Diagnostic Tool User s Manual

Transcription

1 Diagnostic Tool User s Manual February 2016 This guide is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of Research ICT Solutions and do not necessarily reflect the views of USAID or the United States Government.

2 Table of Contents Introduction 1 Data Sources and Benchmarking 1 What is the mobile ecosystem? 2 What is Mobile Integration? 3 How to use the tool: General Functionality 4 Country selection 4 Viewing Data 5 Traffic light typology 5 Analytical Process 6 Mobile Ecosystem Indicator Definitions & Uses 8 Component 1: Affordability 8 Mobile prepaid voice basket (USD) 8 Mobile prepaid basket % of GDP/capita per month 8 Mobile prepaid 1GB broadband basket (USD) 9 Cost of 1GB basket as share of GDP per capita per month 9 Effective price (USD) 9 New affordability indicators 10 Component 2: Access 10 Active SIM cards per 100 inhabitants 10 Individual internet users per 100 inhabitants 11 % of mobile owners with smartphones 11 Component 3: Usage 11 Average revenue per user in USD (Blended ARPU) 12 Highest minutes of use (MOU) per connection 12 Data traffic per connection (highest among operators) 13 Facebook users per 100 inhabitants 13 Component 4: Infrastructure 13 International bandwidth per user (Kbps) 13 % Population covered by mobile signal 14 % Population covered by 3G signal 14 Connections per number of Base stations 14 Investment per subscribers in USD 15 Component 5: Competition 15 Herfindahl-Hirschman Index 15 Number of Mobile Operators (excluding MVNO) 16 Market share of largest mobile operators 16 Highest MNO EBITDA Margin in country 16 Interconnection: Mobile Termination Rates (US ) 17 Mobile-specific taxes / TCMO 17 Mobile Integration Indicator Definitions & Uses 18 Mobiles for Development Programming 18 Number of smartphone users 20 Number of Facebook users 20 Number of mobile money agents 20 Number of active mobile money users 20 Cost in US cents for 10,000 bulk SMS 20

3 USAID: User Manual 1 Feb 2016 Case study: Namibia 21 Affordability 21 Access 22 Usage 22 Infrastructure 23 Competition 23 Mobile Integration 24 Conclusion 24 Appendix 1: Forthcoming Affordability Indicators 26 Prepaid Smartphone Basket 26 Prepaid 1GB basket 27 Bundled Value Index 27 Appendix 2: Data sources 28 Appendix 3: Importance of Benchmark selection 30

4 Acronyms & Definitions Acronym 2.5G 2G 3G ADSL Base Station Bitstream DSL GPRS GSMA HSDPA HSPA IVR IP ISP ITU Kbps LTE M2M Mbps MTR Description 2.5G ("second and a half generation") is used to describe 2G-systems that have implemented a packet-switched domain in addition to the circuit-switched domain. It does not necessarily provide faster services because bundling of timeslots is used for circuit-switched data services (HSCSD) as well. The first major step in the evolution of GSM networks to 3G occurred with the introduction of General Packet Radio Service (GPRS). 2G is short for second-generation wireless telephone technology. Second generation 2G cellular telecom networks were commercially launched in Three primary benefits of 2G networks over their predecessors were that phone conversations were digitally encrypted; 2G systems were significantly more efficient on the spectrum allowing for far greater mobile phone penetration levels; and 2G introduced data services for mobile, starting with SMS text messages. 3G telecommunication networks support services that provide an information transfer rate of at least 200 kbit/s. Later 3G releases, often denoted 3.5G and 3.75G, also provide mobile broadband access of several Mbit/s to smartphones and mobile modems in laptop computers. This ensures it can be applied to wireless voice telephony, mobile Internet access, fixed wireless Internet access, video calls and mobile TV technologies. Asymmetric Digital Subscriber Line A land station in the land mobile service. For example, in cellular and personal communications uses, each cell has its own base station; each base station is interconnected with other base stations and with the public switched network. A sequence of bits which represent a stream of data transmitted continuously over a communication path Digital Subscriber Line General Packet Radio Service Groupe Speciale Mobile Assocation High-Speed Downlink Packet Access High Speed Packet Access Interactive voice services Internet Protocol Internet Service Provider International Telecommunication Union Kilobits per second (should be kbit/s) Long Term Evolution Machine to Machine (M2M) refers to technologies that allow wireless systems to communicate with other devices. M2M is increasingly used in consumer appliances to monitor usage and/or faults. Megabits per second Mobile Termination Rate

