International tariff benchmarks – comparing the cost of broadband Q2 2014

Entry level, median or average? Which one helps us understand the picture?

Comparing tariffs between markets can be a contentious process. There are any number of variables and drivers that we take for granted very often when it comes to making comparisons between anything let alone something as complicated as broadband tariffs.

We are concious of these challenges at Point Topic and so we will try in this short piece to draw out some metrics and comparisons that help us all understand where we are and in particular where we are compared to others.

The three most commonly used comparison aggregations that we are going to review are:

  • The entry level tariff – often ignores variations in bandwidth caps, time charging, actual bandwidth offered and overall availability of a tariff in the market.  Best used to indicate the conditions at the low end of the market and best comparator if you’re looking at the market penetration for broadband overall or a particular technology.
  • The median tariff – the value in the middle of the count of all values in the set.  Can be skewed by unbalanced reporting or data gathering.  Useful as a general indication of the country market and for inter market comparisons.
  • The average tariff – doesn’t represent an amount anyone actually pays, skewed by extremes in price.  The most helpful single number for comparing whole country markets when you want to understand the range of options for the consumer (in our view, let us know in the comments if you disagree)

Of course there is a difference in the relative country performance depending on which metric you use and the variation can be significant.

Here we show the price and country ranking for the metrics above for residential services.  The entry level tariff is the lowest tariff available from the operator with the most subscribers in the market.  All prices expressed as international US$ (PPP rates).

Lowest entry level tariffs with median and average

This graph shows the range from the entry level service through the median up to the average value of all the residential tariffs in the market.

This highlights some of the issues we’ve outlined above.  While the entry level price for broadband in Viet Nam is quite low it is much more expensive to move up the ladder in bandwidth or service terms and ultimately ‘better’ broadband.

The spread in Ukraine and Russia seem to indicate that it is relatively straightforward to get more bandwidth, at least in terms of cost, but perhaps that means that those on entry level tariffs are subsidising those on the higher levels.

If we look at some of the larger markets around the world and compare again we start to see some indications of issues to note.

Selected market benchmarks

Broadband tariffs Q214 selected markets

 

Again we see a very narrow spread in Germany versus a much wider differential in India.  While in Korea the median is actually higher than the average indicating the presence of numerous tariffs at the lower end of price scale.

You can also represent this in a table.  Here we use rankings as opposed to absolute monetary values to help understand more easily where a particular market lies in relation to others.

 

We’ve included a ‘variance’ column to indicate how the different ranks for the different metrics are spread.  So we see the wide spread in Viet Nam from the first graph in this section represented with a high variance.  At the other end of the variance scale countries like Switzerland rank very consistently.

This is only one set of metrics measuring one aspect of the broadband markets so it is dangerous to draw conclusions in isolation.  However, Germany aside, countries with variance over 600 tend to be the less mature markets often with wide income disparities and aren’t traditionally associated with ‘successful’ broadband markets.

Then again those with very low variance aren’t always going to be top of the list for places with plenty of bandwidth and penetration, Mauritania being an example.

There’s plenty of information in the variation that we find.  If a market has a median value close or even in some instances above the average it implies a large number of relatively low cost tariffs. Conversely if the median if close to the entry level price then there are plenty of ‘expensive’ tariffs on offer in a market.

We’ll be looking at further comparisons in the coming quarters, reviewing what relation there is between bandwidths, costs and other factors.  In fact we’ve completed this analysis for a number of projects particularly for the European Commission and unsurprisingly there are significant correlations to report.

Tariffs are key to all broadband markets going forward.  Many mature markets are now at the stage where the non-adopters need to be addressed. One of the commonest barriers to broadband adoption is the cost not only of the subscription itself but particularly the total cost of ownership in year one which includes the kit you need to get online with as well.  Understanding where your market stands should help you plan your strategy whether at an operator, regulator or other broadband related supplier.

We welcome your comments on this or other outputs.