Search Results for: Rewheel

Earlier this month, I wrote that Rewheel a consultancy based in Finland, had “released another misleading and problematic report” [see: Comparing prime rib with ground meat • November 5, 2020]. It turns out I wasn’t the only one concerned with the quality of the international price comparisons produced by the Finnish company.

Today, a group of 24 leading telecommunications academics, telecom policy experts and economists released a scathing review of Rewheel’s methodology, saying “the Digital Fuel Monitor by Rewheel/research is a prime example of misinformation on the Internet”.

As I have written before, a number of parties around the world have responded to Rewheel’s simplistic analysis in various regulatory fora through the years, warning that the examination of the state of competitiveness in a country is more complex than simply making up some averages and comparing them internationally, as has been Rewheel’s approach. As I wrote a few weeks ago, 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.”

Today’s multi-author report [pdf] assesses Rewheel’s latest ranking method in detail and details the many ways it falls short.

The authors detail the factual errors and logical inconsistencies in Rewheel’s report, and once again conclude Rewheel’s approach is fundamentally flawed.

The strong consensus among the group of experts is to issue a warning about these unscientific studies, that mislead consumers, politicians, competition authorities, and policy makers. (In 2019, Canada’s Department of Innovation, Science and Economic Development (ISED) paid more than $30,000 to Rewheel.)

Given the many theoretical and practical flaws and errors contained in the Rewheel study, we find it of no value when comparing prices internationally or establishing the level of competition in a country. A warning label informing readers about the lack of intellectual rigor and the misleading and incorrect nature of the Rewheel study’s results is appropriate and recommended.

According to the authors, “The Rewheel story is easy to understand. It is also completely wrong.” Further, “Rewheel’s rankings are of no value in comparing prices and assessing the level of competition in wireless markets.”

“Rewheel’s assumptions are unsupported and create distorted rankings.” Rewheel has developed a following, with sensationalist headlines generated from its ‘freemium’ business model reports, enticing various bodies to invest tens of thousands of dollars in its complete reports.

As with much of the information on the Internet, Rewheel follows the freemium model. That is, it publishes attention grabbing headlines and some colorful charts for free, but anyone seeking to understand more about the derivation of the data must pay Rewheel’s fees for the full content.

Like much misinformation circulating on the internet, it is tough to eradicate it. The authors suggest that perhaps it is time for social media outlets to apply one of their warning labels to those retweeting Rewheel’s flawed reports.

Regardless, it is time for Canada’s policy makers and regulatory authorities to relegate Rewheel’s reports to the level of obscurity they so richly deserve.

It appears the Digital Fuel Monitor has once again been shown to be running on empty.

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A report by a Managing Director at NERA Economic Consulting says policy makers and regulators should ignore the Digital Fuel Monitor, an international mobile pricing study regularly published by Finland’s Rewheel Research. According to the new report, there is no “simple fix” for the Digital Fuel Monitor; it needs “a complete redesign of the study’s methodology.”

The Digital Fuel Monitor, published regularly for the past 5 years, is somewhat simplistic (eg. “how many 4G gigabytes will €30 buy”) and many industry observers rely on the abbreviated ‘public’ version of the study. Most have likely never examined the complete report in detail.

Each time Rewheel releases its studies, I have found them to be problematic, especially with some of the conclusions that don’t seem to follow from the methodology of the study. Among other problems, Rewheel’s studies are premised on the overly simplistic belief that low prices are the sole indicator of competitiveness of mobile markets as stated succinctly in a 2017 tweet:

Its statement at the time was in response to a posting from Verizon that pointed to other key indicators of competition: “falling prices, exploding demand, significant investment, boundless consumer choice and innovation.”

The report by Dr. Christian Dippon, Chair of NERA’s Global Energy, Environment, Communications & Infrastructure Practice, challenges the study methodology and conclusions drawn by Rewheel. “Oversimplified and Misleading International Price Comparisons Must Not Guide Policy and Regulatory Decisions” concludes that Rewheel’s report is a “simplistic ranking exercise that assumes away the complexities of an international comparison by treating all plans, networks, and countries as identical. This apples-to-oranges comparison offers no economic insights, and governmental agencies cannot use it as the basis for proper regulatory and policy decisions.”

The report, commissioned by TELUS, takes the reader through what Dr. Dippon calls fundamental and fatal flaws in Rewheel’s approach:

Rewheel’s methodology:

1. ignores all plan differences except the monthly data allowance;
2. ignores all network quality and country cost differences;
3. distorts its results by omitting the most popular plans, including family and prepaid plans;
4. ignores several price elements including multiple plan requirements and activation fees;
5. fails to adjust for PPP; and
6. includes VAT.

