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Oversimplified and Misleading International Price Comparisons Must Not Guide Policy and Regulatory Decisions
The Situation
Since 2014, Finnish telecommunications consultancy Rewheel Oy (“Rewheel”) biannually publishes the “Digital Fuel Monitor” (DFM,) which purports to be an international comparison of mobile wireless prices in the 28 member states of the European Union and the 34 member states of the Organisation for Economic Co-operation and Development. The study has received considerable attention from the media and public advocacy groups and interested market participants have proffered Rewheel’s rankings as economic evidence in regulatory and policy debates around the globe. Even governments and regulators have taken notice of their country’s rank in the Rewheel study. However, uncertainty exists as to whether the parties citing Rewheel’s study have indeed purchased the entire study or if they are using the abbreviated public versions, which consist of a few pages of largely unlabeled statistics and some commentary, as support for their arguments.
NERA's Role
Canadian telecommunications company TELUS Communications, Inc., commissioned NERA Managing Director Dr. Christian Dippon to examine Rewheel’s study and its methodology. Dr. Dippon reveals that the DFM assumes an unrealistic world where consumers only care about how much data they can get for a certain budget and all other competitive differentiators (i.e., plan and quality differences) and cost differences (e.g., size of network built) are irrelevant. Marketplace evidence clearly refutes this simplistic assumption because mobile wireless providers with the alleged data-richest plans do not enjoy the largest market share. In fact, there is no indication of a positive correlation between providers offering data-rich plans and market share, thus refuting the assumption that consumers only care about data allowances.
The Result
As Dr. Dippon notes, the Rewheel study is a highly simplistic ranking exercise that assumes away the complexities of an international comparison by treating all plans, networks, and countries as identical. This apples-to-oranges comparison offers no economic insights, and governmental agencies cannot use it as the basis for proper regulatory and policy decisions. Decisions as important as these require an in-depth analysis based on facts and a sound methodology that account for specific market circumstances.
Short of a complete redesign of the study’s methodology, there is no simple fix. Consistent with other international price comparisons, such a redesign would correct for Rewheel’s data collection errors (e.g., exclude all taxes) and employ an econometric model that considers, or normalizes, for the differences in plans, networks, and country-specific cost structures, among other factors. Absent these corrections, the Rewheel study results provide no meaningful insight into prices—let alone competition.