Towards Evidence -based Policy : gathering and analysing supply side data

Transcription

1 Towards Evidence -based Policy : gathering and analysing supply side data Young Scholars Seminar, ` Port Louis, Mauritius, 2012 Prof Alison Gillwald Research ICT Africa, Inrastructures Programme University of Cape Town.

2 INSTITUTIONAL ANALYSIS Ministry of Communication develops overall policy for the telecommunications sector from which Department develops strategies Stakeholders/ Civil society/ Consumers, citizens, operators, service providers, academia, unions inputs Parliament Informs initiates laws Policy Formulation Process Ministry & formulates inputs Regulator & Competition Commission In participatory administrative justice systems it is required that the regulator and competition authorities are consulted and that public hearings are held before a policy is gazetted. Once it is a bill Parliament, through a multiparty parliamentary committee, will also hold public hearings before passing the law

3 The Parliaments passes laws based on policies Stakeholders/ Civil society/ Consumers, citizens, operators, service providers, academia, unions inputs Parliament Informs laws Policy Formulation Process initiates Ministry & formulates laws inputs policy directives Regulator & Competition Commission The Minister can provide policy directives to the regulator between major policy reviews.

4 The policy determines the institutional arrangement for the sector - the degree of autonomy of the regulator, competition commission and universal service agency etc. - through the appointment process, funding, and delegation of powers. Civil society (institutional arrangements) Stakeholders/ Consumers, citizens, operators, service providers, academia, unions. inputs Parliament Informs laws Policy Formulation Process initiates Ministry & formulates laws inputs policy directives Regulator Competition Commission Universal Service Agency licensing conduct regulation market failure Market Structure The policy also determines the market structure through requiring the regulator to licence certain categories of operators/service providers and exempting others. Market conduct is in response to the market structure and determines the nature of the regulation.

5 The performance of the sector - competitiveness reflected in access, range choice of services, price and quality - is the outcomes of the policy and legal framework and creates the conditions either conducive to investment in the sector or not. Parliament laws Civil society/ Informs laws conduct Stakeholders/ Consumers, citizens, operators, service providers, academia, unions. inputs Policy Formulation Process initiates Ministry & formulates inputs policy directives Regulator & Competition Commission regulation Market Structure Policy outcomes: competitiveness - choice, prices, quality of infrastructures, services and products

6 Evidence-based policy Telecom Regulatory Enviro (TRE) (stakeholder perception survey) NRA website analysis Indicators Regulatory & Policy Impact Assessment Data-mining and economic modelling - gender, mobile-banking, informal sector usage ICT Sector Performance Review Supply Side Data HH Survey SME Survey Demand Side Data

7 Case Study Namibia

8 International trends and best practice Best practice : Termination rate = cost of termination of efficient operator: Promote economic efficiency Provide incentives to invest in new technologies to reduce costs and expand product offerings Promote competition Promote universal service (through low access/retail prices) if passed on/effectively regulated NGN / IP based: voice traffic will become insignificant...new pricing principles RPNP...hence SKA

9 Mobile termination costs Namibia (N$/ZAR): MTC being the most efficient operator Current MTR MTC total expenditure per minute MTC opex per minute 1,06 1,02 0,97 MTC direct cost and depreciation per minute MTC direct cost per minute 0,34 0,48 MTC 50% of dircet cost and depriciation per minute 0,24

10 Model 1: Immediate N$0.30 Model 2: Symmetric glide path to N$0.30 that started 1 July 2006 Model 3: Symmetric glide path to N$0.30 starting 1 July 2009 Model 4: Asymmetric glide path to N$0.30 starting 1 July 2009 MTC model: reduction to N$0.60 until 2011 CellOne Telecom Namibia MTC 2nd choice: if accompanied by other regulatory interventions 2nd choice: if accompanied by other regulatory interventions Rejected: sees no reason to wait to remove market distorting factors 1st choice: because of current traffic imbalance Rejected: same as for Model 3 2nd choice: Removing distortionary factors immediately but request higher transit charge for outgoing international calls 1st choice: Compensates for market distortions of past years Rejected: only gradually removes market distortions and disadvantage TN and consumers unjustifiably for two years longer Rejected: only gradually removes market distortions and disadvantage TN and consumers unjustifiably for two years longer Rejected: same as for Model 3 No comment No comment No comment No comment Otherwise: Drop in EBITDA margin to 37% because of having to compete on a level playing field