Dr. Dippon demonstrates the fallacy of using price as the sole measure of competitiveness by examining Rewheel’s assertions about its home market, Finland.

Rewheel presents Finland as one of the cheapest and most competitive countries in its 41 study countries. Rewheel bases this conclusion on its understanding that Finland offers unlimited data at €25, ahead of most other countries. Rewheel’s own data, however, demonstrate that the average Finnish subscriber does not demand unlimited data. Instead, Rewheel reports that the average Finnish subscriber demands 23.8 GB of data per month, which Rewheel reports costs €25. At this average Finnish demand level, Finland is by far not the cheapest country because Austria, Australia, Romania, Ireland, Slovenia, Sweden, the United Kingdom, Israel, Poland, France, and the Netherlands all offer plans that meet and/or exceed the average Finnish demand level of 23.8 GB with price points cheaper than €25.

Among the other problems discussed by Dr. Dippon is what he terms a failure by Rewheel to consider overall consumer expenditures. For example, Austria has 1.7 mobile subscriptions per person; Canada has 0.865. “By focusing exclusively on the price of a single plan, the Rewheel study fails to recognize that in many of its study countries consumers purchase more than one plan and thus spend more on mobile wireless service per month.”

Specific to Canada, Dr. Dippon points out that “Canada is home to some of the fastest and most advanced wireless networks in the world. Yet, based on its simplistic ranking exercise, Rewheel labels that country [Canada] as noncompetitive and laggard.”

Dr. Dippon points out the contradiction: “Quite simply, a market cannot both be noncompetitive and offer some of the best mobile wireless services in the world.”

The report is an important critique by a recognized authority in regulatory economics, confirming my long-held view that there are problems with Rewheel’s studies. It merits a close read by Canada’s regulators and policy makers.

Parliamentarians on the Standing Committee on Industry and Technology (INDU) have mustered faux outrage in their undertaking of a study on “Accessibility and Affordability of Wireless and Broadband Services in Canada”.

So far, the Committee has questioned witnesses from Quebecor / Videotron, the Competition Bureau, the CRTC, Bell, Rogers and TELUS. The Quebecor / Videotron panel was led by CEO PK Peladeau, but the Committee wanted the CEOs of the other major carriers to appear before them. Instead, the designated witnesses were a Chief Financial Officer, the President of the Wireless business unit, and the Executive Vice President of legal and regulatory affairs.

In other words, the carriers were represented by the kinds of experts equipped to answer questions related to the study. That was clearly the approach used by the Competition Bureau and the CRTC. Both agencies sent representatives responsible for areas expected to be the focus of the study. The CRTC Chair didn’t appear; the Commissioner of the Competition Bureau wasn’t there. No summons to appear were issued to the leaders of the agencies.

But the INDU members displayed faux outrage at the corporate CEOs who sent mere mortals to actually respond to questions, when the parliamentarians wanted their faces, if not their heads.

A couple years ago I wrote, “Giving elected officials the chance to ask questions of regulators is an important part of our democratic process. It can be very informative when used wisely. Unfortunately, the opportunity is wasted if Committee members are unprepared or do not have a solid understanding of the industries they are overseeing.”

The same can be said when MPs are armed with flawed or seriously outdated information. Rather than relying on official government data from ISED, the CRTC, or Statistics Canada, MPs were citing deeply flawed and widely discredited reports from Rewheel Research to mistakenly charge that Canadian mobile prices are the highest in the world. Recall, the International Center for Law and Economics referred to Rewheel as a “careless mish-mash of data points from which no reliable conclusions can be drawn.”

It simply isn’t true that Canadian prices are the highest in the world. Not by a long shot. Last November I wrote about a PwC study laying out a fact-based narrative on telecom affordability in Canada, painting a very different picture from the conventional wisdom.

MPs acknowledged that Canadian prices are coming down (as you have been reading here), but claimed prices are falling slower than in peer markets. That is also not true. In fact, prices have been going up in the US, the UK, and Australia (as well as many other countries).

MPs confused ARPU (a proxy for monthly bills), with prices – a mistake about which I write too frequently.

Witnesses have delivered information that is actually relevant to the study. That Canadian government fees for spectrum are the highest in the world, adding $5 per month in extra cost to mobile phone bills. That capital intensity by Canadian carriers is among the world’s highest, delivering high quality service across a challenging geography. That prices have fallen more than 15% in the past 12 months, roughly 50% in the past 5 years, despite price increases of close to 20% over the past 5 years in the overall Canadian economy. That the industry has created (and fully funded) targeted affordability programs to deliver home internet, mobile services, and devices to vulnerable communities.

