The International Telecommunications Society met in Perth, Australia earlier this week. Last year’s conference was in Montreal. There was an interesting paper [ pdf, 57KB] examining wireless payment models presented by Sandy Levin, co-authored by Stephen Schmidt of TELUS.

The paper contrasted the benefits of Wireless Party Pay (WPP) models (in use in the US, Canada, Hong Kong and Singapore) with Calling Party Pay (CPP) models (in use in most of the rest of the world).

CPP was put in place to encourage the adoption of mobile phones. A mobile phone owner could get a phone and keep it on and receive unlimited calls at no charge. The calling party paid, and the calling party, rather than the receiving party, would decide if the call was worth the price. This did encourage the adoption of mobile phones, but it required a separate mobile code so the calling party knew he was being charged.

The paper notes that CPP has resulted in high rates, especially for call termination, because service providers were permitted to exploit the market power resulting from their call termination bottleneck.

For whatever reason, regulators may have correctly found retail service to be competitive and as such, they did not regulate the prices of retail service. However, regulators in CPP countries have only started to turn their attention to the price of call termination even though it was a bottleneck giving the service provider exploitable market power.

The paper also has an observation about super-normal mobile penetration rates:

What is measured is the number of SIM cards. Partly because of high pricing, many customers in these countries have more than one SIM card. A visitor to a country who purchases a SIM card is also counted. All of this serves to overstate penetration rates in these countries, evidenced in part by suspiciously high “penetration” rates, often over 100%. The significantly lower penetration rates in the U. S. and Canada, where SIM cards are less common and where individuals generally have only one mobile telephone number, are a more accurate measure of actual penetration because it is closer to a measure of the number of individuals who have mobile service than in countries that count SIM cards.

The paper ends with an interesting conclusion. In countries that retain CPP, call termination rates will need on-going regulation because, even though mobile service might competitive at the retail level, mobile service providers can exploit the call termination bottleneck.

When the OECD first released highlights from its Broadband Report in early June, I started to ask about the possibility of the OECD getting it wrong.

Right away, I asked why we blindly accepted the OECD clearly being wrong about Canada’s fastest available internet speeds. To the OECD, Videotron’s world leading DOCSIS 3.0 deployment in 2008 just didn’t happen.

As it turns out, the OECD spends most of its time looking at incumbent telcos probably because most OECD countries don’t enjoy two separate wires into the household. As a result, the OECD frequently ignores the cable industry which, in Canada, has a 15% market share advantage over the so-called “incumbent” phone companies.

The most glaring error – and the lie that keeps getting repeated – was the OECD saying that on average, Canadians are paying $26.11 (USD) per megabit for our broadband. It isn’t true. It is just plain wrong.

How did the OECD mess up so badly on this one?

It turns out that the OECD collected its data by looking at advertisements – in the case of Canada, they looked at 16 ads: 5 DSL offers from Bell, 4 cable ads from Rogers, 4 cable ads from Shaw and 3 WiMax offers from Bell. There was no weighting based on market share; just price divided by Mbps. Add up the results, divide by the number of ads, there you go.

So Canada’s national average was skewed because the OECD happened to base 20% of its assessment on a product like WiMax which has less than a 5% share of the market. The OECD number was further skewed by giving equal weight to ads for Lite and Ultra-lite offers. So, by OECD logic of applying equal weight to each of the 16 ads, about half of Canadians are subscribing to wireless or light services – which have a much higher cost per megabit than the mainstream broadband services.

The OECD took the time to look at 71 ads from Australia, including 8 different offers from Bigpond at 8Mbps and 10 different offers from Bigpond at 30Mbps. There were 22 offers examined from Denmark; 36 from Finland; 36 from New Zealand. Denmark and Finland are countries with populations comparable to the Greater Toronto Area, yet the OECD did more than double the level of research for Finland than all of Canada. New Zealand has an even smaller population.

