(Continues from previous post.)
Last time, I took the Commission to task for trying to build excitement over the level of cellphone penetration in Canada in their consultation video. Why? Because the only metric that really counts in 2012 is the takeup of smartphones: smartphones do data, feature phones don’t. Let’s consider penetration in a more meaningful context.
Penetration. Data released by the OECD in December 2011 says Canada is 24th out of the 34 member countries in terrestrial mobile wireless broadband subscriptions, as indicated in this chart (OECD broadband portal, spreadsheet 1d):
OECD: wireless broadband subscriptions per 100 inhabitants
Notice this dataset covers mobile devices like laptops using a dongle for Internet access. As it has done elsewhere with wireline broadband, the Commission has cherry-picked a more inclusive number (cellphones in general), rather than a more meaningful number (data-capable mobile devices). And that’s not the only way the Commission is glossing over problems…
Rates. Every year the FCC is required to file a report on international broadband prices. The rationale: how are we doing up against other industrialized countries and how can we improve? Its 3rd report, issued August 2012, shows this chart, summarizing the average monthly net price per gigabyte of wireless data for 37 countries, using smartphone data plans with usage limits (Appendix C, p.17):
The FCC data indicates Canada ranks 26th out of the 37 countries included. Notice Canada’s monthly average is about three times higher (at $30) than the US rate (at $10; USD using PPP). I’ll venture a wild guess and say there’s a correlation between our high retail prices and low smart-device penetration.
Service. Let’s go to the third leg of the stool. How do Canadians feel about the treatment they get from their carriers? The Commission has a trenchant comment on the consultation page covering that very point:
“The CRTC recently examined the wireless market and found that wireless contracts were a significant concern for Canadians. Many Canadians said that contracts for cellphones and other personal mobile devices are confusing. Last year, consumer complaints to the Commissioner for Complaints for Telecommunications Services about wireless services outnumbered all other telecommunications services combined.”
Although I have no hard data on Canadian attitudes, the American Customer Satisfaction Index (ACSI) provides a useful proxy. ACSI notes the US wireless carriers rate 70 on their 100-point scale. Among the very few industries Americans dislike more than their carriers are airlines (67), the federal government (66.9) and newspapers (64). Compared to the carriers, Americans actually prefer their banks (75) and health insurers (72).
Let’s put this all together:
- Penetration of data-capable devices: Canada is 24th out of 34 countries.
- Rates for mobile data services: Canada is 26th out of 37 countries.
- Satisfaction with wireless services: the Commission launched the wireless code proceeding in response to a flood of consumer complaints.
Typically, if you learn an industry suffers from low penetration plus high prices plus poor satisfaction, you leap to one overwhelming conclusion: the industry in question is not competitive. Hence my question: Why, in the face of all this evidence to the contrary, does the CRTC claim our wireless industry is competitive?
In the FAQ for this consultation, the Commission lists a number of questions, the most interesting of which concerns why the CRTC doesn’t regulate the price of wireless services. A few posts ago, I described the Commission’s answer to a similar question about wireline broadband as arrogant and condescending, because the answer they give is patently untrue: “there is enough competition in the [broadband] market and retail customers have a choice and can shop around for service packages.” My Aunt Fanny.
The Commission offers up the same malarkey about wireless. So… Why does the CRTC not regulate the prices of wireless services?
On the same day the wireless code proceeding was announced (October 11), the Commission issued its “Decision on whether the conditions in the mobile wireless market have changed sufficiently to warrant Commission intervention with respect to mobile wireless services” (Telecom Decision CRTC 2012-556). Its conclusion is summarized in the FAQ thusly:
“In the decision issued on 11 October 2012, the CRTC found that there was competition sufficient to protect the interests of consumers and it did not need to regulate rates.”
Okay, that’s what they found – where’s the evidence? Here’s the rest of the paragraph:
“Although many consumers indicated concerns about wireless rates and the competitiveness of the wireless market, a number of market indicators demonstrate that consumers have a choice of competitive service providers and a range of rates and payment options for mobile wireless services. According to the CRTC’s 2012 Communications Monitoring Report, new entrants in the mobile wireless market continue to increase their market share and coverage. Companies continue to invest in new infrastructure to bring new innovative services to more Canadians. Moreover, the average cost per month for mobile wireless services has remained relatively stable.”
The Commission sums up the two sides of the argument. Many consumers have complained about lack of wireless competition, whereas the CRTC’s experts have unearthed a “number of market indicators” that prove these concerns groundless. What are these indicators? Growing new-entrant market share and continuing capex. Great, but what are the actual numbers so we can draw our own conclusions?
And here’s where the Commission really lets us down: instead of facts on the page, it provides a link to its Communications Monitoring Report. The whole CMR, a 240-page document. From there, you’re on your own.
Sure, there’s data in there, if you hunt for it and don’t mind interpreting the graphs and tables on your own. Let’s vet the Commission’s claim that (unnamed) companies “continue to invest in new infrastructure to bring new innovative services to more Canadians.” Well, duh, of course they’re investing. What matters is how much is really upgrading; whether the incumbents are meeting demand; whether they’re following the ITMP framework by using investment before data caps and throttling; etc. Here’s what you get on p.168 of the CMR:
Okay, so CAPEX (purple bars) is “continuing” (the bump in 2008 reflects the AWS spectrum auction); and the ACEPU (average capex per user) is moving right along with it. But we get no explanation or benchmarking. What e.g. do these figures mean for efficient use of spectrum and customer satisfaction (like low number of dropped calls). The CRTC is not saying, because apparently all us mere mortals need to hear is, don’t worry, money is being spent.