11 After several consultations with all operators: Industry consensus Immediate drop of termination rates to N$0.60 to catch up with the region and international developments Glide path to the estimated cost of an efficient operator + 25% mark-up, ie NS0.30 Immediate fixed-mobile convergence of termination rates It gives time to MTC and CellOne to conduct LRIC studies and contest the results

12 The best outcome for Namibia Fair competition among telecommunication operators Lower consumer prices Better services Maximum job creation Highest income for government through company tax and individual income tax Reasonable returns for shareholders / investors (including government)

13 Termination Rates US cents 14,40 MTR FTR 9,00 8,20 8,20 6,80 6,80 5,50 5,50 4,10 4,10 Jan 2009 July 2009 Jan 2010 July 2010 Jan 2011

14 Overall TRE 2009 Score (-2 = very inefficient, +2=very efficient) Overall Comparative TRE 2011/2012 Rwanda Tanzania Kenya Ghana Nigeria Uganda Botswana Cameroon Mozambique South Africa Ethiopia

15 Market Entry Access to scarse resources Nigeria Uganda Kenya Rwanda Tanzania Botswana Ghana South Africa Mozambique Cameroon Ethiopia Rwanda Tanzania Ghana Kenya Botswana Mozambique Nigeria Cameroon Uganda South Africa Ethiopia

16 USO Regulation of Quality of Service Ethiopia Rwanda Tanzania Ghana Cameroon Kenya Nigeria Mozambique Uganda Botswana South Africa Rwanda Tanzania Botswana Cameroon Ghana Kenya Nigeria Uganda Mozambique Ethiopia South Africa

17 Interconnection Tariff regulation Rwanda Kenya Tanzania Mozambique Ghana Nigeria Botswana Cameroon Uganda South Africa Ethiopia Rwanda Kenya Nigeria Ghana Tanzania Ethiopia Uganda South Africa Mozambique Cameroon Botswana

18 MACRO ECONOMIC ANALYSIS

19 Macro economic indicators Census & Household survey number of users spend National Accounts Contribution to GDP - Value add Labour contribution Contribution to imports & exports Contribution to tax base

20 ICT Development Index (ITU) COUNTRY Mauritius Seychelles Tunisia Morocco Egypt South Africa RANK 2008 RANK GDP per capita Uses composite of 11 indicators to determine the level and evolution over time of the ICT developments in countries and in relative to other countries Clustered into 3 areas: ICT Access reflecting the level of networked infrastructure and access to ICTs ICT Use reflecting the level of use of ICTs in the society ICT skills reflecting the ICT capability and skills required to use ICT effectively

21 Network Readiness Index (WEF) Sweden Singapore Finland Denmark Norway United Kingdom South Korea Tunisia Mauritius India South Africa Source: Global Technology Report

22 E-Government Index Korea Singapore Australia Malaysia Seychelles Mauritius South Africa Tunisia India

23 Telecom investment & economic growth! Correlations between telecom penetration and growth - fixed, mobile, broadband.! Causality?! Network effects! World Bank 2010 study - 10% increase in broadband penetration accelerates economic growth by 1.38% point in developing countries, more than in developed economies South Africa 5,17 6,38 7, Senegal 6,84 7,81 8,96 9,75.. Brazil 3,37 4,15 4,62 4,61.. China 3,30 3,19 3,06 2,88.. India 2,28 2,42 2, Kenya 4,34 4,74 4,05 6,05 6,32 Turkey 2,78 2,60 2,27 2,51 2,27 Tunisia 4,08 4,28 4,17 4,20 4,33 Korea, Rep. 4,62 4,67 4,70 4,65 4,72 Telecommunications revenue as % of GDP Source: World Bank, IC4D database 2010