The information that demonstrates the “Accessibility and Affordability of Wireless and Broadband Services in Canada” is available to members of INDU. Hopefully, we will see the MPs shed their faux outrage and open their minds to the answers being shared at the next meeting.

To paraphrase Neil Diamond’s song (recorded by The Monkees), disappointment haunts my dreams. In part, I think it’s because I’m a believer.

Why? I’m talking about watching last week’s emergency meeting of Canada’s Standing Committee on Industry and Technology (INDU), called to review the announcement that there will be price increases for some mobile customers – those not currently under contract – at some of the service providers. You would never know that Canada’s mobile prices are lower – much, much lower – in the past year if you watched that meeting. You would never know that the price increases aren’t across the board.

I wrote about this issue last week in advance of the INDU meeting. But during the meeting, there was so, so much misinformation being spewed that I had trouble figuring out where to start. Indeed, on Monday, National Bank Financial issued a report entitled “What To Make of Last INDU Meeting With Incorrect Statements”.

You can watch the 2-hour committee meeting yourself on ParlVu. In it, you will hear MPs say that the first thing that happened after the Rogers / Shaw / Quebecor transaction closed was prices going up. That simply isn’t true. A month after the deal closed, mobile prices fell. Indeed, they fell enough to warrant stories like “Rogers launches cheaper 5G cell phone plans, doubles data for its most popular plans” in the Globe and “‘A new era of competition?’: Rogers slashes prices for most of its fastest cellphone plans following Shaw takeover” in the Star.

As National Bank Financial observed in its note:

Conservative members of INDU made these statements on Jan. 11: “it was a promise that prices would go down…we realize now that it’s false”, “I don’t think I have a single constituent in my riding that would agree that cellphone prices have come down”, and “Rogers…made it very clear that this deal…would inject a new and substantial source of competition…and we didn’t see that”

It’s hard to reconcile these with reality.

Aggressive price competition characterized the mobile market throughout 2023. This continued a trend of declining prices that has been going on for several years and has seen Statistics Canada’s Cellular Services Price Index decline by almost 50% in the last five years. A number of times in the past year, Statistics Canada pointed to mobile services as the largest downward contributor, moderating the monthly consumer price index. Last month, Statistics Canada wrote “Consumers who signed on to a cell phone plan in November paid 22.6% less than those who did so in November 2022” (The December CPI figures released earlier this week show that cellular services are down 26.8% compared to December 2022). New mobile options have also been introduced, with some service plans waiving roaming fees in destinations like the US and Mexico and 5G service being expanded to include some flanker brand offerings.

MPs cited so-called international price studies claiming Canada had the highest mobile prices in the world. That simply isn’t true. This blog has consistently pointed out the errors in methodology by many groups who try to undertake international pricing comparisons (such as Rewheel Research or Cable.co.uk). Last year, I wrote “Telecom Price Studies: 2022 Edition” (March 21, 2023) and “Trusted Sources For Telecom Data” (June 27, 2023) which should be good reference points for you. The posts would be even better starting points for Members of Parliament, and their staff.

In the INDU meeting, you will hear some Members of Parliament read correspondence from constituents who complain that they are paying over $250 per month for 2 phones and can’t afford an increase in price. If those MPs were really serious about helping their constituents, they would tell their constituents that mobile rates have dropped considerably and they should contact their service provider (or a competitor) to find out what better deals are available.

If consumers have an affordability issue, there are programs offered by a number of service providers to help disadvantaged households. These services are provided by the service providers with no government funding. In addition, to address those subscribers who only want a cell phone for emergencies or occasional use, the CRTC requires that the major mobile service providers offer a $15 plan with 250 MB of data, 100 minutes of outbound calling and unlimited inbound calling and SMS texting. It is worth noting that this CRTC plan skews Canada’s ranking in some international pricing studies because they attribute a $60/GB price to such a plan, even though no one seriously in the market for a data plan would select this mandated offering.

