Shaping the Future of Regulators

Digitalisation of processes and regulatory delivery in the Peruvian telecommunications sector: Case study on the Telecommunications Regulator (OSIPTEL)

Context

OSIPTEL (Organismo Supervisor de Inversión Privada en Telecomunicaciones) is one of four economic regulators under the aegis of the Presidency of the Council of Ministers, created in the 1990s to oversee Peru’s transition to a liberalised economy.1 It is a specialised and decentralised regulatory body with technical, administrative, economic and financial autonomy in charge of the regulation of Peruvian telecommunications’ markets.

Its functions are:

• to set tariffs for public utilities in the telecommunications sector

• to establish norms and rules

• to supervise compliance with legal framework

• to enforce regulations

• to act as second instance for customer claims

• to act as competition agency for telecommunication market.

The telecommunications industry is characterised by its technological dynamism. This constant change promotes the existence of new services, upgrades on existing services as well as more efficiency on markets. In particular, wireless technologies have become an inflexion point on the deployment of networks, which allows for increased coverage and access.

In Peru, mobile phone access went from 35% of total households to more than 95% at a national level (70% in rural areas) between 2014 and 2019. In addition, the number of mobile phone lines went from nearly 3 million to more than 40 million and the traffic increased from nearly 45 billion to more than 70 billion minutes in the same period. Mobile internet started in 2010 and nowadays is the preferred service. Investment registered an increase of more than USD 1 billion between 2014 and 2018. Internet usage increased fourteen-fold between 2014 and 2018. Traffic and number of calls have also increased.

Not surprisingly, the rates for these services have decreased. Mobile phone rates went from more than 35 cents a minute in 2014 to nearly 6 cents these days. As for Internet, the cost for a megabyte went from more than 10 soles to 10 cents on the same period. Industry income has also increased the last four years but at lower rate.

Nevertheless, some remarks have to be made:

• Market structure has changed (the fixed market dropped its market share from 11% to 4% and mobile equipment rose from 8% to 16%).

• The average revenue per user (ARPU) keeps diminishing (on fixed internet from 85 soles to 68 soles and on mobile voice services from 23 soles to 17 soles between 2014 and 2018).

• Income distributes between more competitors (the main two operators went to hold from around 90% of the industry income to 70%).

• Telecommunications have already been deployed to the most profitable areas and the very large majority of households have some type of telecommunication service. In turn, the firms operate in a scarcer telecommunication environment. The challenge they face include:

• It is difficult to reach people and areas that do not have yet access to the telecommunication services (far from the cities, less accessible and low-density areas).

• Deployment costs on uncovered areas are remarkably higher.

• Income and operation margins have decreased.

• It is difficult to get authorisations for deployment of infrastructure.

• Existent capacity is almost completely used and users are not faithful to a brand.

Issues

All these changes, which have taken place over the last four years, added a lot of complexity to the industry and to the role played by the regulator. Communication technologies are part of consumers’ everyday life, and they even govern some aspects of their life. In addition, consumers know more about technologies and their uses. As a result, they have become more demanding and meeting this demand has become more complex for the market and the regulator. In particular, the Peruvian telecommunications regulator faces decreasing income (result of more competition on markets) and more requirements for consumers who demand that the government (regulator) guarantees the meeting of their expectations on services.

Even thought, OSIPTEL do have the power, legal framework and functions to face this new context, management’s capacities could fail short, considering restrictions on economic resources and lack of agility because of legal constraints for public entities. Actually, we had Therefore, the soon we implement improvements on process in spite of the mentioned limitations, the better, since we would have more degrees of freedom to face upcoming challenges.

In this context, regulators must define a strategy to face the following challenges:

• Gaining speed and flexibility to meet the expectations of the public.

• Achieving their goals of promoting competition, quality on telecommunication services, good consumer services’ and telecommunications’ markets development.2

• Dealing with the constraints in resources (human, technical and financial) and respect legal framework.

Approach and intervention

In order to address the context and challenges described above OSIPTEL decided to make the best use of technologies to be more efficient and effective. This will allow OSIPTEL to save time, money and staff hours, which, in turn, can be used to address new issues and demands. In this order of ideas, OSIPTEL conducted last year an evaluation of all its processes and started to develop a technological tool for open data, entitled “PUNKU”.

Concerning the process evaluation, on 2018 OSIPTEL mapped all processes (formal and informal), analysed their automation level and classified and prioritised them, creating clusters. In total, OSIPTEL mapped 128 processes: 43 strategic, 29 operative and 59 supporting processes. The first cluster to have been evaluated in depth is the one constituted by the following processes:

• inspection

• enforcement

• users’ claims

• documentary procedures, being the processes that more expenses demand for the regulator.