5 Acronym OECD OTT QoS RIA SMS USSD VoIP WiMAX Organisation for Economic Cooperation and Development Over the Top refers to delivery of audio, video, and other media over the Internet without the involvement of a networked operator (i.e. an operator with cable or wireless or other form of physical infrastructure) in the control or distribution of the content. Examples of OTT services include WhatsApp, Skype, FaceTime. Quality of Service. QoS is becoming an important indicator, especially for newer entrants in the mobile market. Research ICT Africa Short Message System USSD stands for Unstructured Supplementary Service Data. USSD is a protocol used by GSM cellular networks to communicate with the MNO servers. The most common usage of USSD is for mobile money services. Unlike SMSes, USSD messages create a real-time connection to the server during a session that remains open, allowing a two-way exchange of a sequence of data. Voice over Internet Protocol A technical standard for fixed wireless Description "2

6 Introduction The Diagnostic Tool for USAID staff and partners is comprised of an online platform providing key statistics on national mobile ecosystems as well as comparisons between countries and regions. This User Manual, a complement to the online platform, is designed to provide users with: general instructions on how to navigate the website, an overview of website functionalities, and tips and best practices for interpreting the data presented. Together, the online platform and this manual seek to assist the user to find answers to two primary questions: How to invest in and strengthen the building blocks of a robust mobile ecosystem where such fundamentals are not in place. How to integrate mobile technology into programs as a way to strengthen or accelerate development outcomes. This manual provides a context for the high-level or macro perspective of the health of the mobile ecosystem and the granular or detailed perspective of how to integrate mobiles in aid projects. A USAID program officer may use the Diagnostic Tool to assess how mobile technology may be integrated into USAID programming or, at a policy level, what steps may need to be taken to create a conducive mobile ecosystem. The tool provides the user with the ability to assess a dynamic and complex environment reasonably quickly and to build a justification for whether or not one wants to use mobile technology in a program and/or identify measures to improve the ecosystem. Data Sources and Benchmarking The Diagnostic Tool pulls data from a variety of internationally renowned sources as well as data that is collected and analyzed by Research ICT Solutions. Table 1: Data sources Organisation Description URL GSM Association (GSMA) International Telecommunication Union (ITU) Facebook Telecommunications Management Group (TMG) The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 250 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organisations in adjacent industry sectors. ITU is the United Nations specialized agency for information and communication technologies ICTs. The ITU allocates global radio spectrum and satellite orbits, technical standards and supports increased access to underserved communities around the world. Facebook is a corporation and online social networking service. TMG is a consulting firm, based in Washington D.C., that has been operational since It provides strategic, managerial and technical advice to telecommunications entities, governments and international agencies e.com m "1

7 Organisation Description URL International Monetary Fund (IMF) Clickatell The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Founded in 2000, Clickatell is a leader in global mobile messaging, helping businesses connect and interact with their customers. The tool presents these indicators in a format intended to lead the user to interpret the data in a meaningful way. Rather than presenting the user with individual pieces of data, the tool allows the user to benchmark components of the ecosystem against other countries that are relevant for the country under consideration. The user is able to choose and vary the benchmarked countries to identify potential intervention points. The Diagnostic Tool uses benchmarking of individual indicators and various carefully constructed components to provide more analytical power than indices. It requires the user to make a choice of countries to benchmark against and, depending upon the selection of countries, the comparison of an indicator may change from favorable to unfavorable. It is, however, this context that helps to determine interventions points for policy makers and regulators. Benchmarking is a process of identifying ways to improve performance and integral to this process is identifying the cause of a country s performance. It is not important where in a global ranking a country features but what other countries that faced a similar problem have done or where they have failed. Both success and failure is of equal importance for the analytical process. What is the mobile ecosystem? The mobile ecosystem is conceptualized as an interconnected, multilayered ecosystem of communications networks, services, applications, and users. 1 An ecosystem approach enables the identification of linkages between different elements in the system, and reveals how the effective functioning of one part of the system is dependent on the successful functioning of other parts. 2 The environment created by each element of the ecosystem and the relationships between these elements, determines how conducive the overall environment is to investment that is needed to drive the growth of the sector. It explains whether people have access to, and can afford, mobile technology and supports the process of determining what interventions are likely to succeed, given the composition of the ecosystem. The Diagnostic tool captures the mobile ecosystem by five components or building blocks: Affordability Mobile Integration Infrastructure Usage Access Affordability: In the ecosystem diagram in Figure 1, Affordability is larger than the other components because price is a key indicator of the level of Competition Figure 1: Mobile Ecosystem 1 Kim, Y. Kelly, T. Raja, S Building Broadband: Strategies for the Developing World, available at infodev-files/resource/infodevdocuments_1045.pdf 2 Research ICT Africa, How Ordinary People Got Connected Despite the Connected People, available at itunes.apple.com/ca/book/how-ordinary-people-got-connected/id ?mt=11 "2

