4 countries with IRAs than countries with private involvement in the local loop in 2003 while the opposite is true for developed countries. In other words, a country does not seem to need a regulator to attract private operators and a regulator does not guarantee that the government will be open to the private sector in its local loop. Second, it shows that, while on average the introduction of the private sector was simultaneous in developed countries (in 1997), private sector participation briefly preceded the creation of regulatory agencies in developing countries.

# **3. TELECOM PERFORMANCE AND ITS DIMENSIONS**

In this section, we first discuss the dimensions of telecom performance of interest to policymakers. Then we define the performance indicators we have selected in order to analyze the impact of reform policies on sector performance and present basic data for developing and developed countries.

It could be argued that the five main dimensions of telecom performance of interest to policymakers are fiscal costs, access rates, affordability of services, quality of services, and productivity. The main challenge is thus to identify economic indicators that best approximate these dimensions in practice and for which data are available for a large sample. The need for wide coverage essentially rules out the fiscal dimension of the analysis. There is essentially no statistical information on the level of subsidies in the sector before and after reforms. While in many countries, in particular the richest ones, it could be argued that reforms have simply ended any type of public financing in the sector, for many of the poorest, this assumption does not necessarily hold. In the poorest parts of Central America or Sub-Saharan Africa for instance, subsidies are still key sources of financing for connectivity in rural or remote areas.

Access indicators should measure the extent to which people have the right to obtain or take advantage of telecom services—it does not necessarily mean they use the service. Affordability indicators should give a sense of the extent to which telecom services are provided at a reasonable price. Quality indicators should encompass both qualitative and quantitative measures of quality. The former captures perceived quality or costumer satisfaction, while the latter captures technical quality reported by the operators with a low degree of discretion involved. Finally, productivity indicators should provide a measure of the improvements on the production side of the business.<sup>10</sup> With this in mind, we have selected six indicators from the ITU. The proxy for access is the number of telephone subscribers defined as “total telephone (fixed mainlines plus cellular) subscribers per 1000 inhabitants.” This variable or one of its variations has been used in almost all previous papers. We use telephone subscribers, as opposed to mainlines, in order to have a better representation of the current telephone market in which mainlines and mobiles are substitutes. Even though this may be the best access indicator available, it is far from perfect. As Wallsten (1999) explains, it is not possible to 10 See Estache and Goicoechea (2005b) for more details on performance dimensions.