A week and a half ago, ISED released the latest edition of its series of telecom price studies. I’m going to look at that report over the course of a few posts.
It’s a real challenge to create meaningful international telecom price studies.
Remember when two dozen leading economists and academics said, “The Rewheel story is easy to understand. It is also completely wrong.” and “Rewheel’s rankings are of no value in comparing prices and assessing the level of competition in wireless markets.” Rewheel’s reports were characterized by ICLE as “a careless mish-mash of data points from which no reliable conclusions can be drawn.” Last week’s report [pdf, 1.2 MB] lives up to that billing.
I looked at a couple well publicized international telecom price studies about a year and a half ago. In that post, I write of my frustration with “the misinformation from pseudo-statistical studies being circulated with viral velocity”. I pointed out what should be easy to detect flaws with the methodology being used by Cable.co.uk.
Typical problems with telecom price studies arise from overly simplistic examination of the different countries. While most studies adjust for currency variations, very few make adjustments for PPP (purchasing power parity). If consumers are earning 80% less in one country, it doesn’t help for them to pay 25% less for their digital connections.
Fewer still account for variances in quality of the products and services, such as speeds, coverage, costs of building networks. That can be like comparing prices for bicycles and motorcycles. A recent PwC study [pdf, 660 KB] compared Canada to the rest of the G7 plus Australia. Canadian carriers invest almost double the amount capital measured on a per subscriber basis ($168 vs $87), with capital intensity 35% more (19% versus 14%).
There are hundreds (or thousands) of price plans available in each country. It is virtually impossible for telecom price studies to look at which plans are the most popular in each market. And then, how would a study start to compare those to the plans in other countries? Arithmetic averages (means or medians) are somewhat meaningless. Are the plans that most consumers are buying are weighted more heavily than those on extreme ends of the menu? In countries with 150 to 200% mobile penetration rates, does the study account for people paying multiple bills?
Let’s consider the telecom price study released earlier this month by Innovation, Science and Economic Development: “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2022 Edition” [pdf version, 1.8MB]. Wall Communications prepared the report for ISED.
As in some other recent years, the 2022 edition is missing a section on caveats to the interpretation of the findings. Those notes used to be an important part of the study. For example, in 2016, the ISED study included a page of notes, including these two paragraphs:
Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks. As wireless technology is constantly improving and consumers demand ever more bandwidth and data caps, service providers are constantly increasing features. In the Study, these changes are reflected by the need to regularly update the definition of service baskets. Hence, price increases in those baskets may in part, simply reflect better service levels offered to consumers.
This Study did not take into account the network technologies deployed in the networks nor the speed or quality of service of those networks. Finally, this Study did not account for any cost of service or socio-economic factors that may be relevant for price differences across different domestic and international jurisdictions. Thus, factors such as population density, terrain and climate have significant impacts on the cost of service. Similarly, socio-economic factors such as affordability indicators (i.e. mobile prices in relation to disposable income), number of handsets per subscriber, number of minutes of usage per subscriber and other factors were not within the scope of this Study.
The 2022 edition includes a few caveats in its Introduction, but it would benefit from a separate “reader’s notes” section.
I’ll look at the results of ISED’s 2022 price report in another post later this week.