NERA Economist Identifies Shortcomings in the Wall/Nordicity Study and Introduces Correct Methodology for Economically Sound Price Comparisons

The Situation

Since 2008, the Canadian government’s Innovation, Science and Economic Development (ISED) department and the Canadian Radio-television and Telecommunications Commission (CRTC) have retained Wall Communications Inc. (“Wall”) or NGL Nordicity Group Ltd. (“Nordicity”) to conduct a price comparison of communications services in Canada and select foreign jurisdictions (“the Study”). Wall and Nordicity use nearly identical study methodologies, and every year both consultancies claim Canadian prices are among the highest in the industrialized world. The purpose of the present report is first to examine the accuracy, or lack thereof, of the Wall/Nordicity Study and second to conduct an economically sound price comparison for the same countries.

NERA's Role

Canadian telecommunications company TELUS Communications, Inc. hired NERA examine the Study’s methodology, evaluate it for robustness and accuracy, and—in the event that it is found wanting—to conduct a concurrent study using methodology based on international standards to evaluate the price levels of wireless telephony, wireless Internet, and fixed broadband in Canada.

The Result

This report reaches two overarching conclusions: (1) The Study’s findings of high prices in Canada relative to other countries is false because it is the result of a poorly designed study and incorrect data interpretation; and (2) a properly designed and executed study methodology reveals that the existing prices for communications services in Canada are cheaper than the prices that foreign providers would charge in Canada for the same service plans.

Considering the significant shortcomings of the Wall/Nordicity Study, this report introduces a proper price comparison of communications services in Canada and ISED’s select foreign jurisdictions. This proper analysis reveals two key points. First, Canadian providers do not charge high prices relative to the benchmark countries. Second, approximately 80% of the Canadian mobile wireless telephony, mobile broadband Internet, and fixed broadband Internet plans studied have prices below international benchmarks, which means that Canadian consumers are paying relatively lower prices given the specific market offerings, networks, and country conditions.