Network use metrics: Good versus easy and why it matters

Introduction

Telecoms, like much of the business world, often revolves around measurements, metrics and KPIs. Whether these relate to coverage of networks, net-adds and churn rates of subscribers, or financial metrics such as ARPU, there is a plethora of numerical measures to track.

They are used to determine shifts in performance over time, or benchmark between different companies and countries. Regulators and investors scrutinise the historical data and may set quantitative targets as part of policy or investment criteria.

This report explores the nature of such metrics, how they are (mis)used and how the telecoms sector – and especially its government and regulatory agencies – can refocus on good (i.e., useful, accurate and meaningful) data rather than over-simplistic or just easy-to-collect statistics.

The discussion primarily focuses on those metrics that relate to overall industry trends or sector performance, rather than individual companies’ sales and infrastructure – although many datasets are built by collating multiple companies’ individual data submissions. It considers mechanisms to balance the common “data asymmetry” between internal telco management KPIs and metrics available to outsiders such as policymakers.

A poor metric often has huge inertia and high switching costs. The phenomenon of historical accidents leading to entrenched, long-lasting effects is known as “path dependence”. Telecoms reflects a similar situation – as do many other sub-sectors of the economy. There are many old-fashioned metrics that are no longer really not fit for purpose and even some new ones that are badly-conceived. They often lead to poor regulatory decisions, poor optimisation and investment approaches by service providers, flawed incentives and large tranches of self-congratulatory overhype.

An important question is why some less-than-perfect metrics such as ARPU still have utility – and how and where to continue using them, with awareness of their limitations – or modify them slightly to reflect market reality. Sometimes maintaining continuity and comparability of statistics over time is important. Conversely, other old metrics such as “minutes” of voice telephony actually do more harm than good and should be retired or replaced.

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Looking beyond operator KPIs

Throughout the report, we make a semantic distinction between industry-wide metrics and telco KPIs. KPIs are typically generated for specific individual companies, rather than aggregated across a sector. And while both KPIs and metrics can be retrospective or set as goals, metrics can also be forecast, especially where they link operational data to other underlying variables, such as population, geographic areas or demand (rather than supply).

STL Partners has previous published work on telcos’ external KPIs, including discussion of the focus on “defensive” statistics on core connectivity, “progressive” numbers on new revenue-generating opportunities, and socially-oriented datasets on environmental social and governance (ESG) and staffing. See the figure below.

Types of internal KPIs found in major telcos

Source: STL Partners

Policymakers need metrics

The telecoms policy realm spans everything from national broadband plans to spectrum allocations, decisions about mergers and competition, net neutrality, cybersecurity, citizen inclusion and climate/energy goals. All of them use metrics either during policy development and debate, or as goalposts for quantifying electoral pledges or making regional/international comparisons.

And it is here that an informational battleground lies.

There are usually multiple stakeholder groups in these situations, whether it is incumbents vs. new entrants, tech #1 vs. tech #2, consumers vs. companies, merger proponents vs. critics, or just between different political or ideological tribes and the numerous industry organisations and lobbying institutions that surround them. Everyone involved wants data points that make themselves look good and which allow them to argue for more favourable treatment or more funding.

The underlying driver here is policy rather than performance.

Data asymmetry

A major problem that emerges here is data asymmetry. There is a huge gulf between the operational internal KPIs used by telcos, and those that are typically publicised in corporate reports and presentations or made available in filings to regulators. Automation and analytics technologies generate ever more granular data from networks’ performance and customers’ usage of, and payment for, their services – but these do not get disseminated widely.

Thus, policymakers and regulators often lack the detailed and disaggregated primary information and data resources available to large companies’ internal reporting functions. They typically need to mandate specific (comparable) data releases via operators’ license terms or rely on third-party inputs from sources such as trade associations, vendor analysis, end-user surveys or consultants.

 

Table of content

  • Executive Summary
    • Key recommendations
    • Next steps
  • Introduction
    • Key metrics overview
    • KPIs vs. metrics: What’s in a name?
    • Who uses telco metrics and why?
    • Data used in policy-making and regulation
    • Metrics and KPIs enshrined in standards
    • Why some stakeholders love “old” metrics
    • Granularity
  • Coverage, deployment and adoption
    • Mobile network coverage
    • Fixed network deployment/coverage
  • Usage, speed and traffic metrics
    • Voice minutes and messages
    • Data traffic volumes
    • Network latency
  • Financial metrics
    • Revenue and ARPU
    • Capex
  • Future trends and innovation in metrics
    • The impact of changing telecom industry structure
    • Why applications matter: FWA, AR/VR, P5G, V2X, etc
    • New sources of data and measurements
  • Conclusion and recommendations
    • Recommendations for regulators and policymakers
    • Recommendations for fixed and cable operators
    • Recommendations for mobile operators
    • Recommendations for telecoms vendors
    • Recommendations for content, cloud and application providers
    • Recommendations for investors and consultants
  • Appendix
    • Key historical metrics: Overview
    • How telecoms data is generated
  • Index

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Network convergence: How to deliver a seamless experience

Operators need to adapt to the changing connectivity demands post-COVID19

The global dependency on consistent high-performance connectivity has recently come to the fore as the COVID-19 outbreak has transformed many of the remaining non-digital tasks into online activities.

