Friday, August 14, 2009

Interesting, But Deeply, Deeply Flawed

The OECD's broadband rankings have been misused by those with an agenda to talk down the progress the U.S. has made during the last decade in making broadband available. Now over 90% of America's households have access to broadband, with a subscription rate of 60%. The agenda -- to drive policymakers towards exercising much more regulatory control over, and even government ownership of, Internet networks -- is not subtle or hidden.

At a June 5 Free State Foundation seminar, Ambassador David Gross, State Department's immediate past U.S. Coordinator for Communications and Information Policy, stated: "Almost everyone agrees that the OECD's broadband statistics are useful and certainly interesting. However, virtually everyone agrees that they are deeply, deeply flawed." And, true to his title, Ambassador Gross was probably speaking diplomatically. The transcript is here.

Now comes the OECD with a new report that purports to show that the prices paid by U.S. consumers for wireless services are higher than those paid by consumers in many OECD countries. Perhaps the report is interesting, but it also looks, like the broadband reports, to be "deeply, deeply flawed."

The fundamental problem is that the OECD assumes, for purposes of determining price values, hypothetical usage packages that do not reflect the reality of the extent to which U.S. consumers use their mobile devices each month. In short, the calling profile of the average U.S. consumer is nearly three times as much as the calling profile for the assumed "high use" OECD package and six times as much as the "medium" use package.

A report released in May 2009 by CTIA, the wireless industry trade association, indicates that Merrill Lynch's research shows the price per minute of service in the U.S. is the lowest of the 26 OECD countries and U.S. consumers have the highest minutes of use per month of the 26 OECD countries.

You can review both the OECD and CTIA reports, and you should do so. Aside from the pricing data, the CTIA report contains much data, fully consistent with other sources and not contested, which demonstrate the competitiveness of the U.S. wireless industry, and, concomitantly, the extent to which such competitiveness has led to a wide array of choices in applications and equipment for consumers.

Presumably, it is good that Americans, on average, use their wireless devices much more, on average, than do their counterparts in OECD countries. U.S. consumers must perceive value in doing so.

Before any policymakers begin to use the new OECD report as a pretext for regulating the highly successful U.S. wireless industry, they should understand, to borrow from Ambassador Gross, that the OECD report may be interesting, but "deeply, deeply flawed."