But never mind the gory details. The CMR is a document no mainstreamer in her right mind would ever try to wade through. Here’s how the executive summary opens:
“The Canadian communications industry is growing. Revenues from communications services increased 3.3%, rising from $57.4 billion in 2010 to $59.3 billion in 2011. This growth was driven by a 5.5% increase in broadcasting revenues and a 2.5% increase in telecommunications revenues.”
How nice for the industry. But it’s a little weird to be bragging about all the money half a dozen conglomerates are making off the the backs of Canadian consumers, when the Chair has just proclaimed in his introductory message that “Canadians are taking a keen interest in their communications services.” I think what he means is Canadians are taking a keen interest in seeing exactly the opposite of bigger revenues for the conglomerates – like better service, lower prices, more options, an end to throttling and so on.
Meanwhile, back at the FAQ, here’s the last sentence in the passage cited above: “Moreover, the average cost per month for mobile wireless services has remained relatively stable.” Did it ever occur to the CMR editors that someone might come along and say: Yeah, the cost per month for Canadians has remained around the 12th most expensive out of 37 industrialized nations. Not to labor the obvious, but bragging about stable prices when those prices are high makes a person look, well, high.
It’s high time we had a consumer-friendly version of the CMR
If Chairman Blais is serious about his consumer agenda, my advice would be to add the CMR to his to-do list immediately. The main task is to “version” the CMR, i.e. have an edition released with the express purpose of explaining to consumers some of the many things they don’t understand – like data caps and why the Commission once thought they were such a great idea. Remember, the beneficiairies will include the CRTC itself. Three years ago, an online movement got started on the self-explanatory domain dissolvethecrtc.ca. That was certainly not the first time, nor will it be the last, that some Canadians, including prominent editorialists, will have expressed deep frustration with the Commission’s work. Our regulator has a lot of image rebuilding ahead, including doing a much better job of explaining to the mainstream what it does, how and why.
Here’s a couple of other suggestions.
The Commission should give some indication it’s thinking outside-in, at least occasionally. A keyword search of the CMR turns up exactly three mentions of “affordability,” none of which is part of any actual discussion about the rates we pay. The Commission also needs to show it’s begun thinking about advanced measures of communications infrastructure like uplink bandwidth and latency. Guess how many times “latency” is mentioned in the 240-page CMR? Zero. The FCC report is all over latency (using millions of real-life measurements compiled by Ookla). Maybe the Commission is burying any discussion of latency because our ranking is the fourth-worst out of the 35 countries measured by the FCC…
How many countries does it take to make Canada look good? (As few as possible)
Finally, let’s review some comments about the CMR I cited in August 2011 from Pete Nowak, in a post entitled The CMR: CRTC’s annual exercise in pseudo-science. Pete wrote a post in a similar vein, with the catchy title CRTC is peddling broadband Kool-Aid. Here’s part of what he had to say:
“The report paints a rosy picture of broadband internet services, suggesting that [our] prices and speeds compare very well against other countries. […] Looking at the actual report, it’s clear how the regulator came to its ridiculous conclusion: only eight select countries – Canada, the United States, Japan, United Kingdom, France, Germany, Italy and Australia – were compared” (my emphasis).
In the current CMR, the “international perspective” section runs a dozen pages (pp.177-188). The first table (6.1.1) provides pricing details on telecom services. Only this time, instead of eight countries, Canada is compared to five other countries: the US, UK, France, Australia and Japan. Details abound in the notes about currencies and data caps. A reference is included to Appendix 4, which contains 300 words of text explaining the rationale for sampling, weighting, treatment of taxes, typical consumption patterns, choice of bundles and so on.
The only problem is that nowhere is there any rationale for why we’re being compared to five other countries – and why those five countries? Other charts and tables in this section mix and match selected countries from around the globe; then the five countries above, plus Germany; then those six countries plus Italy (some of the tables citing the OECD as a source); then all the OECD countries; and so on.
Now compare what the FCC has to say about a key part of the methodology used in its international broadband report (p.4):
“As with past reports, the 38 countries we selected for comparison present a diverse profile of countries with developed broadband markets, including all 34 OECD countries. Our selection exceeds the requirement of the BDIA [Broadband Data Improvement Act] that we review broadband data for 75 communities in 25 countries. With respect to speeds, our review of data on average actual download speeds reported by a sample of consumers from 38 countries […] finds that the United States ranks 24th in average actual speeds purchased and experienced by consumers. The United States ranks 17th when based on a stratified sampling technique using weighted average actual download speed.”
And that in a nutshell is what the CRTC should be aspiring to. Not just doing good research based on good methodology, but having the intellectual honesty to say we suck, if that’s what the data indicate.
Coming up in Part 3: Some shrewd advice on social media, featuring my latest $100 idea: Chief Consumer Officer Motzney starts a weekly blog!