Monitoring Retail Prices · 2013. 4. 1. · Cell2Cell own Network Peak Cell2Cell own Network Off Peak Cell2Cell own Network Off Off Peak Cell2Cell other Network Peak Cell2Cell other

Monitoring Retail Prices

Dr Christoph Stork

Tuesday, 21 August 12

Need to RegulateFull competition in the telecom sector cannot be expected anywhere anytime soonUntil then, fair competition needs to be established or maintained through sector specific regulation

Price is the ultimate indicator for competitionLower prices expand markets to rural areas and lower income groups...not universal service obligationsMonitoring prices and hence cost to end-user remains a key regulatory function


Regulatory Applications1. Consumer protection, price transparency and effective cost to

consumers. Example Namibia: 29 products, constantly changing promotions, insufficient information on webpage and form retail outletsExample Vodacom South Africa: 37 products varying on every single aspect (peak/off peak, on/of-net, fixed, bundled airtime, handset...)

2. Defining universal service obligations in terms of affordability, alternative approach to the usual geographic access obligations

3. Monitoring impact of regulatory interventions such as licensing, retail and wholesale tariff regulation, number portability...


OECD Mobile Basket Methodology

Pricing products for basket of minutes and SMSOnly Dominant operators

Together 50% market share: 2006 DefinitionLargest 2 operators: 2010 Definition

Cheapest product from dominant operators for country comparison


OECD 2006 Definition


Exercise: Translate annual basket into monthly baskets

Low Medium High Cell2Cell own Network Peak Cell2Cell own Network Off Peak Cell2Cell own Network Off Off Peak Cell2Cell other Network Peak Cell2Cell other Network Off Peak Cell2Cell other Network Off Off Peak Cell2Fixed Peak Cell2Fixed Off Peak Cell2Fixed Off Off Peak SMS Peak ON-NET SMS Peak OFF-NET


Translation into minutesLow Medium High

Cell2Cell own Network Peak Cell2Cell own Network Off Peak Cell2Cell own Network Off Off Peak Cell2Cell other Network Peak Cell2Cell other Network Off Peak Cell2Cell other Network Off Off Peak Cell2Fixed Peak Cell2Fixed Off Peak Cell2Fixed Off Off Peak SMS Peak ON-NET SMS Peak OFF-NET

6.912 15.6 39.483.6 7.488 12.5

3.888 8.112 13.821.782 4.056 7.641.65 3.744 6.923.168 7.8 21.843.168 6.825 16.81.65 3.276 5.321.782 3.549 5.8821.45 32.5 35.7511.55 17.5 19.25


LimitationsMethodology does not take into account the size of a network. If, for example, someone changes from Network A to Network B but most of the contacts that this person usually calls are on Network A, then this person will now make more off-net calls than on-net ones, which are typically more expensive. Free handsets bundled with post-paid contracts can-not be taken into account by this methodology. This needs to be considered when comparing the cost of two usage bundles. The cost difference between two bundles, one with and one without a free handset can be interpreted as the price the consumer pays monthly for the handset.A price comparison does not take into account the quality of service, coverage and roaming agreements.This price comparison is aimed to assist consumers in picking the right packages but it cannot be the only source for a decision.


OECD 2010 Definition


General Basket RulesAt least two largest network operators are covered for each country, based on subscriber numbers. The operators covered should between them have at least 50% of the market share.Discount brands offered by the network operators will only be included when clearly linked with the network operator’s website and brand.Offers shall be typical 2G and 3G services with the main focus on voice.A range of relevant price packages shall be covered, allowing the lowest cost package to be selected for each operator. Only price presented clearly as current on the operator web pages will be considered.The basket methodologies can be used to compare different types of offers such as pre-paid, post-paid or SIM-only plans.Nonrecurring charges are distributed over 3 years.Selective discounts are calculated with the algorithm described in the section on selective discounts above.The value of call and message allowances included in the package will be deducted from the usage element of the basket, up to the value of actual usage.Allowances are deducted in the following order: Selective discounts, most restricted minute allowance, least restricted minute allowance, message allowance, value allowance. Specific volume discounts will be deducted from the total cost at the end.Off-net mobile-to-mobile charges are weighted according to subscriber numbers for each country, where relevant for the pricing of calls.Call costs are calculated using the duration of D + (Unit(seconds)-1)/2, based on basket call duration D given below concerted to seconds and average per second charges. The Unit is the billing unit in seconds.