8 competition in the sector. The price of mobile voice and data services are the starting point for any assessment of the health of a country s ecosystem. If mobile voice and data prices are high in comparison to the benchmarked countries, then the causes of high prices (and therefore the lack of competition) need to be assessed. In most countries, the mobile voice market is maturing and prices have been in steady decline. In comparison, mobile data is a rapidly growing market and prices are far more volatile. In countries where both voice and data prices are high, there are usually significant obstacles to the successful implementation of programs using mobile. Access: The category of access is defined by a set of indicators capturing the prevalence of mobile connection devices as well as internet use. Access is linked to affordability because lower prices mean greater access and more usage. Usage: Usage measures the consumption of mobile services such as voice and internet. Content is a difficult indicator to assess due to the global nature of the internet: content is consumed from around the world. However, local content remains a critical indicator of usage. The Diagnostic tool measures local content by the number Facebook users since Facebook is locally produced content. Infrastructure: Infrastructure requires investment and fair competition provides an incentive for mobile operators to invest in infrastructure. The Diagnostic Tool measures both the extent and quality of infrastructure available in a country. The extent of infrastructure is measured by network coverage - how much of the population has access to mobile signal. The quality of infrastructure is measured by the number of subscribers per Base Station (BTS). The level of investment is further expressed as investment per subscriber. Competition: The competition component impacts upon - and is impacted by - the other components since it is at the heart of any ecosystem outcome. Fair competition in the sector leads to reasonable returns on investment for operators and affordable prices for end users. Competition is evaluated by a concentration measure and wholesale prices such as mobile termination rates. Various implications follow based on the results of the analysis of the mobile ecosystem. For example, if mobile prices are too high the cause is often insufficient competition. Competitive bottle necks include high market concentration, monopoly control over essential facilities and high, above cost, mobile termination rates (MTRs). 3 Retail prices could be reduced by safeguarding fair competition through lowering MTRs to the cost of an efficient operator. The consequence would be higher usage and greater mobile penetration because more people can afford to use mobile phones. A healthy mobile ecosystem means that mobiles can be deployed more effectively for social and economic development. What is Mobile Integration? The five building blocks of the mobile ecosystem discussed above are combined to provide insight into the potential application of mobile technology to development (i.e. mobile integration). For example, is there an opportunity in the country to deliver services and to receive payment via mobile money? Is smartphone penetration sufficiently advanced for sophisticated mobile applications? Or should the focus remain on basic forms of communication such as SMS or USSD that target basic and feature phones? The indicators in the Mobile Integration section focuses on Facebook, mobile money and smart phones and the cost of delivery of basic messages (such as SMS). Facebook is a proxy for local 3 MTRs are the wholesale rates that mobile operators charge each other to terminate calls from another network "3

9 content creation: Facebook users create their content in their own language, so measuring Facebook penetration is a useful measure of activity on the web. Mobile money is a proxy measure for financial inclusion: the greater the number of mobile money users, the higher the financial inclusion. Smart phone penetration is important because the range of services is massively expanded with smartphones compared to basic or feature phones. How to use the tool: General Functionality This section provides a brief overview of the basic elements of the online platform and highlights several of the graphical user interface (GUI) features. The section walks the user through how to select the country of interest and comparison countries; explains how to interpret the traffic light typology used to show comparisons; and provides a brief demonstration of an analytical process that can be used to assess the overall mobile ecosystem. This manual will be updated routinely as new features and indicators are added to the website. Users are encouraged to submit additional suggestions and comments through the Comments/ Help button at the top right of the entry page. The recommended browser for viewing the maccess Diagnostic Tool is Safari, Firefox or Google Chrome. Country selection Upon logging into the system, the first step for the user is to select the country of interest and any desired comparison regions or countries. To do so, the user should click the orange box titled Benchmark Selection at the top right of the screen. This will reveal the fields for country and comparison selections as shown in the Figure below. A country may be benchmarked against individually selected countries, against a region or a subregion. The user is required to first select the country of interest and then choose the benchmark regions or countries. "4

