Tuesday, May 06, 2008

About the ITIF's Broadband Rankings

It's nice to see a broadband measure that gives Australia a reasonable score. It's a pity there are so many flaws in the data's assumptions. I'm referring to the ITIF study published here.

Since last year, when with Market Clarity's Shara Evans (my then employer) I looked at the then-inadequate OECD data (it has improved immeasurably since, but still has some unfortunate measures and assumptions that I'll get to in a minute), I have approached this debate with some trepidation. Broadband measures are a religious thing: they seem to exist primarily so that policy-makers and advocates can verify the opinions they already hold, rather than to inform the debate and spark new ideas. Saying “the broadband league tables don't mean that much” is a good way to get screamed at from every direction.

Hence any measure that says “(insert your country name here) is (leading the world) / (trailing the world)” will be accepted uncritically by whichever side agrees with the figures, and rejected by the other side. The figures themselves are irrelevant to the debate.

Well, here's what the ITIF has found: Australia is placed 12th in the OECD according to a measure of penetration, average download speed, and price per megabit per second.

Only one of those measures – penetration – is valid as a measure. As for the other two:

Average download speed – measured, according to ITIF, by “averaging the speeds of the incumbent DSL, cable and fiber offerings [sourced from the OECD's April 2006 figures, so 12 months out of date – RC] with each assigned a weight according to that technology's relative percentage of the nation's overall broadband subscribership”.

The ITIF admits that “average plan speeds” is flawed, and tries to weigh the average plan speeds against share of subscribers. But that's silly: because the core measure (average plan speed) is meaningless, and anyhow, all OECD nations publish statistics placing subscribers in speed bands (similar to the ABS's ongoing Internet survey in this country). Why not use a direct measure rather than massaging an indirect measure?

Lowest price per Mbps – This measure is even worse than the last, because the measure gives the best score to the worst service. The provider that most oversubscribes its infrastructure will yield the lowest price per Mbps, but at the cost of the real throughput delivered to the customer. A better measure would be to analyse price on a per-Gigabyte, per-month basis, and the only reason I haven't done such an analysis on an international basis is that nobody's paying me to do so.

Another point: international price comparison should be based not on a “raw” translation to US dollars, but on a proportion of average income. That way, if an Australian Gigabyte per month costs X% of income and a South Korean Gigabyte costs Y%, we can confidently identify which consumer is paying more.

Still, these flaws can arguably be forgiven, if the authors were able to argue that they do not affect relative outcomes between countries.

What's interesting is the overall conclusion from ITIF that “non-policy factors account for roughly three-fourths of a nation's broadband performance”.

In other words – as I have argued for years – government policy is not what broadband is all about. Broadband is a consumer product, just like 4WD vehicles, plasma TVs and the rest, and beyond the single question “is it available?” there's not much the government can do.

And why, anyway, is there some magic about broadband which makes it deserving of government funds, but not an LCD TV or a new fridge?

So what are the factors, according to ITIF, which most influence a country's broadband scores?

Urbanicity, age, and Internet usage.

The last is a no-brainer: people don't buy broadband if they're not connecting to the Internet at all. The age of a population can be discussed at length, so I'll leave that for another time.

But urbanicity caught my eye, because (again with Market Clarity) I ran this analysis in 2006. At that time, we concluded that urbanicity was a huge factor in broadband adoption – simply because concentrations of people attract telecommunications infrastructure investment. It's nice to see ITIF agreeing with that analysis.

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