THE ORGANISATION FOR ECONOMIC Co-operation and Development (OECD) biennial study on comparing wireless markets should be viewed for what it is: a limited analysis comparing four wireless plans in Canada with other OECD nations, says a new report from Nordicity.
The report, International Wireless Market Comparison, prepared for Telus, argues that OECD analyses are suspect because they only compare advertised prices. Instead, it says, a full understanding requires a look not only at price but other important factors.
“Cost should only be considered as part of an international wireless comparison – rather than the definitive factor,” states Nordicity, noting that elements such as cost trends, geographic challenges, competitive market structure, and the penetration of other telecom services have to be taken into account.
The report was done based on preliminary numbers released by the OECD last November. The final report is expected to be released this week.
Kurt Eby, a manager at Nordicity and author of the report, tells Cartt.ca in an interview that the report “should be viewed with respect to its limitations.”
When the OECD reports its final figures and it mentions Canada, “it’s actually referring to a couple of Rogers’ plans and a couple of Bell plans and that’s it,” he adds. “[People] read it and they think it’s something that’s comprehensive and I think it’s something you can argue that it’s not.”
Nordicity points out in its research that comparing wireless service prices without consideration of the penetration rate in each nation – many European nations have penetration rates that surpass 100% while Canada does not – doesn’t provide an accurate picture of Canadian wireless prices versus those in other OECD nations. For example, Finland has a penetration rate of 197%, which means that virtually all wireless subscribers have two plans. When penetration is factored in the average wireless price in Finland is $42.16 not the $21.37 as previously reported by the OECD.
“When calculated on a straight per-subscription basis, Canada is misrepresented as having the highest per-subscriber wireless cost in the OECD. In fact, without considering penetration rates, Canada’s wireless costs are represented as being more than $16 greater (65%) than the OECD average. Of course, such a conclusion is erroneous and must assume that literally millions of wireless plans worldwide are going unpaid,” states the report.
Eby says that factoring in the penetration rates creates an apples-to-apples comparison that looks at subscribers rather than subscriptions. If a subscriber has multiple subscriptions, then the aggregate of those plans should be used not the cost of a single plan, he argues.
“It has to be calculated in terms of what does each individual person pay, otherwise it’s not a relevant comparison,” he told Cartt.ca.
Another key metric left out of the OECD’s analysis is comparing wireless costs with average per-capita income. The report says that when taking income into consideration, Canada fairs well against the other OECD nations.
“While Canada has the seventh highest per capita income of the 27 profiled countries – thus, relatively high capital and operating expenses – it has below-average wireless voice and total wireless (voice and data) service revenues as a percentage of per capita income. In fact, Canada has the 11th-lowest total wireless costs as a percentage of per capita income in the OECD, 12% below the international average,” highlights Nordicity.
For a number of years, the OECD has criticized Canada for having wireless prices that are too high. This has prompted calls from many parts of the Canadian telecommunications sector for government intervention into the wireless space. But the major Canadian players have long regarded the OECD’s methodology as irrelevant because it was incomplete and its measurement baskets didn’t match the calling patterns of Canadian wireless users.
Since the last report in 2009, the OECD has changed its comparison approach. Rather than having just three baskets – low, medium and high usage – it now uses a more granular approach with six usage baskets.
Eby acknowledges that this new approach could show Canada isn’t as bad as it’s been previously reported to be. “I think with the old [methodology] – the low, medium and high usage – the Canadian calling pattern was really falling outside of it and I think next week when they release the new report with the six baskets, in a couple of them, Canada will look pretty good, or at least average or above average,” he says.