24 Comparative investment! in infrastructure Gaps in South African data reflect its failure to submit data over several years to ITU for global indicator reports Kenya 9,13 10,47 23,28 12,72 18,93 21,56 16,60 19,21 Korea, Rep. of 134,55 193,69 108,01 112,32 117,89 137,70 141,17 128,65 Senegal 6,53 10,41-8,61 13,28 15,85 17,37 - South Africa 31,10 15,74 19, Tunisia 22,00 31,26 41,20 41,56 26,83 29,55 22,35 29,32 Total annual CAPEX in telecommunications/population (in USD, including fixed, mobile and Internet services. It should include all operators) Source: ITU 2010, WB 2010.

25 SECTOR ANALYSIS

26 Number of fixed lines as a percentage of the population (Source: ITU) Tunisia South Africa Botswana Namibia Senegal Kenya Cameroon Benin Cote d'ivoire Ghana Ethiopia Burkina Faso Nigeria Uganda Zambia Tanzania Mozambique Rwanda ,09 12,34 12,3 8,97 8,68 8,43 7,28 6,93 6,85 6,61 6,63 6,66 2,02 2,3 2,75 1,68 1,68 0,94 1,36 2,27 2,75 1,38 1,48 1,51 1,88 1,46 1,46 0,12 0,39 0,22 1,13 1,13 1,1 0,95 0,95 0,87 0,87 0,96 0,66 0,54 0,72 0,98 0,73 0,71 0,69 0,29 0,4 0,39 0,35 0,36 0,38 0,17 0,32 0,37

27 Performance! Fixed-lines Access Tunisia 12,65 12,18 12,45 South Africa 9,22 8,91 8,62 Botswana 7,24 7,41 7,4 Namibia 6,61 6,57 6,54! Less than 20% households have a fixed-line telephone! Large scale disconnection of subscribers unable to afford services Senegal 2,26 1,95 2,22! 60% of users are not interested in a fixed-line service even Kenya 1,23 1,67 1,67 if prices were to come down Cameroon 1,01 1,34 1,66! Negative consequences of privatisation: Benin 1,32 1,19 1,42! Sequencing - absence of competition Cote d'ivoire 1,23 1,73 1,34! Maximisation of state asset came at some cost for Ghana 1,65 0,62 1,12 development of a competitive sector. Ethiopia Burkina Faso 1,12 0,83 1,11 0,95 1,1 1,06! Anti-competitive practises chilling effect on competitive sector.over the last 10 years, subscribers had been Nigeria Uganda 1,07 0,54 0,86 0,53 0,92 0,71 brought onto the fixed line market with the universal access targets set by Government as part of the Zambia 0,75 0,72 0,7 privatisation. To-date they are unable to afford the service Tanzania 0,4 0,29 0,4! Policy & Regulatory bottlenecks: Mozambique 0,36 0,35 0,36 Rwanda 0,24 0,17 0,33 Number of fixed lines as a percentage of the population (Source: ITU 2010) The decline in Telkom s fixed-line network has severe implications for the development of widespread affordable access to a comprehensive information infrastructure..! Delayed market entry, licensing delays, absence of competition enabling provisions in policy like LLU, absence of short term asymmetrical rates

