Friday, March 09, 2007
Lies, damned lies and statistics
The headline grabbing news that Canada's wireless penetration rates were on par with Gabon helped colleagues enjoy their 15 minutes this week.
Statistics can be persuasive. They appear to be so factual, but also allow for distraction through irrelevant comparisons. Comparing Canadian wireless prices to overseas rates is an example of such comparisons.
Outside of North America, wireless services are paid for using a system known as Calling Party Pays (CPP). When you travel overseas, it is quite common to be able to get a phone with unlimited incoming calls for free from your hotel; the hotel and their supplier carrier make money everytime you receive a call. Incoming calls are free but you pay for outgoing calls, often a lot, especially if calling to another carrier.
Why is European data usage so much higher? A large component is text messaging to people in order to avoid placing expensive voice calls. You text message your colleague or parent at the office and have them call you back - call it the modern way of taking home pens and pads of paper from the office. Free monthly service, high per minute outbound calling, high costs to call to a mobile from fixed lines or other carriers. Is that the kind of competitive wireless environment we want to emulate?
Canadian wireless minutes of use are higher than most other countries. Is this consistent with a conclusion that prices are inhibiting use of wireless? Canadian rates per minute have fallen substantially and can be expected to continue along that trajectory. Calling plans are continuing to get more creative. As a consumer, I would like rates to fall even more - I like free, to tell the truth.
But government intervention to artificially stimulate an additional competitor? I liked the opening of Rob Carrick's column in yesterday's Globe and Mail:
Although, I'd agree with government action to help the Leafs. Playoffs are around the corner.
Technorati Tags:
spectrum, AWS, Industry Canada
Statistics can be persuasive. They appear to be so factual, but also allow for distraction through irrelevant comparisons. Comparing Canadian wireless prices to overseas rates is an example of such comparisons.
Outside of North America, wireless services are paid for using a system known as Calling Party Pays (CPP). When you travel overseas, it is quite common to be able to get a phone with unlimited incoming calls for free from your hotel; the hotel and their supplier carrier make money everytime you receive a call. Incoming calls are free but you pay for outgoing calls, often a lot, especially if calling to another carrier.
Why is European data usage so much higher? A large component is text messaging to people in order to avoid placing expensive voice calls. You text message your colleague or parent at the office and have them call you back - call it the modern way of taking home pens and pads of paper from the office. Free monthly service, high per minute outbound calling, high costs to call to a mobile from fixed lines or other carriers. Is that the kind of competitive wireless environment we want to emulate?
Canadian wireless minutes of use are higher than most other countries. Is this consistent with a conclusion that prices are inhibiting use of wireless? Canadian rates per minute have fallen substantially and can be expected to continue along that trajectory. Calling plans are continuing to get more creative. As a consumer, I would like rates to fall even more - I like free, to tell the truth.
But government intervention to artificially stimulate an additional competitor? I liked the opening of Rob Carrick's column in yesterday's Globe and Mail:
The Prime Minister said the other day that paying fees to withdraw money from a bank machine annoys him. Me, too. I'm also annoyed by the inability of the Toronto Maple Leafs to win the Stanley Cup, by morning rush-hour traffic and the long lines at every Tim Hortons in the country. Do I want the government to get involved and solve these problems?The same applies to wireless service competition. Let the marketplace work.
Although, I'd agree with government action to help the Leafs. Playoffs are around the corner.
Technorati Tags:
spectrum, AWS, Industry Canada
Posted by Mark Goldberg @ 3/09/2007 06:42:00 AM 
Comments:
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Couldn't agree with you more about statistics - they can pretty well be used to tell any story the story-teller wants to tell.
On the question of government intervention to artifically stimulate (subsidize?) a new competitor, I have a question: "What's the difference between selling off a spectrum set-aside at less than market value today and allowing non-ILEC licencees a head start when cellular was first introduced into Canada?". Both are a form of subsidy designed to ensure that what is intended to be a competitive market becomes or remains a competitive market.
IF (and it's a big "if") the feds find as a result of the AWS spectrum auction consultation that the wireless market is not competitive enough to merit being free of regulation (and there's nothing wrong with that objective), then the setting aside of spectrum and selling it at less than market value becomes a lever to achieve the objective just like the head start was. IF it finds otherwise, then there's no need for the set-aside.
On how to control or prevent spectrum speculation, the government could do what was done in the housing market here in Ontario years ago and introduce a requirement that auction winners couldn't flip their prize for a certain period of time. As well, in order to ensure prompt use, the government could put penalties in place that would induce winners to move promptly.
One last question: "if the government were to decide the wireless market needed (an)other competitor(s), wouldn't it be wise to wait until the foreign ownership issue is resolved before proceeding?". If foreign interests were allowed to participate in a set-aside auction it would seem the chances for speculation and non-action would be reduced.
Have a good day
On the question of government intervention to artifically stimulate (subsidize?) a new competitor, I have a question: "What's the difference between selling off a spectrum set-aside at less than market value today and allowing non-ILEC licencees a head start when cellular was first introduced into Canada?". Both are a form of subsidy designed to ensure that what is intended to be a competitive market becomes or remains a competitive market.
IF (and it's a big "if") the feds find as a result of the AWS spectrum auction consultation that the wireless market is not competitive enough to merit being free of regulation (and there's nothing wrong with that objective), then the setting aside of spectrum and selling it at less than market value becomes a lever to achieve the objective just like the head start was. IF it finds otherwise, then there's no need for the set-aside.
