Several years ago, Telus had a message for consumers discouraged by repeated studies that found Canadians pay some of the highest wireless rates in the world. In a blog post responding to an OECD study, company executive Ted Woodhead argued “Canada really should be the most expensive country for wireless service in the Organization for Economic Co-operation and Development (OECD), but we’re not. That’s a great success story we should be celebrating.” Celebrating anything less than the world’s highest wireless prices recently came to mind as Telus tried to sow doubt in a Canadian government commissioned study that highlighted yet again the uncompetitive realities of the Canadian wireless market. The company commissioned its own report that implausibly concludes that “communications services in Canada are cheaper than the prices foreign providers would charge for the same plans.”
In fact, the Telus backed study acknowledges that the Canadian wireless plans may leave consumers paying more, yet it argues that those “absolute costs” are meaningless:
although a Canadian plan might be more expensive in absolute terms (i.e., the monthly out-of-pocket expenses incurred by a subscriber) than a plan abroad, or vice versa, observing absolute prices is meaningless as it fails to recognize that the plans are not identical. The regression methodology adjusts (normalizes) for differences in plans and thus compares identical plans, offered on identical networks, in identical countries.
The study therefore rejects comparing actual prices for similar plans (ie. the way a consumer would compare wireless costs and affordability), opting instead to estimate what foreign carriers would charge for the same plans once a selective group of additional factors are taken into account. In doing so, it tries to incorporate the Telus view that indicia such as geography, labour costs, and the weather should be factored into a “normalized” cost for wireless services.
The Telus-backed report makes two primary claims: the Canadian government commissioned study is flawed and its own conclusions provide a better pricing comparison. It cites numerous concerns with the Canadian government commissioned study, starting with the claim that it is “meaningless” because it does not feature a testable hypothesis. It maintains that the study must start from a certain position and seek to prove or disprove the hypothesis. Yet the Canadian government commissioned study is merely a fact-gathering exercise that supports evidence-based policy making, not a report designed to advocate for a particular policy.
The report also suggests the Canadian government commissioned study is flawed because it features too few countries and does not account for network differences (speeds), country differences (geography, labour costs, weather), and differences in caller pay vs. receiver pay systems. However, some of the baskets used in the government-commissioned study include unlimited talk and text rendering the caller-pay differences irrelevant. Moreover, as noted in a post yesterday, the consistent comparison of plans enables tracking of pricing differences over many years, which show that the gap in wireless affordability is growing, not shrinking. As to a broader comparison, recent data from Tefficient suggests that expanding the comparisons only makes the Canadian situation appear worse.
With respect to its own methodology, the Telus backed report says it uses the same approach as the FCC for broadband (not general wireless services). It oddly also points to the UK’s Ofcom research, which uses price comparisons much like the Canadian government commissioned report (the Telus backed report says it is “similar but not identical”). Rejecting the actual costs consumers pay for wireless services, the report proceeds to incorporate the cherry-picked factors identified above to “forecast” what foreign providers would charge for the Canadian plans. While it says this dispels claims that Canadians pay some of the highest prices in the world, it does no such thing. It merely argues that other countries would theoretically have higher prices if they featured the same self-selected marketplace conditions as Canada.
The selective choice of factors is presumably designed to lead to higher “normalized” prices for foreign carriers. Yet the study does not include many other factors that might have the opposite effect: there is nothing on restrictions on foreign investment, nothing on mandated free roaming, nothing on the shared networks between two of Canada’s largest providers, and nothing on the competitive intensity of the market. It is almost as if the Telus study picked the factors designed to “prove” its hypothesis.
While Telus undoubtedly hopes to use the study to lobby against much-needed reforms to inject competition into a sector that even the Competition Bureau says raises concerns with market power, the study is more likely to be viewed by the government and consumers as a partisan document (the references to MVNO policy is a giveaway) that does little to temper lingering frustration with high wireless pricing and the effects of limited competition. Given that Canadian consumers pay actual bills – not normalized ones subject to regression analysis – the data from the vast majority of studies that point to Canadians facing some of the highest wireless prices in the world still stands.