Comparing prime rib with ground meat

There is a story of a shopper going into butcher shop to ask about getting a prime rib roast. The butcher responds that it is $20 per kilo. The shopper responds saying that the butcher down the block only charges $15 per kilo for prime rib. The butcher replies, “so why don’t you buy it from them?” The customer says that the other shop doesn’t have any prime rib, to which the butcher answers “well, when I am sold out, I only charge $10.”

In the past week, Rewheel released another misleading and problematic report [pdf] that confuses international pricing variations with the level of competitiveness in various countries. Rewheel has been criticized in the past, with NERA saying that “policy makers and regulators should ignore” its international pricing study.

There are all sorts of methodological problems with Rewheel’s latest report, “4G&5G connectivity competitiveness 2020”, such as arbitrary selections of plans, arbitrary weighting assignments, and artificially assigning prices to service providers that don’t have offerings that line up with Rewheel’s buckets. But among the most egregious problems is the failure to consider quality in examining measures of competitiveness.

Using Rewheel’s artificial scorecard, the consultancy concluded that “Telus, Bell and Rogers Canada had the least competitive monthly prices”. But, what was Rewheel actually looking at? A careful examination of the chart shows that Rewheel has combined smartphone plans with mobile data plans and apparently, has also added fixed wireless data plans into the mix. It is no wonder the International Center for Law and Economics referred to a previous Rewheel study as a “careless mish-mash of data points from which no reliable conclusions can be drawn.”

Indeed, the Rewheel report itself showcases some of the flaws in its own methodology with two of its specific comparisons:

  • MIN monthly price for 1 gigabyte: 4G&5G smartphone plans with at least 100 mins, 1 gigabyte and 1Mbit/s peak speed
    • Jio India was the operator in 2H2020 with the lowest monthly price for a 4G or 5G smartphone plan that included at least 100 mins, 1 gigabyte and 1 Mbit/s peak speed.
    • Telus Canada was the operator in 2H2020 with the highest monthly price (~16x higher than Jio’s).
  • MIN monthly price for 100 gigabytes: 4G&5G mobile broadband plans with at least 100 gigabytes and 50Mbit/s peak speed
    • Jio India was the operator in 2H2020 with the lowest monthly price for a 4G or 5G mobile broadband plan that included at least 100 gigabytes and 50 Mbit/s peak speed.
    • Rogers Canada was the operator in 2H2020 with the highest monthly price (~17x higher than Jio’s).

While Rewheel may have been seeking to shore up its assertion that Canada’s prices are the least competitive, these direct comparisons highlight the flaws in the research methodology.

In the first comparison, Rewheel examines prices for a 1 Mbps 4G/5G plan. Such low speed data plans aren’t sold in Canada. So Rewheel is comparing the prices offered by TELUS, one of the world’s fastest networks (87.3 Mbps) with the price of service on a network that offers barely a tenth of the speed (9.7 Mbps).

In the second case, we are supposed to be comparing 50 Mbps services, but Jio doesn’t achieve such speeds. In its notes, Rewheel claims “Countries were [sic] operators did not sell a plan that met all the criteria listed above for a given metric (e.g. 5G smartphone plan with 1000mins, UNLIMITED data and 500Mbps) were assigned the highest monthly price among all 48 countries for that given metric.”

How can Jio be ranked as the lowest price provider when it offers a service that doesn’t come close to the 50 Mbps metric? Rewheel is comparing the price of prime rib with the price of ground meat, another careless mish-mash.

You just cannot compare prices without consideration of the quality of the products or services. And you cannot draw conclusions on level of competitiveness in a market based solely on prices.

As Dr. Christian Dippon of NERA has said in the past “Quite simply, a market cannot both be noncompetitive and offer some of the best mobile wireless services in the world.”

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