10 Figure 3: Benchmark Selection The user can choose to compare the selected country against a region, a sub-region, or another single country. Selecting a benchmark region, such as Africa, the Americas, Asia, Europe and Oceania, provides a general picture of where the selected country stands in comparison to the average of all the countries in the selected region. A more accurate comparison is generated by comparing the selected country against a sub-region, such as Mozambique against Southern Africa. Alternatively and complementary to comparing a country to regions or sub-regions, a user can choose the individual countries against which to benchmark the selected country. When a region or sub-region is selected, the countries within the region or sub-region will automatically receive a checkmark. The user can either choose a region or sub-region and then manually un-check unwanted countries or only check desired countries. The selection of comparison countries is critical: it can either skew the results in favor of or against the benchmark country. Comparing, for example, South Africa against the rest of Africa would bias the results in South Africa s favor because it has the largest economy in Africa. Comparing South Africa against Kenya and Ghana, however, provides a more accurate picture because both Kenya and Ghana have chosen policies that open up the ICT sector. Of course, the user may choose to compare the benchmark country with Korea and Denmark, two countries that have topped nearly every league table when measuring ICT access and usage globally. This provides a picture of how far the benchmark country is behind the best in the world. The best benchmark countries for a country are those that are leading in policy and regulatory reform and that are sufficiently similar in terms of economic and social characteristics. The aim of the benchmarking is to identify what can be improved in a country by reference to a group of leading countries. Benchmarking, used in this way, provides a set of targets for a country to aim at. Selecting countries that are laggards is counterproductive because poor performers cannot provide a set of targets for the country to aim at. For an illustration of the impact that benchmark selection can have, go to Appendix 3. Viewing Data Once the benchmark countries have been chosen, press the Submit button. Clicking each title heading will then reveal or hide indicator data and traffic lights. Clicking on the graphs icon will show a graph of the selected countries. In order to view a definition for each indicator, the user can simply hover the cursor over the indicator title to reveal a grey box with text. These boxes provide very basic information; additional information on each indicator is provided later in this manual. Traffic light typology The Diagnostic Tool uses a basic traffic light typology - red, orange, green - to signal how the selected country compares to the average of the selected benchmarked countries. Country-level indicator is 25% higher than the average of benchmarked countries Country-level indicator is within 25% (above and below) of the average of benchmarked countries Country-level indicator is 25% lower than the average of benchmarked countries "5

11 If the traffic light for an indicator is green then it is unlikely to be an obstacle and the next indicator should be assessed. If an indicator is highlighted in red it is likely to be an obstacle and this indicator should be assessed in parallel with other indicators. The traffic lights are red if the country s value is 25% above the average and green if it is 25% below the average for most indicators - in most indicators, a lower score is, such as the cost of usage. The reverse holds true for some indicators, but this is clearly indicated in the definition popup box next to the indicator. Finally, some indicators have different rules based on absolute values and, again, this is shown in the pop-up box next to the indicator. Analytical Process While each component of the mobile ecosystem, and the indicators provided should be considered collectively, this section provides a recommended sequence the user can follow to examine and analyze the data presented. The entry point for a mobile ecosystem analysis is affordability. Pricing has an impact on every other ecosystem building block. Prices and affordability are headline indicators. If prices are low then adoption and use of mobile technology is likely to be high. If prices are high then there is a high probability that there are issues that need to be addressed. Affordability: Voice no problem Data no problem Affordability: Voice prices too high Data prices too high Affordability: Voice no problem Data prices too high Access: If high = no problem Competition: If HHI high = new market entry If MTR above cost = reduce to cost of efficient operator Competition: If HHI high = new market entry If MTR above cost = reduce to cost of efficient operator Usage & Content: If high = no problem Infrastructure: If HHI is high then number of subscribers per base station is also likely to be high and population coverage low Infrastructure: QoS and bandwidth per Internet user low = check international data connectivity Figure 2: Analysis process A recommended, basic process for an initial analysis of the health of the mobile ecosystem is summarized in the figure above. Note that there are other factors such as geography, population density or conflict that may impact the mobile ecosystem. These factors would also need to be considered in a detailed analysis. The first step is to check affordability indicators in the Diagnostic Tool and assess whether they are green or red when comparing to other countries (remember that country selection is important). Based on the status of the affordability indicators, the following scenarios for next steps apply: "6

12 Scenario 1: If affordability indicators are green, then check that access and usage is also green. If access and usage indicators are also green, then the process is completed and the market is likely to be competitive with few obstacles to mobile programs. Scenario 2: If affordability indicators are red then a series of sequential steps will help to determine the cause of the high prices. This means assessing competition and infrastructure indicators. It is probable that both of these components have indicators that are red. A key indicator under the competition component is the HHI indicator which measures market concentration If the HHI indicator is red, then the mobile ecosystem will likely benefit from the entrance of additional mobile network operators.if the HHI indicator is green, then the mobile termination rates (MTRs) indicator should be examined. If MTRs are red, then there is a remedy and the process is complete. If the MTR indicator is green, then the next step is to investigate spectrum availability. This step requires the user to check on spectrum availability with the regulator and to make an assessment, based on interviews, on whether spectrum has been efficiently allocated. Scenario 3: If data affordability is red but voice is green then a similar process needs to be followed. The infrastructure indicators should be examined. If the international bandwidth per user value is low, then conduct further research on international connectivity such as submarine cable subsystems. Domestic data transmission infrastructure may also be a cause for high broadband prices. Prices for International data capacity and leased line prices are not included in the Diagnostic Tool since such data is not readily available. "7

