Approaches to measuring telecommunication services for the CPI Presenter: Michael Abbondante Presenter: Michael Abbondante Authors: Stephen Frost, Margaret Yang & Lewis Conn
Context � Initial thinking & progress report � Initial thinking & progress report � Complex area of price measurement � Fixed-line telecommunication tightly regulated � Mobile telephony less so � Mobile telephony less so � ABS – matched sample
Possible approaches Real time flow of telephone bill samples providing quantity information quantity information Testing different approaches, using bills to 1. create usage profiles (notional quantities) priced using publicly available price schedules. 2. repricing each individual transaction (such as a phone call) recorded using publicly available price schedules. 3. calculate unit values
Bill sample precise service broad type of duration total customer pricing identifier service (sec) charge identifier destination plan state postcode broad type of txn 221590USAGE 221590USAGE 24 24 0.52 0.52 62400MNet 62400MNet A A VIC VIC XXXX XXXX ON_NET_ MOBILE ON_NET_ MOBILE 221590USAGE 27 0.54 62400MNet A VIC XXXX ON_NET_ MOBILE A0LU8USAGE 231 1 62400United King A VIC XXXX IDD_CALL 122100RENTAL 0 -33 62400 A VIC XXXX LINE_RENTAL 122100RENTAL 0 47.85 62400 A VIC XXXX LINE_RENTAL 568400USAGE 10882 12.4 62400 A VIC XXXX LOCAL_CALL 714000USAGE 0 0.35 62400 A VIC XXXX CALL_RETURN 378400USAGE 83 0.27 62400 A VIC XXXX ONE_THREE_CALL 74000USAGE 0 0.35 62400 A VIC XXXX CALL_RETURN 375400USAGE 175 0.28 62400 A VIC XXXX ONE_THREE_CALL A00LUDUSAGE 50 0.5 62400Cowes A VIC XXXX STD_CALL 375400USAGE 375400USAGE 91 91 0.27 0.27 62400 62400 A A VIC VIC XXXX XXXX ONE_THREE_CALL ONE_THREE_CALL 629400USAGE 99 1 62400 A VIC XXXX OFF_NET_MOBILE 629400USAGE 624 4.24 62400 A VIC XXXX OFF_NET_MOBILE 229400USAGE 20 0.5 62400MNet A VIC XXXX ON_NET_ MOBILE 378400USAGE 46 0.28 62400 A VIC XXXX ONE_THREE_CALL 37400USAGE 292 0.28 62400 A VIC XXXX ONE_THREE_CALL
Approach 1 – Average usage profiles Bill segmentation � Calendar year by type of service (e.g. fixed-line, post- paid mobile) paid mobile) Average usage profiles (quantities) � Grouped like bills into a set of usage profiles � Weighting information (revenue) for each service type provided (e.g. mobile to mobile, text ) by the carrier � Fixed for a given period Pricing plans (price) Pricing plans (price) � Priced using publicly available price schedules. For future consideration � Frequency of updating quantities to reflect behaviour change e.g. internet usage by smart phones.
Approach 1 – Average usage profiles Example of a Mobile Profile Chart illustrates a profile where SMS and profile where SMS and 5% 5% data download are 18% the predominant International calls transactions Data downloads 25% International SMS Message bank Calls diverted to mobile SMS 0% 2% Local & national calls 0% 50%
Approach 1 – Average usage profiles Example of a Fixed Line Profile Chart illustrates a profile where local calls are the predominant are the predominant 5% 5% transactions Local Calls 25% Off-net mobile calls 13 Calls 50% National long distance calls On-net mobile calls 0% 20%
Approach 2 – Direct calculation Sample of bills (quantity), repriced each period using latest information – complex in practice Attractive features Attractive features � Observable call destinations and durations � Ability to reprice each transaction � Ensures representative quantities over time and discounts irrational consumer behaviour Unattractive features � Data intensive � Data intensive � assistance and effort from telecommunication provider � Commercially sensitive � changing plan shares � revenue information by service types for weighting � Pricing plans � available, but difficult to locate
Approach 2 – Direct calculation Calculating expenditure – combining the fixed bill quantities with the plan prices Classifying and plans (price) and bills (quantity) � Plans ( price ) classified into high, medium and low- usage with provider advice � Bills classified into high (H), medium (M) and low (L)- activity bills ( quantities ) by: � Could be based on plan type or � Could be based on plan type or � Calculate expenditure from applying a mid-range plan over all the bills; � Classify bills into 3 types (H, M or L) by annual expenditure; and � fix the activity shares for the life of each sample