The typical patterns of networking have broken and a ‘new normal’, albeit possibly a somewhat transitory one, is emerging. The recovery of the global economy will depend on governments, healthcare providers, businesses and their employees robustly communicating and gaining uninhibited access to content and cloud through their service providers – at any time of day, from any location and on any device.

Reliable connectivity is a critical commodity. Network usage patterns have shifted more towards the home and remote working. Locations which were previously light-usage now have high demands. Conversely, many business locations no longer need such high capacity. Utilisation is not expected to return to pre-COVID-19 patterns either, as people and businesses adapt to new daily routines – at least for some time.

The strategies with which telcos started the year have of course been disrupted with resources diverted away from strategic objectives to deal with a new mandate – keep the country connected. In the short-term, the focus has shifted to one which is more tactical – ensuring customer satisfaction through a reliable and adaptable service with rapid response to issues. In the long-term, however, the objectives for capacity and coverage remain. Telcos are still required to reach national targets for a minimum connection quality in rural areas, whilst delivering high bandwidth service demands in hotspot locations (although these hotspot locations might now change).

Of course, modern networks are designed with scalability and adaptability in mind – some recent deployments from new disruptors (such as Rakuten) demonstrate the power of virtualisation and automation in that process, particularly when it comes to the radio access network (RAN). In many legacy networks, however, one area which is not able to adapt fast enough is the physical access. Limits on spectrum, coverage (indoors and outdoors) and the speed at which physical infrastructure can be installed or updated become a bottleneck in the adaptation process. New initiatives to meet home working demand through an accelerated fibre rollout are happening, but they tend to come at great cost.

Network convergence is a concept which can provide a quick and convenient way to address this need for improved coverage, speed and reliability in the access network, without the need to install or upgrade last mile infrastructure. By definition, it is the coming-together of multiple network assets, as part of a transformation to one intelligent network which can efficiently provide customers with a single, unified, high-quality experience at any time, in any place.

It has already attracted interest and is finding an initial following. A few telcos have used it to provide better home broadband. Internet content and cloud service providers are interested, as it adds resilience to the mobile user experience, and enterprises are interested in utilising multiple lower cost commodity backhauls – the combination of which benefits from inherent protection against costly network outages.

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Network convergence helps create an adaptable and resilient last mile

Most telcos already have the facility to connect with their customers via multiple means; providing mobile, fixed line and public Wi-Fi connectivity to those in their coverage footprint. The strategy has been to convert individual ‘pure’ mobile or fixed customers into households. The expectation is that this creates revenue increase through bundling and loyalty whilst bringing some added friction into the ability to churn – a concept which has been termed ‘convergence’. Although the customer may see one converged telco through brand, billing and customer support, the delivery of a consistent user experience across all modes of network access has been lacking and awkward. In the end, it is customer dissatisfaction which drives churn, so delivering a consistent user experience is important.

Convergence is a term used to mean many different things, from a single bill for all household connectivity, to modernising multiple core networks into a single efficient core. While most telcos have so far been concentrating on increasing operational efficiency, increasing customer loyalty/NPS and decreasing churn through some initial aspects of convergence, some are now looking into network convergence – where multiple access technologies (4G, 5G, Wi-Fi, fixed line) can be used together to deliver a resilient, optimised and consistent network quality and coverage.

Overview of convergence

Source: STL Partners

As an overarching concept, network convergence introduces more flexibility into the access layer. It allows a single converged core network to utilise and aggregate whichever last mile connectivity options are most suited to the environment. Some examples are:

  • Hybrid Access: DSL and 4G macro network used together to provide extra speed and fallback reliability in hybrid fixed/mobile home gateways.
  • Cell Densification: 5G and Wi-Fi small cells jointly providing short range capacity to augment the macro network in dense urban areas.
  • Fixed Wireless Access: using cellular as a fibre alternative in challenging areas.

The ability to combine various network accesses is attractive as an option for improving adaptability, resilience and speed. Strategically, putting such flexibility in place can support future growth and customer retention with the added advantage of improving operational efficiency. Tactically, it enables an ability to quickly adapt resources to short-term changes in demand. COVID-19 has been a clear example of this need.

Table of Contents

  • Executive Summary
    • Convergence and network convergence
    • Near-term benefits of network convergence
    • Strategic benefits of network convergence
    • Balancing the benefits of convergence and divergence
    • A three-step plan
  • Introduction
    • The changing environment
    • Network convergence: The adaptable and resilient last mile
    • Anticipated benefits to telcos
    • Challenges and opposing forces
  • The evolution to network convergence
    • Everyone is combining networks
    • Converging telco networks
    • Telco adoption so far
  • Strategy, tactics and hurdles
    • The time is right for adaptability
    • Tactical motivators
    • Increasing the relationship with the customer
    • Modernisation and efficiency – remaining competitive
    • Hurdles from within the telco ecosystem
    • Risk or opportunity? Innovation above-the-core
  • Conclusion
    • A three-step plan
  • Index

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