13 Mobile Ecosystem Indicator Definitions & Uses Component 1: Affordability The affordability component of the tool measures the cost of access and use of mobile voice and data services. Affordability can best be understood and assessed by comparing a benchmark country to other countries. Affordability has a direct link to levels of competition. If prices for a mobile voice basket are high in comparison to benchmarked countries, then the likelihood is that competition is not fair and indicators in the Competition category should be investigated. The usual consequence of high prices would also be lower access and use of ICTs compared to the benchmarked countries. The indicators comprising the affordability component are discussed in the following sections. Mobile prepaid voice basket (USD) Given the complexity of most mobile prices, a price basket is the best way to compare countries and to determine if prices are affordable. To overcome comparative pricing complexities at least partially, the Organisation for Economic Co-operation and Development (OECD) has developed a price benchmarking basket methodology. The price baskets used in the Diagnostic Tool are 4 based on the OECD basket definition of 2010 for prepaid users and include 30 calls and 100 SMS. This basket is tracked by the ITU and published at the end of each year. The basket definition specifies the duration and distribution of calls across time and across networks. The price basket is priced in USD and based on average quarterly exchange rates from oanda.com. Country value is greater or equal to 1.25 * average (i.e. benchmark countries average) Country value is smaller than 1.25 * average and larger than 0.75* average Country value is smaller or equal to 0.75* average Lower is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated annually. Mobile prepaid basket % of GDP/capita per month To add the dimension of affordability, the mobile price basket is divided by GDP per capita in USD to provide an indication of the price basket as a percentage of income and thus relative affordability. It is generally accepted that the affordability threshold is 5%, so countries below 5% are leading. Country value is above 10% Country value is between 5-10% Country value below 5% Lower is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated annually. 4 See for the full definition "8

14 Mobile prepaid 1GB broadband basket (USD) This indicator measures mobile broadband usage costs per month. Like the mobile price basket, the purpose of the mobile broadband price basket is to allow price comparisons within and between countries for mobile broadband services. The basket consists of a prepaid data package of 1 GB (i.e. no long term contracts or discounts), valid for at least 30 days. The ITU collects the 1 GB prepaid data price annually. Country value is greater or equal to 1.25 * average (of benchmarked countries) Country value is smaller than 1.25 * average and larger than 0.75* average Country value is smaller or equal to 0.75* average Lower is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated annually. Cost of 1GB basket as share of GDP per capita per month This indicator is also expressed in terms of GDP per capita in order to capture the affordability dimension. Country value is above 10% Country value is between 5-10% Country value below 5% Lower is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated annually. Effective price (USD) The effective price is an average price that is charged by an operator to its customers over an entire month and over all its products. The blended Average Revenue Per User (ARPU) is divided by minutes of use per connection (MOU). This is a rough estimate for the average price paid by subscribers of a network. Should data revenues go up with all else being equal the effective price would show an increase. 5 Country value is greater or equal to 1.25 * average (of benchmarked countries) Country value is smaller than 1.25 * average and larger than 0.75* average Country value is smaller or equal to 0.75* average Lower is Data source: This indicator is based on data from the GSMA Intelligence Unit and is calculated as an average of 4 quarters. ARPU is revenue divided by the number of subscribers. In this instance, it is blended because it includes both prepaid and contract subscribers. In developing countries, the vast majority (up to 99%) of subscribers are prepaid. In developed countries, the majority of users are on a contract (though the prepaid model is gaining popularity). Minutes of Use is defined as the total number of minutes, including incoming, outgoing and roaming calls, transferred over the mobile network in the period. 5 A more precise measure would be voice only ARPU divided by MOU but this is not widely available. "9

