Monitoring Retail Prices

Transcription

1 Monitoring Retail Prices Dr Christoph Stork Tuesday, 21 August 12

2 Need to Regulate Full competition in the telecom sector cannot be expected anywhere anytime soon Until then, fair competition needs to be established or maintained through sector specific regulation Price is the ultimate indicator for competition Lower prices expand markets to rural areas and lower income groups...not universal service obligations Monitoring prices and hence cost to end-user remains a key regulatory function Tuesday, 21 August 12

3 Regulatory Applications 1. Consumer protection, price transparency and effective cost to consumers. Example Namibia: 29 products, constantly changing promotions, insufficient information on webpage and form retail outlets Example 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... Tuesday, 21 August 12

4 OECD Mobile Basket Methodology Pricing products for basket of minutes and SMS Only Dominant operators Together 50% market share: 2006 Definition Largest 2 operators: 2010 Definition Cheapest product from dominant operators for country comparison Tuesday, 21 August 12

5 OECD 2006 Definition

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8 Exercise: Translate annual basket into monthly baskets 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 Low Medium High Tuesday, 21 August 12

9 Translation into minutes 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 Low Medium High Tuesday, 21 August 12

10 Limitations Methodology 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 con- sumer 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. Tuesday, 21 August 12

11 OECD 2010 Definition

12 General Basket Rules At 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. Tuesday, 21 August 12

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15 Basket Methodology Weaknesses No one is average Baskets do not reflect the most popular package but the cheapest product The same basket is used for all operators: offnet/on-net ratio depends on market share Only dominant operators - new entrants and small operators are likely to be price challengers Tuesday, 21 August 12

16 Expanding OECD Methodology to all operators and all products in a country Comparing Countries OECD Basket Methodology Comparing Operators Comparing Products Tuesday, 21 August 12

17 Comparing Countries Comparing cheapest product available from dominant operators cheapest operator most expensive operator Comparing the difference between cheapest in country - cheapest from dominant operators cheapest in country - cheapest from most expensive operator Benchmarking Tuesday, 21 August 12

18 Prepaid OECD Low User basket in US$ Cheapest operator Dominant operator Most expensive operator Ghana 2.29 Ghana 3.04 Ghana 3.15 Tanzania Kenya Nigeria Ethiopia* Rwanda Benin Botswana Tunisia Namibia Senegal Uganda Zambia Côte d Ivoire Mozambique South Africa Cameroon Ethiopia* Botswana Tunisia Kenya Senegal Zambia Rwanda Uganda Tanzania Mozambique Benin South Africa Nigeria Côte d Ivoire Namibia Cameroon Ethiopia* Tunisia Kenya Botswana Rwanda Uganda Tanzania Senegal Nigeria Zambia Mozambique Benin Namibia Cameroon Côte d Ivoire South Africa Burkina Faso Burkina Faso 12.54Burkina Faso Tuesday, 21 August 12

19 Feb 2010 Low OECD user basket for prepaid Difference Dominant vs cheapest in a country Operators Years since last entry Cheapest Operator for low user basket Dominant Operator Botswana 0% 3 2 Mascom Mascom Ethiopia* 0% 1 11 ETC ETC Mozambique 0% 2 7 mcel mcel Senegal 0% 3 1 Orange Orange South Africa 0% 4 4 MTN MTN & Vodacom Tunisia 0% 2 8 Tunisiana Tunisiana Zambia 0% 3 7 MTN Zain Cameroon 8% 2 10 Orange MTN Uganda 9% 4 2 Uganda Telecom MTN Burkina Faso 12% 3 9 Telcel Zain Côte d Ivoire 14% 4 3 Moov Orange & MTN Ghana 25% 5 3 Tigo MTN Benin 34% 5 3 Libercom MTN & Moov Kenya 44% 3 2 Orange Safaricom Namibia 44% 3 1 Telecom Namibia MTC Rwanda 46% 3 1 Rwandatel MTN Nigeria 53% 7 4 Starcomms GloMobile & MTN Tanzania 60% 9 5 Benson Vodacom Tuesday, 21 August 12

20 Each country has a different story Number of operators Sequence of market entry Market size Market shares Market segmentations User profiles Price and income elasticity of demand Lock-in Club effects Brand loyalty Strength of regulators Past regulatory interventions Laws / licences Disposable income GDP growth Substitutes (public phones, fixed) (Country dummy may be the main explanatory power of panel studies) Tuesday, 21 August 12

21 Month 66 minutes Peak DoC/ICASA 10 On-net Off-Net Fixed-line SMS Off-Peak Off-off Peak Peak Off-Peak Off-off Peak Peak Off-Peak Off-off Peak On-net Off-Net Tuesday, 21 August 12

22 Exercise Find out the prices for low medium and high user baskets for the DoC Basket for CellC, MTN, Vodacom and 8ta Which product is the cheapest and how much does it cost? Tuesday, 21 August 12

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