28 Mobile SIM cards as a percentage of the population (source ITU) Botswana Tunisia South Africa Ghana Cote d'ivoire Benin Namibia Senegal Kenya Nigeria Tanzania Cameroon Zambia Uganda Mozambique Rwanda Burkina Faso Ethiopia ,10 60,86 77,34 96,12 117,76 73,60 77,89 84,59 94,96 106,04 81,54 86,02 90,60 92,67 100,48 23,30 33,25 49,55 63,38 71,49 20,70 37,11 50,74 63,33 76,13 13,00 24,45 41,85 56,33 79,94 29,73 38,31 49,39 56,05 67,21 25,75 30,53 44,13 55,06 67,11 19,96 30,06 42,06 48,65 61,63 22,40 27,35 41,66 47,24 55,10 14,37 20,16 30,62 39,94 46,80 17,20 24,31 32,28 37,89 44,07 13,84 21,43 28,04 34,07 41,62 6,77 13,69 27,02 28,69 38,38 11,00 14,08 19,68 26,08 30,88 3,41 6,72 13,61 24,30 33,40 7,10 10,94 16,76 20,94 34,66 1,10 1,54 2,42 4,89 8,26

29 Performance! Mobile Access! Mobile penetration rates continue to be impressive! But in 2009 Tunisia and Botswana surpassed SA in terms of SIMs as a percentage of population! Supply-side data: penetration rate of 100%! Demand-side data: penetration rate of 62%! Significant number of multiple SIMs (1.13 active SIMs per user) GDP per capita levels! high prices and control costs by not making off-net calls! Penetration levels for poorer people are still at only half the population! Majority of mobile phones in urban areas Mobile phone ownership by geographic area

30 Broadband Internet subscriptions in 2009 (source ITU) Internet Internet users Fixed broadband Mobile cellular Subscriptions in 2009 per 100 Internet subscriptions in subscriptions with in 2009 per 100 inhabitants 2009 broadband access 2009 inhabitants per 100 population Total per 100 population Total Tunisia 5,1 34, 07 3, South Africa Not available 8, 82 0, , Botswana Not available 6, 15 0, , Senegal 0,47 7, 36 0, Ghana 0,38 5, 44 0, , Rwanda 1,47 4, 50 0, , Zambia Not available 6, 31 0, , Mozambique 0,059 2, 68 0, , Nigeria 0,58 28, 43 0, , Cote d'ivoire Not available 4, 59 0, Burkina Faso Not available 1, 13 0, Kenya 2,11 10, 04 0, , Benin 0,21 2, 24 0, Namibia Not available 5, 87 0,02 430** 1, Uganda 0,91 9, 78 0, , Tanzania Not available 1, * 6,439* 1, Cameroon 0,13 3, 84 0, , Ethiopia 0,58 0, 54 0, , Tanzania ITU data for 2008 * Telecom Namibia had 6000 ADSL subscribers in November 2009

31 Case Study South Africa

32 Internet: still a significant gap between the richest countries and all the rest, which have a mix of largercountry stars (VietNam, China) that punch above their category averages, and dogs (South Africa, India) that fall well below. Global ICT Statistics on Internet Usage, Mobile, Broadband: (17 September 2010)

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34 Total Cost of Ownership in Africa (US$) adapted from Nokia (2007) Total(Cost(of(Ownership( Nokia(Average(( African(Average( La.n(American(Average( Asian(Average( 11" 15" 15" 20" 23" 23" 25" 25" 35" 38" 39" 40" 42" 42" 43" 43" 45" 50" 52" 54" 56" 58" 59" 60" 64" 72" 89" Madagascar( Guinea( Mauri.us( Ghana( Sudan( Ethiopia( Egypt( Kenya( Uganda( Tunisia( Algeria( Namibia( Zambia( Botswana( Senegal( Tanzania( Nigeria( Mauritania( Congo( Lesotho( Chad( South(Africa( Côte(d'Ivoire( Swaziland( Angola( Cameroon( Morocco(

35 Mobile termination rates versus cost of usage (source TMG2010) Cost of OECD basket in US cents Mobile Termination Rates 2009 in US cents Minutes of use Mobile Termination Rates 2009 in US cents