15 The effective price is, however, an important indicator to complement the price baskets, which are based on advertised prices. Several operators in Africa, including MTN and Vodacom, offer dynamic prices (prices that change based on supply and demand). Price baskets cannot capture this complexity while the effective price averages out the dynamic discounts. This indicator is based on GSMA data and is computed as the average out of 4 quarters. New affordability indicators An additional three indicators taking into account these evolving dynamics will be added to the web interface and this User s Guide in March A review of these indicators can be found in Appendix 1. Component 2: Access The Access component of the tool consists of a set of internet and mobile phone penetration indicators. Affordability (i.e. price) and the level of competition both influence access. The more competition, the more likely it is that marginalized groups (rural areas, women) have access to mobile. Groups such as the GSMA, ITU, World Bank, and the operators themselves generally report access estimates based on the number of active SIM cards rather than the number of unique subscribers. These organizations derive the number of unique subscribers based on the number of active SIM cards, divided by the estimated number of SIM cards per user. The results are usually heavily biased towards higher penetration levels and should be viewed with some degree of caution. A more accurate way of measuring access is to use nationally representative household surveys in order to establish unique subscribers. Unfortunately, ICT household surveys are rare and therefore the most common indicator of access is the number of active SIM cards and not the number of unique subscribers. Active SIM cards per 100 inhabitants This indicator is also known as mobile telephone subscriptions per 100 inhabitants. Mobile telephone subscriptions refers to the number of subscriptions to a cellular network. The indicator applies to all mobile subscriptions that offer voice communications. It excludes subscriptions via data cards or USB modems, subscriptions to public mobile data services, private trunked mobile radio, radio paging and telemetry services. Mobile telephone subscriptions are generally over-reported because the figure does not take into account the number of SIM cards that an individual may carry. In some countries, people regularly carry more than one SIM card in order to take advantage of price promotions on the three mobile networks. Other reasons include machine to machine communication (M2M). When comparing data on active SIM cards to data on unique subscribers, users should expect this figure to be overreported by between 25% and 50%. Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater of equal 1.25 * average Higher is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated every quarter. "10

16 Individual internet users per 100 inhabitants This indicator refers to the proportion of individuals that used the internet in the last 12 months. Data is based on surveys generally carried out by national statistical offices or estimated based on the number of internet subscriptions and then reported to the ITU. The country-level indicator is 25% or more lower than the benchmark average: Internet penetration is correlated with mobile broadband pricing. If the individual internet penetration indicator is red, then it is likely that the mobile broadband pricing indicator is also red. Strategies to reduce broadband pricing would have an impact on individual internet penetration. Be aware that ITU data is often years out of date (for example, 2015 data is often 2014 data and even 2013 data). Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated quarterly. % of mobile owners with smartphones Smart phone users are cheaply integrated into development initiatives and offer computing abilities that are of benefit for the development of a country. The share of mobile subscribers with a smartphone is generated by dividing the number of smart phones in a country by the number of total connections (i.e. all SIM cards, excluding machine-to-machine SIMs). Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: This indicator is based on data from the GSMA Intelligence Unit and is calculated as an average of 4 quarters and is updated every quarter. Component 3: Usage The Diagnostic Tool provides data on both voice and data usage within a country and for comparisons. Average Revenue Per User (ARPU) gives an assessment of revenue received by operators in comparison to benchmark countries. Minutes of Use (MOU) is correlated with lower prices - the lower the prices, the higher the usage (note that MOU measures voice and not data). The combination of ARPU and MOU is used in the affordability section in the form of effective price, i.e., ARPU/MOU. It is difficult to measure the amount of local online content available to users. The Diagnostic Tool uses Facebook users per 100 inhabitants as an indicator. This is a useful indicator because Facebook is a user content driven social media platform and subscriber numbers are available on a country level. "11

17 Average revenue per user in USD (Blended ARPU) ARPU is defined as total revenue divided by the number of subscribers. In this instance, it is blended because it includes both prepaid and contract subscribers. In developing countries, the vast majority (up to 99%) of subscribers are prepaid. In developed countries, the majority of users are on a contract (though the prepaid model is gaining popularity). ARPU contains not only voice and SMS but also data, handset and termination rate revenues. Despite the acronym, the metric is strictly the average revenue per connection, not per subscriber. Generally, ARPUs decline over time due to less affluent users joining a network at a later stage. This trend has been partially reversed with mobile data becoming an additional revenue source. Along with other indicators such as competition and pricing, this indicator provides insight into demand for services. However, APRU is not an absolute but a relative measure and therefore the traffic light typology is not used. The indicator should be interpreted together with prices and minutes of use and data traffic. Decreasing prices may lead to increasing ARPUs due to faster adoption and increased use, which is a good thing. High ARPU together with low minutes of use may be a bad sign, which can be verified by checking the affordability indicators. If prices are high (and ARPU is high) then it is likely that there is a competitive bottleneck in the market. The next step would be to check the competition indicators in order to find the cause of the bottleneck. If prices are low then there may be revenues from other sources other than voice and data making up the higher ARPU figure, such as increased smartphone sales. Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: This indicator is based on data from the GSMA Intelligence Unit and is calculated as an average of 4 quarters and is updated every quarter. Highest minutes of use (MOU) per connection Minutes of use (MOU) include incoming, outgoing and roaming calls, transferred over the mobile network in the period, per connection. MOU is a useful indicator because it shows how much the mobile network is being used on average, by subscribers, for making calls. The lower the number, the stronger the likelihood that there is an obstacle preventing increased usage, such as high prices or lack of availability or poor connectivity. A low score on the MOU per connection indicator would prompt investigation in other categories such as competition and affordability. Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: The indicator is based on data from the GSMA Intelligence Unit and is calculated using the highest average MOU over 4 quarters of any operator in the country and is updated every quarter. "12