Australia has two thirds of Canada’s population, but the OECD looked at more offers from a single Australian ISP than it did for all of Canada. Had the OECD included multiple high speed offers from Canadian ISPs, its portrayal of Canada’s price performance would have been much lower. The OECD looked at more offers from a small Danish FTTH company with 6500 customers than it did from Bell Canada.

Why would the OECD use such poor data collection methodology?

Why are members of Canada’s media reluctant to critically look beyond the OECD headline numbers?

Why are Canadian government officials not getting such flaws fixed?

By the way, in the OECD analysis, there are only 4 WiMax prices examined in the whole study: 3 from Canada and one from Norway. The pricing from Canada was lower.

Despite the OECD fixation with some smaller FTTH plays, there was no mention of similar Canadian alternatives like Novus that offer fibre to the premises based services. Yesterday, Novus announced that it was upgrading each of its internet services by 10Mbps, with maximum data rates now going up to 60Mbps.

---

Update [August 20, 9:30 am]
Economist Suzanne Blackwell of Giganomics Consulting has done considerable work taking apart the OECD report and she has an excellent posting this morning that looks at Garbage In – Garbage Out that resulted in the flawed OECD results. She points out that the CRTC has found our price per megabit to be less than a quarter of what the OECD has reported, putting Canada into the ranks of the world’s least expensive broadband services.

Forbes had an article earlier this week about the slowdown in growth in US broadband subscriptions.

It isn’t a contraction in the market, it is a reduction in net additions. Only 634,000 new subscribers signed up in the US in the second quarter of 2009. Canada also saw smaller activation numbers. Second quarter is said to be generally slow, perhaps because of student outward migration, although the economy may be making this year especially tough.

In the meantime, Rogers launch of its Ultimate 50Mbps product should heat up the back to school market.

Note: the CBC story on Rogers’ Ultimate launch said that Shaw and Eastlink top out at 25MBps and 15Mbps respectively. Since last February, Shaw actually has been offering the fastest broadband on the continent with its Nitro service, operating at 100Mbps and offering 400GB per month for data transfer.

A letter [pdf, 1.52MKB] to the FCC, the CTIA (the US wireless association) refuted the OECD study that ranked the US dead last in its wireless rankings.

What makes the letter especially interesting is that it was sent in mid-May, long before the OECD’s ridiculous results. The CTIA stats aren’t produced by the industry association; the bulk of the tables are sourced from Merrill Lynch’s quarterly Global Wireless Matrix report.

Among the statements that you will find:

• the US has the lowest average cost per minute [Canada is ranked 5th]
• the US ranks right behind Britain in market share for top two wireless service providers [Canada ranks 4th]

Check out the letter.

While recent figures have been produced [ pdf, 110KB] that point to a decrease in peer-to-peer music traffic, an article in Forbes points to a dramatic increase in video piracy using p2p.

Traffic may be shifting from music to video, perhaps because broadband speeds enable pretty fast conventional file transfers of the much smaller audio files and perhaps because of the ready availability of most content from authorized download sites. It is the growth in video piracy that caught my eye.

As an indication, the Forbes article comments about last year’s top downloaded film, The Dark Knight.

More significant may be the enormous growth in peer-to-peer downloads. The Dark Knight’s 7 million downloads wouldn’t even place the film in this year’s top 10 pirated films. Even marginally successful films like The Day the Earth Stood Still and Transporter 3 were pirated close to 8 million times so far this year.

The Music Ally study [ pdf, 110KB] about the softening in music file transfers provides an indicator of file sharing trends: “the percentage of music fans who have ever file-shared has, unsurprisingly, increased, rising from 28% in December 2007 to 31% in January 2009.”

Video traffic on the internet helps drive broadband adoption and demand for higher speed services, but presents a challenge for effective network management to ensure a satisfactory consumer experience.

As traffic patterns continue to evolve, will network operators have sufficient tools and flexibility to respond?