36 SOUTH AFRICA WHOLE SALE & RETAIL PRICING STUDY

37 Mobile termination rates in US cents (FX = average 2010) Senegal Kenya Mauritius Ghana Namibia Zambia Tunisia wanda Nigeria Tanzania Mozambique Uganda Botswana Côte d Ivoire Burkina Faso South Africa Benin 2,25 2,69 2,82 3,45 4,09 5,90 5,90 7,00 11,31 12,30 Cameroon 16,00 7,46 7,49 7,80 8,23 8,53 8,93 9,92

38 Other BDFM titles Quick Links Site Search Log in Register Subscribe to E-Edition Johannesburg Hi 20 C Low 14 C Pretoria Hi 23 C Low 16 C Bloemfontein Hi 27 C Low 14 C View more cities View 7 day forecast Home Opinion & Analysis Companies Markets Economy & Business Mining Management Sport Lifestyle Tech National News World News Business Education Blogs Mobile Advertising Weather News Headlines Euro crisis of survival as EU mulls Irish lifeline Law firms in Tools ALLISON GILLWALD: Cellphone rates Lower termination fees may spark telecoms turnaround Published: 2010/11/17 07:36:18 AM Ghana, Kenya, Tanzania and Uganda have already seen increased usage with more affordable prices MUCH has been made of Vodacom s R800m loss of revenue in the six months to September, owing to the reduction in termination rates from R1,25 to 89c in March, reported in its interim results last week. As if to confirm the dire warnings by MTN and Vodacom following the decision by the Independent Communications Authority of SA (Icasa) late last month to cut further the rates of dominant operators, this loss of revenue has been used to flag the threat of a future loss of earnings that would have been received from terminating the calls of their competitors on their networks. Currencies Commodities JSE Today RAND/US$ % ZAR/GBP % RAND/EURO % ZAR/AUD CALC % EUR/USD CALC % GBP/USD % JSE data provided by INET. Markets Data delayed by 15 minutes. Find Share From a policy and regulatory perspective, these results demonstrate a far more positive outcome than was widely reported in the media. Despite the loss of earnings from interconnection an expected outcome of the introduction of regulated cost-based pricing following years of extractive pricing overall revenue and operating profits have continued to grow. It is true that this was at a slower rate, with Vodacom s earnings before interest, tax, depreciation and amortisation (ebitda) increasing by only 7% in the first six months of this year, compared with 10,5% for the whole of last year. But ebitda margins remain constant at a healthy 33,2% over the past three years, and Vodacom s share price is constantly on the rise. Historically, prices have been exceptional as a result of unregulated pricing in a duopoly market. In the five years before the impending entry of the third cellphone operator, Vodacom and MTN increased their termination rates by 500%, where they have remained since 2002, despite world prices dropping to a fraction of this. Cost-based termination rates limit these pricing distortions in the market and reduce barriers to fair competition. The transfer between operators caused by above-cost termination rates is generally to the disadvantage of fixed-line operators, small cellphone operators and new entrants to the markets, while it is to the advantage of the dominant cellphone operators. While the focus has been on the loss of revenue, reduced termination rates of course also decrease the costs of termination for operators. This produces efficiencies in the network that can reduce end-user prices and offset losses in interconnection revenue through increased demand and usage, and the more productive use of the network. Management(Tip!When!the!job!market!picks!up,!the!first!to!leave!are often! a! company s! most! valuable! employees. Unfortunately,! you! may! be! inadvertently!encouraging these! future! leaders! to! say! their! goodbyes! by!treating them!as!cogs!in!a!wheel!rather!than!the!individuals!that they!are.!!!!!,(harvard(business(review(and(hbr.org