18 Data traffic per connection (highest among operators) Data traffic per connection provides an indication of how much data is being used by subscribers for accessing the internet. The trend is towards higher data usage, so the expectation is that figures will be getting higher. The Diagnostic Tool only uses the highest reported figure amongst a country s operators. Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: The indicator is based on data from the GSMA Intelligence Unit and is calculated using the highest average Data traffic per connection over 4 quarters of any operator in the country and is updated every quarter. Facebook users per 100 inhabitants This indicator is expressed as the average number of Monthly Active Users per country divided by 100 inhabitants. Facebook users is a proxy indicator for local content. Most of the content on Facebook is created by local users. If Facebook usage is low, then the primary obstacle is likely to be the cost of mobile broadband, which is measured by the 1GB price basket indicator. If pricing is high, then mobile broadband internet use (and therefore Facebook usage) will be low. Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: The data is retrieved from the commercial log-in at Facebook by going to the advertisers information for each country and is updated annually. Component 4: Infrastructure The Infrastructure component consists of a set of indicators that provide information on the extent of network coverage and the quality of service (QoS) for mobile voice and broadband services. Simply put, low infrastructure scores mean that access and usage is likely to be poor. While ICTs more generally provide important direct opportunities for manufacturing, service provision and job creation, their main contribution to economic development is to enhance communication and information flows that improve productivity and efficiency. These 'network effects' required a critical mass to be sufficiently connected for these economic and social multipliers to kick in and the lack of infrastructure will prevent this from taking place. International bandwidth per user (Kbps) International Bandwidth refers to the amount of data to and from a country to the rest of the world. It is the addition of the capacity of all international data lines (such as undersea cables), divided by the number of Internet users in a country. 6 Country value is smaller or equal to 0.75* average Higher 6 While International bandwidth is fairly easy to establish the number of Internet users is more difficult and the ITU has been challenged by several countries on its user statistics. "13

19 Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated every quarter. % Population covered by mobile signal Mobile coverage, expressed as a percentage of the total population. This is typically a measure for 2G GSM coverage but applies often to 2.5G. If population coverage is below 75%, the traffic light is red and if population coverage is above 95%, it is green. Below 75% Between 75% and 95% Above 95% Higher is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated every quarter. % Population covered by 3G signal 3G coverage or allows faster Internet speeds. It is a indicator for modern communications and the ability of people to access online content. The latest available figure from the International Telecommunications Union is used in the Diagnostic Tool. Below 50% Between 50% and 75% Above 75% Higher is Data source: This indicator is based on data from the ITU s Statistical database (Dec 2015) and is updated every quarter. Connections per number of Base stations Number of connections per base station is an indicator for quality of service (QoS). The higher the number of connection per base station, the more likely it is for users to experience dropped calls and poor data quality. This indicator is constructed based on two pieces of information: the total number of connections (active SIM cards) and the number of BTS. This indicator is then calculated by dividing the total number of connections in a country by the total number of BTS deployed in a country. Country value is greater or equal to 1.25 * average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is smaller or equal to 0.75* average Lower is Data source: The indicator is based on data from the GSMA Intelligence Unit and is based on the average over the most recent 4 quarters and is updated every quarter. "14

20 Investment per subscribers in USD Investment per subscriber is another indirect measure for QoS and infrastructure. Measuring QoS would be much more precise but the only global data source is prohibitively expensive. 7 Investments occur in waves in the mobile sector when major technology upgrades take place (e.g. 3G to 4G) or a new operator enters a market and builds a new network. For example, Movitel entered the Mozambican market in 2012, ten years after mcel and Vodacom Mozambique. To catch up with the incumbent operators, Movitel rapidly rolled-out its mobile network such that it now has the largest network in the country. As a result, Mozambique s investment per subscriber has been very high over the past few years. Country value is smaller or equal to 0.75* average Country value is smaller than 1.25 * average and larger than 0.75* average Country value is greater or equal to 1.25 * average Higher is Data source: The indicator is based on data from the GSMA Intelligence Unit and is based on the total Capex over the most recent 4 quarters and is updated every quarter. Capex from the latest 4 quarters for each operators is combined. The resulting annual CAPEX for each operator is added together to get total CAPEX for the country and then divided by the total number of active SIM cards in the country. Component 5: Competition The competition component is at the heart of any ecosystem outcome. Fair competition in the sector leads to reasonable returns on investment for operators and affordable prices for end users. In the mobile ecosystem diagram (Figure 1), competition is the framework within which the other ecosystem building blocks operate. Affordable prices are an outcome of competition between operators. Usage is related to affordable prices and, in turn, to the level of competition. Infrastructure investment is also related to competition: in the scramble to attract users, operators invest in their mobile infrastructure so that they can offer services, faster downloads and quality of service. Investments and infrastructure roll-out are typically the highest in a competitive environment. Access to mobile services is also influenced by the level of competition, especially when operators have exhausted growth in mature markets and are looking for new subscribers and begin to expand mobile coverage for both voice and data. Herfindahl-Hirschman Index A commonly accepted measure of market concentration is the Herfindahl-Hirschman Index (HHI). It is a measure of the size of firms in relation to the sector and an indicator of the amount of competition among them, represented on a scale of 0 (evenly distributed competition) to 10,000 (no competition). It is calculated by the sum of squares of operator market shares (determined by number of subscribers), multiplied by 1,000. A monopoly market would have an HHI of 10,000; a duopoly with each operator having half the market would have an HHI of 5,000; and a market with four operators each having the same market share would have an HHI of 2,500. The HHI is computed for the mobile market based on the number of subscribers. With three operators, one would expect the HHI score to be around 3,300 if market shares are similar. Competition policy recognizes a minimum of four operators are necessary for a market to be 7 Ookla s net index raw data used to be available to the public but has been commercialised since the beginning of "15

