The OECD has released its latest OECD Communications Outlook.
On his blog, Michael Geist provided an overview of his opinions on reading the report last week.
I agree with one aspect of Michael’s review, that I would encourage you to download the report and read it yourself. As Michael says, it is necessary to have an objective reading of the report.
there is so much in this report that everyone can find something to either gloat or criticize
Personally, I don’t end up with the same conclusions that some people have found in the report. It just seems to me that there is much that is being taken out of context.
While Canadian wireless prices were found to be better than US prices in all OECD baskets, I would like to suggest that this was not evidence of anything other than the inability to compare pricing in global markets. There are just too many variables.
For example, some countries offer substantial handset subsidies that simply aren’t counted in any monthly pricing study I have seen.
Further, the OECD study was biased by Euro-centric usage models with low volumes of outbound calls and high numbers of SMS messages. For example, the low volume basket had one call per day, 1.1 SMS messages per day and 8 MMS messages per year. High volume had only 4.5 calls per day (any of you ever had that light a day of usage, excluding days you forgot your phone at home?), nearly 2 SMS per day and a MMS per month.
What the OECD has demonstrated is that pricing studies can show different results based on the baskets being studied.
Contrary to impressions you may have picked up elsewhere, I don’t think the OECD study found that Canadian ARPU increased because of lack of competition. Indeed, the OECD had a review of the competitive landscape in various global markets (see Table 2.2) and Canada’s marketplace looks pretty good. In fact, if you want to get selective in excerpting factoids, the OECD study acknowledges that
The largest growth in total cellular mobile traffic from 2003 to 2005 was in Turkey (67%), followed by the United States (43%), Greece (40%), Denmark (36%) and Canada (36%).
In its comments on the issue of Average Revenue per User (ARPU), Michael Geist says that
The OECD found that, on average, mobile revenue per subscriber dropped from 2003 to 2005 due to increased competition. In Canada, revenue increased during that period.
Let’s have a look at what the report says:
Fierce competition in mobile markets has led to a decline in the average revenue from mobile subscribers in the OECD. Between 2003 and 2005, the average revenue per mobile subscriber fell just over 0.3%. The largest drops in income per subscriber were in the Netherlands, Poland and the United States. Revenues tend to fall in areas with intense competition among operators, areas with increasing proportion of pre-paid accounts, or areas that have historically had very high mobile prices and are now experiencing more competition. Japan leads the OECD in mobile revenue per subscriber at USD 860 per year. The lowest revenues per subscriber are in Turkey, Poland and the Czech Republic.
The OECD report failed to mention another factor that impacts ARPU: SIMs per user. The OECD is really reporting revenue per SIM; the more SIMs per user, the lower the revenue per SIM.
Figure 3.8 on page 77 of the report graphically shows the ARPU shift in the OECD countries. The average reduction is more or less rounding error – 0.3%, or $0.12 per month on a $40 per month bill. Canada’s ARPU increase is in line with that of most countries usually proclaimed as ‘more advanced’ in their states of competition: Austria, Belgium, Korea, Norway, Denmark, Greece, France, the UK, Germany, Italy and on and on.
ARPU rose in Canada and these countries because users found value in adopting additional mobile services. As we all know, rates fell and are continuing to come down. Obviously, people in almost all of the OECD markets have purchased more services.
Comparative studies are far more complex than the simplistic and self-serving excerpts that are typically getting presented by all kinds of groups. Let’s make sure that we’re not selective in presenting partial facts.
I would love to see a more academic and more complete discussion and review of the factors that lead to differences between countries. Without an agenda.
By the way, the OECD report is marred by at least one glaring data error: BCE’s revenues in Table 1.1 ($3.345B) appear to be for one quarter, rather than the entire year. As a result, BCE is listed farther down the table than it should be.
What other errors aren’t as obvious?
Update [July 24, 11:00 am]
FCC Commissioner Robert McDowell has an Opinion piece in today’s Wall Street Journal, called Broadband Baloney. He also notes Euro-centric methodological flaws in the OECD report.
He concludes:
When it comes to broadband policy, let’s put aside flawed studies and rankings, and reject the road of regulatory stagnation. In the next few years, we will witness a tremendous explosion of entrepreneurial brilliance in the broadband market, if the government doesn’t micromanage. Belief in entrepreneurs and a light regulatory touch is the right broadband policy for America.
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