Direct calculation ���������������������������������� Quantity – telephonic Quantity – telephonic Price – Usage plans Price – Usage plans transactions (activity) High Profiles/bills Plans (H prices) Medium Profiles/bills Plans (M prices) Low Low Profiles/bills Profiles/bills Plans (L prices) Plans (L prices)
Approach 2 – Direct calculation Calculating total expenditure � High usage bills expenditure � first high-usage plans ( H1 prices ) multiplied by all high-activity bills; � first high-usage plans ( H1 prices ) multiplied by all high-activity bills; � second high-usage plans ( H2 prices ) multiplied by same high-activity bills and so on… � H expenditure calculated using confidential plan shares (weights) to capture compositional shift � Medium usage bills expenditure � the medium-usage plans (the M prices ) multiplied by all medium- activity bills activity bills � M expenditure calculated using confidential plan shares (weights) � Low usage bills expenditure � the low-usage plans (the L prices ) multiplied by all low-activity bills � L expenditure calculated using confidential plan shares (weights) � Average H, M and L expenditures added together to provide a total expenditure
Approach 2 – Direct calculation Calculating total expenditure for quarter 1 Total bill Plan share Plan share Weight Weight Weight Weight Weight Weight for for Plan (%) Usage in H in M in L Bill for H Bill for M Bill for L quarter H1 8H 32% $20,000 H2 12H 48% $22,000 H3 5H 20% $19,000 H4 1H 0% M1 20M 56% $15,000 M2 10M 28% $16,000 M3 6M 17% $13,000 M4 M4 1M 1M 0% 0% L1 2L 0% L2 28L 80% $10,000 L3 7L 20% $9,000 Weighted average $20,760 $14,944 $9,800 $45,504
Approach 2 – Direct calculation Calculating total expenditure for quarter 2 Total bill Plan share Plan share Weight Weight Weight Weight Weight Weight for for Plan (%) Usage in H in M in L Bill for H Bill for M Bill for L quarter H1 8H 27% $20,000 H2 12H 40% $22,000 H3 5H 17% $19,000 H4 5H 17% $24,000 M1 20M 56% $15,000 M2 10M 28% $16,000 M3 6M 17% $13,000 M4 M4 1M 1M 0% 0% L1 2L 0% L2 24L 77% $10,000 L3 7L 23% $9,000 Weighted average $21,300 $14,944 $9,774 $46,019
Approach 2 – Direct calculation Calculating the price movement Weighted average bill Total bill for High Medium Low quarter Quarter 1 $20,760 $14,944 $9,800 $45,504 Quarter 2 $21,300 $14,944 $9,774 $46,019 Price movement 1.13%
Approach 2 – Direct calculation Things to note � Re-weight prices continually according to proportion of consumers on each plan (within high , medium and low segmentation – fixed basket) � Plan shares based on the ’number of services in operation’ � Plan shares based on the ’number of services in operation’ For future consideration � Re-use bill (quantity) data by applying other carriers’ prices (for the same service) � Consumers’ calling patterns are similar across carriers � customers of major carriers have similar calling patterns, customers of smaller carriers exhibit different behaviour � inappropriate to use post-paid mobile bills to price prepaid mobile services - behavioural differences behavioural differences � These experimental estimates use one set of bills for all periods � desirable to re-sample the bills annually to capture changing consumption patterns � Prices should be re-weighted based on the shifting market shares of the carriers themselves � Robustness to quality change
Approach 3 – Unit values � A daily electronic feed of the transactions accruing on the sampled accounts. � Product billing identifier defines the service, although identifiers change fairly frequently � Potential to use the bills data to construct unit prices � sum of all expenditure / sum of all durations by product type e.g. international by country � Pros - efficient way of constructing price movements � Cons - careful thought regarding nature of the sample: � representativeness over time; and � across carriers.
Assessment of approaches Approach 1: Customer profiles - likely to provide good estimates of price change with less effort. Further research on application of pricing plans to customer profiles required pricing plans to customer profiles required Approach 2: Direct calculation - rigorous method, real world quantities observed. Labour and data intensive, difficult to implement in practice Approach 3: Unit values - using the full richness in the dataset shows great promise, further investigation required. shows great promise, further investigation required. Areas for additional investigation � Pre-paid mobile � pre-paid phone cards � VOIP services
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