21 competitive (though this is dependent upon other factors such as size of market, geographic dispersion and spectrum availability). The HHI does not take market size into account. Above 5000 Between 2500 and 5000 Below 2500 Lower is Data source: The indicator is based on data from the GSMA Intelligence Unit and is based on the average over the most recent 4 quarters and is updated every quarter. Number of Mobile Operators (excluding MVNO) The number of mobile operators operating in a country is part of the HHI calculation but also of use as an indicator by itself. Generally, the more operators a country has the. However, there may also be a case of having too many operators and thus not enough profits for any to roll out enough infrastructure. 1 or 2 3 or 4 5 or more Higher is Data source: The indicator is based on data from the GSMA Intelligence Unit and is based on the average over the most recent 4 quarters and is updated every quarter. Market share of largest mobile operators The market share of operators is also taken into account for the calculation of the HHI. The market share of the largest mobile operator, however, is a more accessible indicator and is also included in the diagnostic tool. Above 50% Between 35% and 50% Below 35% Lower is Data source: The indicator is based on data from the GSMA Intelligence Unit and is based on the average over the most recent 4 quarters and is updated every quarter. The operator with the highest market share is calculated by taking the maximum value among the average market shares across the latest 4 quarters. Highest MNO EBITDA Margin in country The EBITDA margin is calculated as total operating profit in the period, before interest, tax, depreciation and amortization, expressed as a percentage of total revenue. It is a measure of profitability that excludes country specific factors such as taxes and cost of capital and is thus ideal for benchmarking the financial performance of an operator to those of operators in other countries. The EBITDA margin needs to be interpreted together with the HHI and also price baskets. A high EBITDA margin for a monopolist may indicate abuse of market power. A high EBITDA margin in a competitive environment (HHI below 2,500) may be the result of efficient operation and innovation. The EBITDA margin is thus not an absolute indicator but a relative one that needs to be understood "16

22 in the right context. A high EBITDA margin may also not be of concern when prices are low and mobile voice and data coverage is high. For the traffic light scheme an EBITDA margin of 50% or more is set to red. Above 50% Between 35% and 50% Below 35% Lower is Data source: The indicator is based on data from the GSMA Intelligence Unit and is calculated by taking the highest figure among average EBITDA margins over the most recent 4 quarters and is updated every quarter. Interconnection: Mobile Termination Rates (US ) The mobile termination rate (MTR) is the amount that mobile operators charge other operators for terminating calls on their networks for each minute terminated. Termination rates above the cost of an efficient operator distort the market and inhibit competition. The cost of an effect operator converges globally to around US cents. If the indicator is red, the regulator likely requires support in implementing cost based mobile termination rates. This can be done by conducting a cost study or by benchmarking the cost of mobile termination in other jurisdictions. It is important not to benchmark general mobile termination rates (wholesale prices for terminating a call on another operators network) but the cost of mobile termination of an efficient operator. In other words, country selection is key when conducting a benchmark study. Above 4 US cents Between 2.5 and 4 US cents Smaller than 2.5 US cents Lower is Data Source: The data is from various sources including a TMG MTR report from 2015 and data from the European regulator BEREC and is updated every quarter. Mobile-specific taxes / TCMO Mobile specific taxes generally pose an obstacle to communication access and use. They come in various form including import duties on mobile phones, higher VAT or sales tax than for other goods (mobile specific taxes) and luxury taxes. Above 5% Above 0% and below 5% 0% Lower is Data source: The data is based on a report from the GSMA Intelligence unit from 2011, available at intelligence.com/publicpolicy/tax and is updated periodically. "17