for other applications such as policy analysis. For example, government analysts may want to examine the results of privatisation or competition policy. International comparisons allow regulators to see how their country is doing vis-à-vis others. For example, the effects of network expansion under privatisation can be compared (see Figure 6). International comparisons can have a synergistic effect on national regulatory policies in terms of setting targets. For example, in Argentina, one of the obligations on the operators is that the telephone line installation cost be reduced “so that it will be in line with international levels at the end of the exclusivity period.”9 30% 25%
Chile
20%
Argentina
15%
Mexico
10% Latin America 5% 0% 1988
Venezuela
1989
1990
1991
1992
1993
1994
Figure 6 – International comparisons Rates of network growth per year, 1988-94, Latin America Source: ITU World Telecommunication Indicators Database. Note: Chile privatized in 1988, Argentina and Mexico in 1990 and Venezuela in 1992.
Even when there are no explicit license obligations, the regulator may nonetheless want to monitor various statistics for social and economic reasons and to anticipate problems before they arise. In Singapore, the Telecommunication Authority of Singapore (TAS), the regulator, has directed the PTO “to conduct a major review of rates” to ensure that citizens enjoy competitive telephone tariffs in comparison to other countries.10 A further example is the Internet which, to all intents and purposes, is unregulated in most developed countries. There is consequently no requirement on the part of operators to publish any traffic or usage data. It may well be that Internet usage, one of the main factors leading to the development of a global information society, remains completely undocumented, and consequently little understood. Regulators also need to aggregate individual company data to obtain national level data in order to make international comparisons. A growing problem is that in areas
286
where competition is allowed, data is not always collected for new companies. There tends to be a reliance on the statistics of the main incumbent operator because new companies have not been obligated to provide data. This can result in misleading results if only the incumbent operator’s data is used as a proxy for national statistics. For example, a growing number of countries allow more than one operator for mobile cellular services and not including these companies in national level statistics would seriously under-represent the penetration of services. In just two years, the two new cellular operators in Sweden account for over 25 percent of the market are now adding more new subscribers than the incumbent (see Figure 7).
Subscribers (000s) Europolitan
2'500
Comviq
2'000
Telia
1'500 1'000 500 0 1991
1992
1993
1994
1995
New subscribers added (000s) Europolitan
700
Comviq
600
Telia
500 400 300 200 100 0 1991
1992
1993
1994
1995
Figure 7 – Aggregation of country level data Mobile cellular subscribers in Sweden by operator Source: ITU PTO Indicator database.
4.0
Data Issues
There are a number of methodological aspects the regulator needs to consider in maintaining telecom statistics: • Definition – This includes what indicators should be collected and how are they defined. Operators must understand what statistics are required of them. Regulators must ensure that the statistics are meaningful and capture the elements
287
they are trying to monitor. International conventions need to be considered if operator statistics are to be comparable with other carriers and other countries. •
Frequency – The time period for the statistics needs to be established. Should the data be maintained on a monthly, quarterly or annual basis?
•
Coverage – Should data be collected by operator, by region (e.g., state, province) or both?
•
Demographic and macro-economic information – Regulators will often need population and household data, income levels, price indexes and other types of non-telecom data for monitoring license targets. Therefore they will need to establish rapport with the appropriate national statistical agency maintaining this information.
•
Databases – The availability of a database system for maintaining the statistics is important. It can help verify the accuracy of the data, allow relationships to be established between different data sets, and use the same data set for a different reports.
5.0
Conclusions
Statistics are a critical component for monitoring telecom operator license conditions as well as analysing sector developments and making international comparisons. Indeed, telecom operators can technically lose their license if they do not fulfil the numerical targets specified in licenses. Yet the importance of collecting and disseminating statistics is often overlooked in the haste with which new regulatory authorities are created. Hopefully this shortcoming will be overcome as regulatory authorities recognise the usefulness of the statistics.
Endnotes 1 This chapter is adapted from presentations made at the ITU/OECD “Seminar on monitoring and enforcement of licenses for the NIS Communications Administrations”, 7-9 June 1995, Odessa, Ukraine and the ITU/CITEL “Americas Regional Policy Meeting”, 5-8 December 1995, Montevideo, Uruguay. 2 The views expressed are those of the author and do not necessarily reflect the opinions of the ITU or its Members. 3
The ITU and telecommunication statistics:
The ITU has an active program of collecting, processing and disseminating internationally comparable telecommunication statistics. These activities may be helpful for a regulator’s statistical tasks. In the area of definitions, the ITU has compiled a Telecommunication Indicator Handbook . The guide has benefited from the input of telecommunication regulators, operators and regional and international organizations. It lists and defines the most important statistics for tracking the telecommunication sector and also provides hints on other aspects such as data frequency, data derivations and data provision considerations. The ITU maintains a database of telecommunication statistics containing data for over 200 economies with yearly time series beginning in 1960 (World Telecommunications Indicators database). These data are published in international and regional reports and are also available on diskette or via the Internet. They can assist regulators to make comparisons with other countries and regions and assist in setting targets based on global averages.
288
The ITU may also be able to assist regulators in the design and implementation of national statistical databases. The ITU has experience from implementing its own telecommunication statistics database using low cost personal computers and powerful database management software. 4 The term Public Telecommunication Operator (PTO) refers to organisations that provide telecom services for the public at large. Anyone can subscribe to the network; hence the term public which refers to the access arrangement rather than the ownership of the operator. 5 Another strong reason for regulators to collect telecommunication statistics is that with increasing liberalisation in the telecommunication sector, there is now more than one PTO in many countries. Regulators are best placed to collect and aggregate telecommunication statistics on a national level. 6 It should be noted that the type of statistics treated in the survey relate to those useful for monitoring license obligations and policy rather than operational regulatory statistics such as the number of type approvals, frequency assignments or licenses issued. 7
For a list of concession requirements see Telmex. 1991. 1990 Annual Report. Mexico City.
8
Telef贸nica del Per煤. 1995. Memoria 1994. Lima.
9
See Note 11 to the Consolidated Financial Statements, Tariff Structure and Relationship with the Regulatory Authority (CNT). Telecom Argentina. 1994. Financial Statements at September 30 1994. Buenos Aires. 10
Telecommunication Authority of Singapore (TAS). 1994. Annual Report. Singapore.
289