purple motes

The U.S. Census Bureau's Service Annual Survey is a great source of data on the information and communications industries.  I've put together a dataset based on this source to make the data for 1998 to 2007 easier to use.

The Service Annual Surveys cover various categories of revenue, expenditure, and inventories.  The data are collected mainly from surveys of firms with employees (employer firms).  The firms are assigned to industry categories based on the North American Industry Classification System (NAICS).   NAICS 51, Information Sector Services, includes wireline and wireless telecommunications, radio, broadcast television, cable television, and other communications services.  NAICS 54, Professional, Scientific, and Technical Services, includes display advertising, direct mail advertising, and advertising services such as advertising agencies.

I'll call the dataset I put together the Information and Communication Industries Revenue (ICIR) Dataset.  It contains revenue data for the information sector (which includes communications industries) and advertising and related services from the Service Annual Survey for 2000, 2004, and 2007.  These three report years include annual data spanning 1998 to 2007, and, in most cases, contain the most recent revisions of previous years' data.  Because many reporting categories have changed across this decade, all the data cannot be easily organized into one consistent, detailed scheme spanning the decade.  Having the data in an analytically convenient form facilitates extracting, re-organizing, manipulating, matching, and comparing data of interest.

You should refer to the official Service Annual Survey reports to understand and validate the ICIR Dataset.  The variable named "lid" organizes the ICIR Dataset in the line order of the Service Annual Survey reports.  The ICIR Dataset includes some estimates that are not Census Bureau estimates.  See the summary tab for a description of these additional estimates.   To understand the meaning of blank values in the ICIR Dataset, refer to the original Service Annual Survey reports.  The dataset has a complex category scheme that does not include complete partitions at some levels.  Once again, refer to the original reports to understand the items.

Here's the Information and Communication Industries Revenue (ICIR) Dataset as a browser-friendly Google spreadsheet.  You can also download the ICIR Dataset as an Excel workbook.

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On 27 March 2007, Ofcom released a statement setting mobile voice call termination charge controls for the next four years. These new charge controls replace charge controls set to expire 31 March 2007. The previous charge controls had been set for 1 September 2005 to 31 March 2006, but then had been extended for additional year. The previous charge controls had been subject to a lengthy, contentious appeal and a revision that eliminated separate control across rather different types of competitors (fixed-mobile termination vs. mobile-mobile termination). In conjunction with issuing the new charge controls, Ofcom began considering revising those controls in view of the impact of indirect routing for mobile number portability on the effective termination charge.

Inter-carrier compensation issues are quite difficult for regulators. Ofcom's recent call termination statement comes about two years after Ofcom initiated formal consideration of new charge controls through publication of a document entitled Wholesale mobile voice call termination -- a preliminary consultation (7 June 2005). Following that preliminary consultation were two other consultations, Wholesale mobile voice call termination -- market review (30 March 2006), and Mobile call termination -- proposals for consultation (13 September 2006).

Economic formalisms seem to constrain Ofcom's ability to do sensible policy analysis. European Commission recommendations urge national regulatory authorities to define, "in accordance with the principles of competition law," a relevant "market" for regulatory action to be "voice call termination on individual mobile networks" (see Framework Directive 2002/21/EC, Article 15). Ofcom carefully considered Significant Market Power (SMP), Countervailing Buyer Power (CBP), a "two-sided market" (that's not meant to be a duplicative description; it's an organization of transactions currently attracting attention in leading economic and business analysis), and a variety of other concerns of the type typically raised in competition cases. In line with EC recommendations, Ofcom then concluded:

There are separate markets for the provision of wholesale mobile voice call termination in the UK to other Communications Providers by each of Vodafone, O2, Orange, T-Mobile and H3G. (paragraph 1.10)

Ofcom deserves respect and appreciation for collecting considerable data and examining in detail the structure of mobile voice services and businesses. However, defining as "markets" individual companies' mobile voice call termination services is conceptually absurd. Such "markets" are by definition "monopolized" by the company with respect to which they are defined.

Competition law should not be allowed to obtain a dominant position in communications policy analysis. A well-established, highly competitive symbolic market for legal and regulatory claims exists within the framework of competition law. That market spurs economic growth for lawyers, economists, regulatory affairs departments, technical consultants, etc. For more inclusive economic development, communication regulators should consider interconnection rules in relation to broad economic development goals.

Having communication service providers earn a large share of their revenue from basic voice communication is likely to impede growth in broadly capable networks and innovative communication services. Ofcom's charge controls set mobile voice call termination rates about 5 pence per minute through 2011. Consider those charges with respect to some real-world communications development goals. Vermont, for example, is pursuing the goal of having for everyone, everywhere state-wide symmetric mobile data service of at least 3 Mb by 2010, and at least 20 Mb by 2013. Such development could easily support zero-price mobile call termination charges. On the other hand, if zero-price mobile termination charges would cause a major loss in revenue to mobile service providers, such charges are much less likely to occur. Through both regulatory lobbying and large expenditures on marketing and promoting, communications service providers can sustain prices with little relation to economic and technical aspects of reality.