Each process evaluation follows two steps: redesign and implementation.

OSIPTEL have already made some changes on the inspections and users´ claims process, approving last year the New Inspection Approach (Resolution No. 255-2018-CD/OSIPTEL) and starting with electronic notification. The New Inspection Approach searches to save time and money by changing the inspection technique: prioritising connectivity to telecommunication companies (in order to access to on-line information), focusing on three types of information:

• Monitoring of networks (to have information about quality, service interruptions).

• Claims on first instance.3

• Consumers services channels.

Electronic notification is cost efficient, considering that OSIPTEL has to notify more than 250 000 resolutions a year.

In addition, OSIPTEL has already prepared the terms of reference to hire a consultancy service to help with the redesign of all four process of the first cluster, mentioned above.

The consultants must compile information about the process, the main participants, the legal framework, the resources used, the information flow and their quantities, among others and identify main problems as well as propose possible solutions. These solutions must contemplate a process completely digitalised and the technological platforms needed to accomplish this goal. In addition, business intelligence associated with the process should be proposed.

The idea is to have on one side digital files (non-confidential documents) shared with regulated entities and/or users and the public and on the other side a platform to allow the exchange of information with the stakeholders. These exchanges could for instance concern administrative processes or statistics relating to these processes that could help decision making of senior management. For example, an automatic way to have data about which enterprises comply less with regulations, the levels of sanctions imposed in each case, the rules that the operators do not follow or the most popular claims, could serve to better decisions on regulations ex post evaluations and identifying gaps on current rules, as well as to measure our performance and the impact of our regulations.

Regarding open data, OSIPTEL is finalising the implemententation of “PUNKU”, an application that provides statistical information of the telecommunications sector in an interactive way and promote transparency. Information includes data concerning traffic, connections, lines, market share, financial numbers, and claims. Users will have access to general data but can also require reports and indicators (graphics and excel). Consequently, “PUNKU” will enable consumers, enterprises and government to take better informed decisions. Moreover, OSIPTEL will save time on processing data, making graphics and tables and even avoiding information requirements process, since everything will be available in “PUNKU”.

The information that feeds PUNKU is collected quarterly, by semester o year. The operators send this information to OSIPTEL using SIGEP (an on-line system) and after some validations and consistency tests, non-confidential data is transfer to PUNKU to be available to the public. PUNKU is already in place at https://punku.osiptel.gob.pe/.

Results, impact and lessons learnt

The impacts of these changes are not yet entirely measurable, since most of them are still being implemented. Some positive outcomes are listed below.

Concerning the change in approach of the inspection process, (from field inspection to connectivity and in-house analysis), it has been estimated that OSIPTEL would save about 30% of the current budget allocated to its activity of network monitoring. Merely by avoiding trips and interactions with organisations to get information on quality of services, the savings in terms of staff hours must be underlined too, since the efforts to get the correct information (letters, meetings, etc.) are huge.

Savings resulting from “digital file” would also significant. Indeed an inspection file counts on average 105 pages and an enforcement file counts on average 30 pages. Companies usually request copies of all the files at least once during the process. The digital file would allow saving at least the shipping costs and the staff hours required to make copies, to prepare CDs/CDV with information, etc. In addition, having a platform will facilitate a fast exchange of information and promote transparency.

Regarding second instance claims, OSIPTEL had already started to notify electronically. Currently about 20% of the notifications are electronic and it could reach 80% by the end of the year. Considering that OSIPTEL notifies around 23 000 resolutions per month and that the average cost per notification is around USD 1.5, this change would represent more than USD 25 000 in savings per month (around USD 300 000 for a year), without considering staff hours saved. OSIPTEL believes that other improvements on the process could be made and that more technology should be used. This would allow OSIPTEL to reallocate resources to other activities.

Finally, thanks to “PUNKU”, telecommunications market data will be accessible to a wide range of users, making consumers and operators’ decisions more informed and efficient. The regulator will also take advantage of this information on all processes (regulation, inspection, and consumer’s services) and senior executives will have interactive information readily available for decision making. In addition, we will avoid requirements of information (around 150 a year).

Notes

← 1.  It was created by the Legislative Decree No. 702 in 1991 and effectively starting operations in 1994.

← 2.  As stablished on OSIPTEL Strategic Plan 2018-2022, https://www.osiptel.gob.pe/categoria/plan-estrategico-institucional.

← 3.  OSIPTEL is in charge of user claims as second instance, but the majority of them are solved on first instance (more than 95%), meaning that we do not have details about 95% of the claims, information that can be valuable not only for inspection matters but for identify serious market problems.