On how to control or prevent spectrum speculation, the government could do what was done in the housing market here in Ontario years ago and introduce a requirement that auction winners couldn't flip their prize for a certain period of time. As well, in order to ensure prompt use, the government could put penalties in place that would induce winners to move promptly.
One last question: "if the government were to decide the wireless market needed (an)other competitor(s), wouldn't it be wise to wait until the foreign ownership issue is resolved before proceeding?". If foreign interests were allowed to participate in a set-aside auction it would seem the chances for speculation and non-action would be reduced.
Have a good day
Posted by 
: 1:05 PM, March 09, 2007
: 1:05 PM, March 09, 2007
Having just read “Swaddled in Nanny Nation–The Coddling of Canada” in today’s Financial Post, I was reminded of your recent entries concerning such topics as competition and free markets as they relate to the wireless industry in particular and telephony in general and some of the comments I have posted.
Yesterday, you wrote about how statistics can used to create what appear to be factual and persuasive arguments about things that may be irrelevant. The above-noted National Post article contains the following statement: “OECD statistics show that a moderate cell phone user in Canada pays a monthly fee of $48 a month. In Denmark it's $9”.
This statistical comparison supports one of the findings of the Seaboard report that came out last week. You questioned that report’s recommendations because they would take away an advantage low volume cell phone users have derived from the current situation while favouring moderate and high volume users. Well, as a moderate user, when it means potentially saving $39 a month, I take notice because to me $39 a month is not irrelevant.
What’s the cause of this situation? Well, the Post’s article quotes a University of Calgary economist who lays the blame at the CRTC’s doorstep–“the CRTC ‘fails Canadians miserably. It sets prices artificially high, which pleases incumbent companies here but is a barrier to new entrants. The twisted logic was higher prices bring more competition and competition's good," he says. It's the exact opposite! Competition brings lower prices, and if we have to pay for competition through higher prices, we don't want it’."
Yesterday, in commenting on your entry, I said that the key issue in determining whether or not there should be a low-cost spectrum set aside for new entrants was whether or not there was enough competition in the wireless market. The economist quoted above, as well as other academic and industry observers who have also observed the significant price differentials between Canada and other jurisdictions would conclude there isn’t enough competition in Canada’s wireless market so go ahead with the set aside.
Deregulation and open, competitive markets are supposed to bring benefits to consumers including lower prices, better service as well as innovative to products and services that enhance efficiency and productivity. This is Mr. Bernier’s argument for justifying all of his actions to date. The question to be asked is ‘has deregulation of the wireless market achieved the goals it was supposed to achieve and, if not, why not?’. If the Seaboard and OECD statistics as well as similar findings in other reports and press coverage are true, then deregulation has failed Canadian cell phone consumers. Why?, perhaps because there isn’t enough competition.
If that’s the case, then a low-cost spectrum set-aside to allow new entrants into the market to hit the ground running fast enough to keep up with the existing players doesn’t seem like such a bad idea. An even better idea would be to hold off on taking such action until the foreign ownership debate is resolved.
Today’s Post article is the first of three. The third article, on Tuesday, will focus on the cell phone industry as an example of how Canadian businesses are being coddled while consumers are being harmed.
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Yesterday, you wrote about how statistics can used to create what appear to be factual and persuasive arguments about things that may be irrelevant. The above-noted National Post article contains the following statement: “OECD statistics show that a moderate cell phone user in Canada pays a monthly fee of $48 a month. In Denmark it's $9”.
This statistical comparison supports one of the findings of the Seaboard report that came out last week. You questioned that report’s recommendations because they would take away an advantage low volume cell phone users have derived from the current situation while favouring moderate and high volume users. Well, as a moderate user, when it means potentially saving $39 a month, I take notice because to me $39 a month is not irrelevant.
What’s the cause of this situation? Well, the Post’s article quotes a University of Calgary economist who lays the blame at the CRTC’s doorstep–“the CRTC ‘fails Canadians miserably. It sets prices artificially high, which pleases incumbent companies here but is a barrier to new entrants. The twisted logic was higher prices bring more competition and competition's good," he says. It's the exact opposite! Competition brings lower prices, and if we have to pay for competition through higher prices, we don't want it’."
Yesterday, in commenting on your entry, I said that the key issue in determining whether or not there should be a low-cost spectrum set aside for new entrants was whether or not there was enough competition in the wireless market. The economist quoted above, as well as other academic and industry observers who have also observed the significant price differentials between Canada and other jurisdictions would conclude there isn’t enough competition in Canada’s wireless market so go ahead with the set aside.
Deregulation and open, competitive markets are supposed to bring benefits to consumers including lower prices, better service as well as innovative to products and services that enhance efficiency and productivity. This is Mr. Bernier’s argument for justifying all of his actions to date. The question to be asked is ‘has deregulation of the wireless market achieved the goals it was supposed to achieve and, if not, why not?’. If the Seaboard and OECD statistics as well as similar findings in other reports and press coverage are true, then deregulation has failed Canadian cell phone consumers. Why?, perhaps because there isn’t enough competition.
If that’s the case, then a low-cost spectrum set-aside to allow new entrants into the market to hit the ground running fast enough to keep up with the existing players doesn’t seem like such a bad idea. An even better idea would be to hold off on taking such action until the foreign ownership debate is resolved.
Today’s Post article is the first of three. The third article, on Tuesday, will focus on the cell phone industry as an example of how Canadian businesses are being coddled while consumers are being harmed.
Posted by : 11:19 AM, March 10, 2007
: 11:19 AM, March 10, 2007 << Home
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