39 R E S E A R C H I C T A F R I C A P O L I C Y B R I E F N O. 1 Africa Prepaid Mobile Price Index 2012: South Africa Among 46 African countries studied, South Africa ranks poorly for prepaid mobile telephony affordability. Ranked 30th out of 46 African states, South Africa is now far behind countries where the regulator, has enabled competition by enforcing cost-based mobile termination rates. The resulting competition has in many cases driven down prices for consumers. Not long ago, South Africa and Namibia shared the same mobile termination rates and had similar end-user prices. Today, Namibia enjoys amongst the cheapest mobile prepaid prices in Africa, as a result of the slashing of its termination rates to close-to-cost, which pressured the incumbents towards cost-based pricing, thereby increasing demand and remaining highly profitable. RIA Policy Brief No 1 March 2012 SA ranks 30th Mobile prices are cheaper in over 30 African countries than they are in South Africa with prices in Kenya, Mauritius, Egypt and Namibia only a fraction of the price of even the lowest priced services in South Africa. Neighbouring countries several times cheaper South African prepaid mobile prices are three times more expensive than in Namibia. Lack of pass-through of price reductions to endusers In South Africa, even the modest reductions imposed on termination rates have generally not been passed on to end-users. Cell C and 8ta Two relatively late market entrants, Cell C and the most recent entrant 8ta, have attempted to introduce cheaper mobile prepaid products, but these products have not forced down the general price level. SA operators do not compete for price The dominant mobile operators, Vodacom and MTN, have been able to withstand the pricing pressure from price cuts by later entrants, and all operator s prices have settled around the levels set by the dominant operators.

40 8ta 8ta struggles in in competitive market lifts lid on insurance pla HOME IN-DEPTH NEWS OPINION PEOPLE PODCASTS REVIEWS START-UPS WE About Advertise Contact Home» Search results for Research ICT Africa pricing Busting myths about SA s high mobile prices The reaction of various interest groups to a year-long study by Research ICT Africa into prepaid mobile prices across the continent and SA s relatively poor showing in it are perhaps not surprising. They nevertheless prompt clarification and hopefully further debate before the issue of the high price of communications in SA is again swept How ANC is squandering SA s digital future 20 April Comments Read More The release last week of Research ICT Africa s report on mobile phone pricing in Africa has provoked a little controversy. The facts are quite damning. SA has some of the highest mobile costs on the continent. This is odd given the country s comparative wealth and infrastructural advantages. By rights, SA ought to have the cheapest phone 19 April Comments Read More Coverage in Business Day, Mail & Guardian (weekly), Tech Central, IOL, and News 24. Icasa tackles critics over telecoms prices The Independent Communications Authority of SA (Icasa) has hit back at a recent report by Research ICT Africa, which criticised the authority over higher retail and wholesale mobile call rates, saying the report fails to consider various costs that affect SA operators. SA s prices are comparatively high; the authority has no 16 April Comments Read More SA mobile prices among the highest in Africa A new research study has found that SA has some of the least affordable prepaid mobile tariffs on the continent and is falling behind many of its neighbours because of high wholesale call rates between operators. The findings are contained in a Research ICT Africa policy brief, with research conducted over the past year

41 Minster of Comm Budget Vote June 2012 Minister of Communications ask for transparency in mobile pricing Head of Parliamentary Portfolio Committee on Communication (ANC) cites Policy Brief in opening response and announces Parliament to hold public hearing on pricing in June Official Opposition Party response draws verbatim on brief request on challenges within sector. Opposition Party (COPE) extensively quotes RIA SA Sector Performance Review. Operators call for off -the-record meeting.

42 Cheapest product available for each operator for OECD Low user baseket in ZAR 100 8ta Cell C MTN South Africa Vodacom South Africa Virgin Mobile Jan 11 Mar 11 May 11 Jul 11 Sept 11 Nov 11 Jan 12 Mar 12 May 12

43 Ranking out of 46 African Countries 30 Cheapest prepaid product from Dominant Operator Cheapest prepaid product in country January 2012 May 2012

44 This research is made possible with the support of IDRC, Google and OSI. See