Expert Dialogues Mohsen HAMOUDIA mohsen.hamoudia@francetelecom.com Adjus ting Forecas ting M ethodsTothe Needs Of The Telecommunication Sector Examining Forecasting Methodologies To Assist And Support Operators In The Transition From A Regulated Environment To Deregulated Markets ITU - International Telecommunication Union Geneva, Switzerland Market, Economics and Finance Unit in coope ration with 25-26 Oc tobe r 2004 IIF - International Institute of Forecasters
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor Table of Contents � Introduction � A Changing Environment : From a Monopoly Situation to Liberalized Markets � Limitations of “Traditional” Forecasting Methods and Models � Case Study from an Important Operator experience in International Traffic : outlining the forecasting methods undertaken and how they held up to the challenges of Telecom Deregulation in 1998 � Conclusion 2
A Changing Environment From a Monopoly Situation to Liberalized Markets
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (1/10) In Europe, 1998 was a very important event because the European Telecom Industry has been entirely deregulated. The main effects and consequences were : � Increasing number of operators, carriers and Internet providers in the deregulated markets � Increasing (and aggressive) competition and new Alliances � Explosion of new products and services � Evolution of the Customer Choices and usages : From Telecommunication to Communication � Falling Prices and Falling Revenue � Pressure on Settlement Rates on Bilateral Routes 4
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (2/10) � The Telecom Deregulation level From 1 – Regulated markets to 5 – Fully Liberalized markets 5
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (3/10) � Increasing and aggressive competition Int'l Traffic by Carrier Type 140 New Carriers in Competitive Outgoing Int'l in Minutes (Billions) Markets 120 Existing Carriers in Competitive 100 Markets Monopolies 80 60 40 20 0 1990 1992 1994 1996 1998 1999 2000 6
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (4/10) � The International Carrier Boom Number of Carriers 2805 3000 2500 2000 1760 1500 1000 586 367 500 0 1995 1997 1999 2000 7
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (5/10) � A general overview of Worldwide Telecom Industry Fixed Telephony Data Services Mobile Internet 1460 bEuros 1162 bEuros 145 780 bEuros 83 161 123 62 67 573 529 203 427 448 581 +10% / year + 5% / year 1998 2002 2006 2005 1,2 billion of fixed lines 1,5 billion of mobiles 900 millions of Internet Access Source : Idate 8
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (6/10) � Explosion of new products and services � P2P Communications : + 40 % � Fixed Voice Calls : only + 18 % � Fixed Voice Share in the Global Call volumes falled Monthly Number of communication by FT’s Customer Structure of communications Mail 1,8 3% 4% Internet SMS 11% SMS mobile 5,2 fixed voice Text voice 1,0 mobile 97% mobile voice 49% voice fixed 19,6 42% voice 32,6 voice fixed Voice fixed voice + 18% voice 51% 43% 20,2 1997 2002 1997 2002 Source : FT/DPS 2003 9
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (7/10) � Evolution of the Customer usages and Choices France : Monthly Number of communication by Customer 200 180 Communication Customer wants Communication asynchrone 160 Internet rather Telecommunication 140 120 SMS and mobile data 100 80 Communication synchrone 60 Mobile voice 40 20 Fixed voice 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Fixed voice Mobile voice SMSand mobile data Minitel Internet mail & IM Internet WEB &t P-to-P Source : FT/DPS 2003 10
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (8/10) � Evolution of the Customer usages in Enterprises France : Number of communications by employee and by day 8 0,08 7 1,92 6 5 SMS 1,49 eMails 4 Mobile 3 Fixed Traffic 3,84 2 1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source : FT/ DPS 2003 11
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (9/10) � Falling Prices and Falling Revenue Lowest Available Retail Price for Calls from Germany Australia Poland Turkey 2000 Austria 1997 UK France USA 0 0,5 1 1,5 2 DM/minute 12
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment (10/10) � Price Evolution : France Telecom’s Prices for Fixed Voice Traffic CAGR 100 (1997 – 2002) 90 80 Line rental (€/month) + 5.0% 70 Local call (€/100) - 2.8% 60 National call (€/100) 50 -13.3% International call (€/100) 40 -12.4% Fixed to mobile (€/100) 30 - 9.5% Mobile to mobile (€/100) 20 -16.9% 10 0 1994 1996 1998 2000 2002 13
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor The Changing Telecom Environment : Conclusion The Modeling and Forecasting Techniques in the Telecom Industry are significantly and highly impacted by this changing environment : � It is necessary to Understand the real issues facing Operators in a newly Liberalized & deregulated environment � These changes must lead the historical players (incumbents) to “re-engineer”, adapt and reshape their Forecasting processes and techniques to face and challenge the new environment � These market changes must drive “new” and more suitable forecasting Techniques 14
Limitations of “Traditional” Forecasting Methods and Models in the Context of Competitive Markets
Adjusting Fore casting Me thods To the Ne e ds Of The Te le communicat ion S e ctor Using inadequate Forecasting Model : an example Traf_D 1600 1600 1600 Traf_D Traf_D Forecast_D 1400 1400 Forecast_D Forecast_D 1400 1200 1200 1200 1000 1000 1000 800 800 800 600 600 600 400 400 400 200 200 200 0 0 0 7 6 8 9 0 6 6 9 7 7 8 8 9 9 0 0 9 9 9 0 9 9 - 9 9 9 9 9 9 0 0 6 7 8 - - v - - - - - - 6 6 6 7 8 8 8 9 9 9 6 7 7 8 8 9 9 v i - i - - v i - v a i - v i - 7 7 9 9 6 6 6 7 8 9 9 n a t n a t a t p t n a t 9 9 9 9 9 9 9 9 9 9 9 9 9 7 9 8 9 9 m p m p n m p n m m p 9 9 9 9 9 9 9 9 9 9 9 9 9 a a a a e a - - - - - - - - 9 - 9 - e e e e - - l t - - t - - l t - - t - - - - - - - - - - - - j s j s j s j s j s v r i c v r i l c v r i c v r i l c v r l i t v - r i l t v - r i l t v r i l t v u v u v u v u v u c v u c v u c v u c n a o n a o n a o n a o n o n o n o n o j j j j a j a j a j a j a a a a a a a a j j j j j j j j Univariate B&J Univariate B&J Univariate B&J Monopoly Competitive Transition situation Market • 2000 : Deregulation of Telecom • Jan 1998 : Deregulation of • 1999 : Deregulation of Market has produced its full effects Telecom Market has produced Telecom Market its early effects • Traffic Forecast for 2000 not • Traffic Forecast for 1998 accurate et MAPE has shown an • Traffic Forecast for 1999 not accurate. increasing error. accurate. • Forecasting Model = Univariate B&J • Forecasting Model = for 2000 • Forecasting Model = Univariate B&J for 1998 Univariate B&J for 1999 • Very important change in the actual traffic • Until early 1998 : Telecom • Starting 1999 : Telecom environment was stable. environment was instable • In 2000 : Telecom market was widely because full competition opened and fully competitive • In 1998 : Some New players • In 2000 : Increase of the number of entered the market • In 1999 : Increase of the New players in the market number of New players in the market 16
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