Basket Methodology Weaknesses

No one is averageBaskets do not reflect the most popular package but the cheapest productThe same basket is used for all operators: off-net/on-net ratio depends on market shareOnly dominant operators - new entrants and small operators are likely to be price challengers


Expanding OECD Methodology to all operators and all products in a country

OECD Basket Methodology

Comparing Countries

Comparing Operators

Comparing Products


Comparing CountriesComparing cheapest product available from

dominant operators cheapest operatormost expensive operator

Comparing the difference between cheapest in country - cheapest from dominant operatorscheapest in country - cheapest from most expensive operator

Benchmarking


GhanaTanzania

KenyaNigeria

Ethiopia*Rwanda

BeninBotswana

TunisiaNamibiaSenegalUgandaZambia

Côte d’IvoireMozambiqueSouth Africa

CameroonBurkina Faso 11.04

8.59

7.64

7.45

7

6.57

6.33

6.12

5.06

5.06

5.04

4.92

3.74

3.74

3.63

3.35

2.93

2.29 GhanaEthiopia*Botswana

TunisiaKenya

SenegalZambiaRwandaUganda

TanzaniaMozambique

BeninSouth Africa

NigeriaCôte d’Ivoire

NamibiaCameroon

Burkina Faso 12.549.3

8.96

8.15

7.76

7.64

7.5

7.45

7.26

6.95

6.87

6.6

6.12

5.93

5.06

5.04

3.74

3.04

Cheapest operator Dominant operatorGhana

Ethiopia*TunisiaKenya

BotswanaRwandaUganda

TanzaniaSenegalNigeriaZambia

MozambiqueBenin

NamibiaCameroon

Côte d’IvoireSouth AfricaBurkina Faso 12.54

10.36

9.54

9.3

8.96

8.81

8.32

8.18

7.76

7.52

7.26

7.04

6.87

6.66

5.93

5.36

3.74

3.15

Most expensive operator

Prepaid OECD Low User basket in US$www.researchICTafrica-data.net


http://www.reehttp://www.ree

Feb 2010 Low OECD user basket for

prepaid

DifferenceDominant vs cheapest in a

country Operators

Years since last

entry

Cheapest Operator for

low user basket

Dominant Operator

Botswana 0% 3 2 Mascom MascomEthiopia* 0% 1 11 ETC ETCMozambique 0% 2 7 mCel mCelSenegal 0% 3 1 Orange OrangeSouth Africa 0% 4 4 MTN MTN & VodacomTunisia 0% 2 8 Tunisiana TunisianaZambia 0% 3 7 MTN ZainCameroon 8% 2 10 Orange MTNUganda 9% 4 2 Uganda Telecom MTNBurkina Faso 12% 3 9 Telcel ZainCôte d’Ivoire 14% 4 3 Moov Orange & MTNGhana 25% 5 3 Tigo MTNBenin 34% 5 3 Libercom MTN & MoovKenya 44% 3 2 Orange Safaricom

Namibia 44% 3 1 Telecom Namibia MTC

Rwanda 46% 3 1 Rwandatel MTNNigeria 53% 7 4 Starcomms GloMobile & MTNTanzania 60% 9 5 Benson VodacomTuesday, 21 August 12

Each country has a different storyNumber of operatorsSequence of market entryMarket sizeMarket sharesMarket segmentationsUser profilesPrice and income elasticity of demandLock-inClub effectsBrand loyalty

Strength of regulatorsPast regulatory interventionsLaws / licencesDisposable incomeGDP growthSubstitutes (public phones, fixed)(Country dummy may be the main explanatory power of panel studies)


Month 66 minutesMonth 66 minutes DoC/ICASA

On-net

Peak

On-net Off-PeakOn-net

Off-off Peak

Off-Net

Peak

Off-Net Off-PeakOff-Net

Off-off Peak

Fixed-line

Peak

Fixed-line Off-PeakFixed-line

Off-off Peak

SMSOn-net

SMSOff-Net

10

10

10

10

10

10

2

2

2

5

5


ExerciseFind out the prices for low medium and high user baskets for the DoC Basket for CellC, MTN, Vodacom and 8taWhich product is the cheapest and how much does it cost?


Documents

Monitoring Retail Prices · 2013. 4. 1. · Cell2Cell own Network Peak Cell2Cell own Network Off Peak Cell2Cell own Network Off Off Peak Cell2Cell other Network Peak Cell2Cell other