Requiring communication providers who offer voice communication to accept voice communication from others at no charge to those others would help to deflate revenue from basic voice communication. One technical description of this sort of interconnection regime is "bill and keep". Discussion of bill-and-keep has tended to focus on inter-carrrier compensation (pie splitting or money-routing) rather than on more important issues of industry structure. Regulation of mobile voice call termination rates has much broader implications for communication service users than pass-through of termination rate reductions or the particular circumstances of mobile voice calls. Regulation that supports per minute pricing of voice communication through the year 2011 does little to foster important communications possibilities that are already clearly visible.

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The largest share of value in communications services is the value of presence. How can communication services providers measure their performance in capturing this value?

Average Revenue Per User's Relation (ARPUR) is a practical measure of presence value. ARPUR is Average Revenue Per User (ARPU) divided by some measure of user's interaction with other users (relations). Such a measure might be the least number of users who account for in total at least 50% of the given user's communication sessions, time, or revenue. The higher the ARPUR, the more the communication service is creating value through presence.

Persons typically value most highly the presence of family and friends. Limitations of time and attention, which good communication services can help to relax, constrain the number of family and friends that a person can sustain in daily interaction. The value of communication with the family and friends that persons do sustain is typically high and enduring. A good business plan for communication service providers is to capture a large share of this value. ARPUR is a metric of success in doing this.

While not often recognized as such, telephone service is a quintessential presence business. A study in the U.S. in the 1970s found that 50% of residential calls go to a set of five numbers. I think this has been roughly true for personal telephone service in most places throughout the history of telephone service. Creating more value in these relations creates value in this kind of communication service. It's a presence business.

For contrast, consider an anti-presence communication service: telemarketing. Telemarketing involves mass distribution of information of interest only to a small number of persons. The telemarketer typically does not know any of the persons whom she contacts and does not typically repeatedly contact them. Moreover, most of her contacts probably wish that they did not know that she existed. A good communication service for telemarketing users might have a high ARPU. But its ARPUR would be near zero. It's not a presence business.

ARPUR might help a new communication service provider steer its business between the imperatives of viral marketing and the long-term value of presence. Viral marketing, like infectious diseases, propagates most rapidly with some highly promiscuous agents. A communication service that wants to succeed virally needs to enable promiscuous agents. On the other hand, promiscuity is inconsistent with large presence value. The business challenge might be to manage change from low initial ARPUR to strongly rising ARPUR.

Suggested analytical exercise: Consider ARPUR for portraiture over the past 500 years. Take the user relation to be the gift of a picture of oneself to another person. What has been the trend in ARPUR? What has been the trend in total portraiture industry revenue? For relevant information on the economic history of the photography business, see Photographs and Telephone Calls in Sense in Communication.

Take-away message for busy communications executives: Get out of the telecom toilet and get your business purring. Stop sniffing ARPU and start making ARPUR!

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About Oct. 20, 2005, U.S. Public Broadcasting Service (PBS) stations broadcast a documentary entitled Breaking the Silence: Children's Stories. Reviewing the documentary, the ombudsman for PBS and the ombudsman for the Corporation for Public Broadcasting (CPB) both expressed concern that the documentary did not fairly document the problem it addressed.

In response to numerous complaints of bias, on Dec. 21 PBS issued a statement that declared, "The producers approached the topic with the open mindedness and commitment to fairness that we require of our journalists." Enjoy your holiday! No problem here. We hope that you'll forget about this little documentary and troublemakers like these before the time comes to celebrate the Martin Luther King, Jr. Holiday.

A subsequent letter (pdf) from a media watchdog group to the Inspector General of the Corporation for Public Broadcasting suggests that at least some observers consider the PBS review for bias to have been highly biased. The PBS institutional review also seemed to fail to impress the CPB ombudsman. He subsequently declared, "I found the program to be so totally unbalanced as to fall outside the boundaries of PBS editorial standards on fairness and balance."

Bias has been a perennial concern with respect to traditional media. Recently, a study of media bias (pdf draft) , forthcoming in a leading economics journal, found empirical evidence of media bias. Some blogs, which make no claim to be unbiased, have sharply criticized the study.

Evaluating media bias is difficult discursively and institutionally. New video distribution networks, along with cheap, powerful, video cameras and desktop video editing software, give everyone a chance to be a video producer. That might help educate persons to evaluate bias more reasonably. I encourage you to consider this unbiased news video reporting on the Galbi brothers' 800 meter challenge!

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About the year 2001, 40% of persons in the world lived in countries where there was less than one fixed-line telephone per hundred persons. Good radio regulation can help to foster rapid development of communication capabilities for many persons around the world.

Björn Wellenius and Isabel Neto of the World Bank recently posted a paper, The Radio Spectrum: Opportunities and Challenges for the Developing World. I hope this important topic gets more attention in development economics.

Update: Check out this very impressive website and book on Wireless Networking in the Developing World.

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