Producer Price Index Manual: Theory and Practice ... - METAC

10. Treatment of Specific Products
• Number of full-time-equivalent employees,
• Type and location of store,
• Hours of operation,
• Total sales volume, and
• Time since last renovation,
•
10.180 These characteristics are readily available
and, instead of using them directly, it may prove
more effective to transform them into ratios. For
example, forming a ratio of checkouts to store traffic
yields a measure of checkouts per customer that
may indicate better or faster service with all else
remaining equal. Other possible ratios to include
are checkouts to sales, employees to sales, stock
keeping units to store area, employees to store area
and, checkouts to store area.
10.181 A key aspect of retail trade services are the
services that can be linked to the maintenance of an
inventory. However, the valuation of inventories is
difficult to incorporate in price indices. 8
K. Telecommunication, ISIC 642 9
10.182 This section examines the compilation of
the U.S. PPI for a relatively new and difficult component
of the telecommunication industry–wireless
communication.
10.183 The primary output of wireless telecommunications
is that of placing parties in communication
through a radio network, parallel to the traditional
wire line network of the telephone system.
The U.S. PPI program has developed an index for
this industry. Cellular telephone services include
Traditional Cellular Service, Personal Communications
Services (PCS’s), and Enhanced Specialized
Mobile Radio (ESMR) and are defined as being
“voice-grade” and interactive. Paging is defined as
“less than voice-grade” because it involves only the
sending of characters or numbers. Paging services
however, can include customer notification of
voicemail messages waiting at a voice mailbox provided
by the paging company.
8 Diewert, W.E. and A.M. Smith, 1994, “Productivity
Measurement for a Distributive Firm,” The Journal of Producitivity
Analysis, Vol. 5, pp. 335–47.
9 See Gregory Deuchars, Kuniko Moriya, and Junko Kunihiro
"Price Indices for Telecommunications Services,”
Voorburg Group, Statistics Canada Web Site
10.184 There are three types of voice grade wireless
services: Traditional Cellular Service, ESMR,
and PCS’s. The distinction between these is in how
they are licensed and in the frequency and power
level used in transmitting and receiving. To the
buyer, the technical differences between the three
are not noticeable. The services can be augmented
with add-on features, including services such as
voicemail.
10.185 In the United States licenses for Traditional
Cellular Service are granted by the federal government
according to geography. In the 1980s, about
300 licenses were distributed for urban areas and
about 400 for rural areas. There were only two licenses
available for each Metropolitan Statistical
Area (MSA) or Residential Service Area (RSA).
10.186 ESMR systems operate at a lower frequency
and higher power setting than cellular service.
ESMR uses an improved “push-to-talk” technology
previously used only by dispatch services
for taxicabs and mobile repair operations.
10.187 PCS’s are provided in the same manner as
conventional cellular systems, except that license
areas are much larger. These systems work at a
higher frequency and lower power setting, which
require more cell stations in a given area. There
were about five licenses auctioned per MSA, which
greatly increased competition in each area.
10.188 Paging services allow messages to be sent
to a subscriber. Messages can be delivered or stored
for later delivery. The messages can be just numbers
or characters and numbers.
10.189 In the United States, the item classification
is associated with the regulatory designations that
are, in turn, related to the various technologies used
to provide the service.
10.190 The fundamental issue in developing a
pricing methodology was to define a net transaction
price that would reflect discounts, new service
plans, and new service features.
10.191 The price measure for all wireless telecommunications
services was chosen to be the unit
value and is defined in terms of minutes for each
applicable rate for all similar services in the reference
period. All minutes for a particular service are
included in the measurement each month. A unit
value is calculated for that service and represents
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