Time expired for the INDU Committee before the meeting could reach agreement on next steps. At some point, the Committee will be returning to undertake a more complete review of telecommunications, one that was proposed by Bloq MP Sébastien Lemire last September:

That, pursuant to Standing Order 108(2), the committee undertake a study on the modernization of the regulatory framework and the convergence of wired and wireless products to ensure that future decisions are informed by robust data and recommendations for the benefit of all consumers in terms of accessibility and affordability; that it examine this convergence with relevant stakeholders and what they can enable through technological advancements such as 5G, fiber optics, Wi-Fi 6, and many others; that it examine the need for ubiquitous connectivity, necessary data transmission speeds, and innovative opportunities for businesses and consumers in Canada and internationally; that it scrutinize the operating costs of these technologies and the maintenance of so-called critical infrastructure; that it examine the need for network resiliency in the face of climate change; that it specifically investigate unused spectrum in more remote and rural areas as well as deployment targets; that it examine the need to expand mobile connectivity to improve public safety, particularly along roads and highways; that it examine telecommunications tower construction programs and infrastructure deployment financing; that the Committee allocates a minimum of six meetings for conducting this study and that it report its findings and recommendations to the House.

It remains to be seen whether such a study will generate heat and smoke, but fail to create light. As National Bank Financial said “There will be more headlines and studies, but any analysis should be based on correct information.”

Watching certain Parliamentarians in Committee means that sometimes disappointment haunts my dreams. But, I’m still a believer.

I think that the greatest skill I picked up in university was critical thinking, gathering evidence, facts, observations and forming a judgement by the application of rational, and unbiased analyses. I learned to be skeptical of so-called conventional wisdom and I have become the family’s resource for urban legend mythbusting.

That is a role that keeps me busy. There is a lot of misinformation masquerading under academic imprimatur in newspapers and online journals.

An article in yesterday’s Globe and Mail included a line that caught my eye. “A 2022 study found that Canada’s wireless rates were the second most expensive in the world – seven times more expensive than Australia, 25 times more expensive than France and Ireland and 1,000 times more expensive than Finland.”

Canadians complain about mobile prices, but does anyone in Canada actually believe that they are paying one thousand times more than what they would pay in Finland?

In fact, we don’t.

So how did the author, a university professor and Academic director for University of Toronto’s Victoria College, make such a claim? The online version of the article links to a study from the widely discredited Rewheel/Research, criticized as “a prime example of misinformation on the Internet.”

Three years ago, a report signed by two dozen academics and economics experts detailed factual errors and logical inconsistencies in Rewheel’s report, and concluded Rewheel’s approach is fundamentally flawed. “The Rewheel story is easy to understand. It is also completely wrong… Rewheel’s rankings are of no value in comparing prices and assessing the level of competition in wireless markets… Rewheel’s assumptions are unsupported and create distorted rankings.”

Yet, the professor had no trouble writing that Canada’s wireless rates were 1,000 times more expensive than Finland. Last year, I was paying $85 per month for my plan (my prices have dropped considerably earlier this year). Does anyone think you can find a plan for less than 10 cents per month in Finland?

Critical thinking.

The article is also flawed when it states,

This spring, Industry Minister François-Philippe Champagne approved Rogers’s $26-billion takeover of Shaw, further consolidating its dominance in an already concentrated telecom space. Proponents of the deal, including Mr. Champagne, argued that it could “drive down prices across Canada,” despite reducing consumer choice in Alberta and B.C.

In fact, there has been no reduction in consumer choice in Alberta and British Columbia. The logo on cable and internet bills for Shaw subscribers may have changed to Rogers, but Rogers had never been a wireline services option in those provinces. Shaw’s wireless services were spun out to Quebecor (Videotron), a company that did not previously operate in Western Canada. Not only was there no reduction in consumer choice, but Freedom Mobile is now owned by a company that is willing and able to invest in more competitive technology.

Indeed, the finding by the Competition Tribunal, a judicial body, stated [pdf, 1.25MB]:

It bears underscoring that there will continue to be four strong competitors in the wireless markets in Alberta and British Columbia, namely, Bell, Telus, Rogers, and Videotron, just as there are today. Videotron’s entry into those markets will likely ensure that competition and innovation remain robust. … Moreover, instead of the two firms (Telus and Shaw) that offer bundled wireless and wireline products in those markets today, there will be at least three (Telus, Rogers, and Videotron).

The strengthening of Rogers’ position in Alberta and British Columbia, combined with the very significant competitive initiatives that Telus and Bell have been pursuing since the Merger was announced, will also likely contribute to an increased intensity of competition in those markets.

It was difficult for me to take the rest of the article seriously when the sections on telecom were so seriously flawed.

As students return to school this week, be prepared to challenge instructors and lecturers. Carefully examine references and resources to test for credibility.

Critical thinking is the most important skill I developed in my university days.

Welcome back to school.