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How to measure success/failure of Brazil’s broadband policy

I was invited to conduct a discussion at the Cabinet Office in Brasilia with senior government officials driving the Brazilian Broadband Policy that will shortly be announced. Representatives of the relevant ministries, ANATEL the regulatory agency, the public telecom operator and a local think tank participated in what proved to be a lively discussion.

Given the policy was almost fully formulated, I decided to focus on performance indicators, a subject I was working on for both UNCTAD and one which had preoccupied me since the time I was a regulator. It is also a subject that LIRNEasia has developed considerable expertise in. My guess was correct. Decisions had been made on the policy instruments that would be used and the ends that were desired, but not on how to figure out whether the policy instruments were working or not. Brazil_May10.

I first raised the standard criticisms about “teledensity” and such, where the failure of the ITU to recognize the qualitative change from a government-dominated monopoly service to a vibrant competitive industry had led to continuing reliance on supply-side data that came through multiple steps (operators to regulatory agency to ministry to ITU) with all the attendant delays and errors, had resulted in a mess. The flaws in the data increased from fixed lines to mobile to Internet, with massive problems caused by non-standard definitions and flawed data collection. For example, no one knows what an active SIM is, despite their numbers being bandied around. Broadband lacks common definition and in some cases, arbitrary multipliers have been used (10 in the case of Indonesia) to arrive at numbers of Internet users.

I then moved on to discuss the work I had done with Haymar Win Tun of the LKY School at National U of Singapore, where we had organized the countries covered by the ERI, NRI, IDI and KEI by deciles. Here too the end results were problematic because they drew from the same poisoned wells of UN system indicator databases, but at least they recognized factors other than ICTs. The inclusion of other indicators in the mix diluted the errors in the ITU databases, though perhaps introducing additional errors. Haymar and I argue that it was more defensible to simply talk about deciles and not about positions in a ranked list because the existence of input errors makes the small differences between countries insignificant.

Brazil was in the third decile from the top in KEI and IDI, which posed the question as to what target they should adopt. Advancing a decile at the top of a league table is a lot more difficult than doing so at the bottom. To advance to the next decile, Brazil would have to displace an OECD country and or city-states such as Hong Kong, Macau and Singapore. The sense of the room seemed to be that they would like to set the country an ambitious target. It would be nice indeed for a BRIC to take out a European country. I pointed out that Cypress and the Slovak Republic seemed doable and that Greece, which was currently two deciles ahead was also vulnerable.

We discussed the ways in which the target could be achieved, including unpacking the indices to identify the subcomponents most amenable to increase and then concentrating policy attention on them. The value of relying on demand-side data that would allow the questions most pertinent to Brazil’s broadband policy was underlined, even if this meant that comparability and benchmarking would suffer.

Given the heavy reliance on subsidies and other interventions, I asked whether it would not be better to let market forces operate by allowing greater entry, thereby triggering a shift to the Budget Telecom Network Model. I wondered why Brazil was consistently at the bottom of the rankings in terms of Nokia’s mobile and mobile data TCO tables and why billion of USD were lying unspent in the Brazil Universal Service Fund. If these problems could be resolved there would be less need for subsidies, I said. I also pointed out the need to ensure cost-oriented and non-discriminatory access to fat pipes, not only within Brazil, but also under the sea. Unless these input prices declined, there was no point in lowering retail data and voice prices, which would only result in congestion and poor QoS. Without lower retail prices more people would not get connected and use would not increase.

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