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OECD humiliates Minister Coonan.

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Senator Stephen Conroy Deputy Opposition Leader in the Senate Shadow Minister for Communications and Information Technology

OECD humiliates Minister Coonan

The OECD has overnight released a damning rejection of the analysis of a report on Australia’s broadband performance compiled by a recently formed, minor Australian consulting firm and endorsed earlier this week by the Minister for Communications, Senator Coonan.

Earlier this week, Senator Coonan ‘welcomed’ a report from ‘Market Clarity’ as “a new and robust assessment of Australia’s broadband performance.”

However, just a day later, the OECD has found that the report released earlier this week by ‘Market Clarity’:

• Contained a series of “serious methodological and factual errors”; • Includes findings that are “highly dubious and are likely the result of computational errors and/or a flawed methodology”. • “omit(ed) current, official data sources”

The OECD went on to say that many of the false assumptions on which the Market Clarity report is based could have easily been cleared up had the firm contacted the OECD about its findings.

The public confusion caused by this utterly discredited report could have been avoided if the Minister (or the media) had bothered to put Market Clarity’s criticisms to the OECD.

The only news story here is the desperation of a government Minister that would blindly trust a report by a recently formed minor Australian analyst company over a long standing, universally respected international organisation.

Over the past month the Minister for Communications has: • Directed the ACCC to stop collecting data on Australia’s broadband performance; • Launched an advertising propaganda campaign talking up Australia’s broadband performance; • Commenced behind closed doors negotiations for a political broadband quick fix with

Telstra; and • Desperately endorsed a minor analyst’s report (without even reading it) over data collected by the Organisation for Economic Development.

Australia needs action from the Howard government on Australia’s broadband problems - not the politics of denial.

Labor remains committed to its plan to deliver access to True Broadband of at least 12 mbps to 98% of Australian homes and families in partnership with the private sector.

Further information: Stephen Conroy on (02) 6277 3295 or Tim Watts, 0439 315848 17 May 2007

The OECD’s response to the Market Clarity Report

The OECD welcomes informed criticism on all the information and communication technology indicators it produces in co-operation with its Member countries. We routinely field inquiries and queries on methodology across all the data we publish to assist policy makers. The recent report by the consultancy firm Market Clarity, focusing on one of the indicators we publish, does not fall into the category of informed criticism and has serious methodological and factual errors. Unfortunately, Market Clarity did not contact the OECD or offer us the possibility to comment on their report. We would have been able to clarify many of their misunderstandings as well as correct the factual and computational errors that appear in the report.

Market Clarity’s omission of current, official data sources and subsequent estimation of broadband totals undermines the statistical validity of the report’s findings. In addition, Market Clarity has chosen to adopt a different methodology for counting broadband (e.g. including 3G) than the OECD but then applies it inconsistently. Finally, Market Clarity is also inconsistent across countries in how it attempts to remove connections slower than 256 kbit/s.

The OECD publishes statistics on broadband subscribers every six months. Data on broadband penetration by households are also published. These data are supplied by our experts in Member countries ranging across regulatory authorities, the Ministries responsible for communications policy and official statistical agencies. In Australia, for example, data are sourced from the ACCC and ABS. We also confer with the leading firms in each market in gathering data on prices and the services on offer as well as collecting subscriber data. The OECD broadband data are also reviewed by government officials (Ministry officials, telecommunication regulators, statistical agencies) before their release.

The OECD Working Party that produces data on broadband statistics is comprised of national telecommunication regulators and Ministry officials from the 30 OECD countries. This composition provides access to official broadband data sources that can otherwise be difficult to assemble. Without direct contact with regulators and member governments it is possible for researchers to miss relevant, official data. For example, Market Clarity’s analysis for Korea, one of the leading broadband countries in the world, is based on extrapolations from January 2006. However, Korea has arguably the best broadband reporting timetable of any country in the world. The Korean government updates broadband subscriber data monthly via its ISIS statistical portal ( The data is only available in Korean and the OECD is able to tap into its diverse language culture to gather this and other member country data. Market Clarity’s report, however, replaces official data with their own estimates and criticizes the OECD data as not being consistent with their own.

One of the other striking examples of outdated data in the report is the Czech Republic. The OECD receives official broadband data every three months from the Czech Ministry of Informatics ( Market Clarity’s most recent data from the Czech Republic was from 2005, nearly 18 months old and a full year older than the official data that the OECD reported last month for December 2006. There are many countries where the OECD data from official sources is more recent than Market Clarity was able to locate. Market Clarity’s use of estimates instead of official data provided to the OECD ensures there will be

differences in subscriber totals and the findings of the report in general.

Another key discrepancy in the report is the treatment of 3G mobile subscribers which are dealt with as a separate indicator in the OECD methodology. The Market Clarity report includes 3G mobile subscribers in the United States for June 2006 (11 million) and wonders how these could be omitted from the OECD figures. Contacting the OECD would have provided a ready explanation. The OECD and its member countries have agreed not to include these data in this particular indicator. This does not advantage or disadvantage the United States’ ranking as these data are similarly excluded for all countries.

Indeed, if Market Clarity had been consistent in their treatment of 3G mobile across countries then the additional 3G mobile subscribers for Korea (36 million) and Japan (48 million) would dwarf all other countries and give Korea a combined broadband penetration rate of 103 subscribers per 100 inhabitants - more broadband subscribers than people.

The OECD recognizes the need for a new indicator on mobile broadband but there are significant methodological issues that first need to be carefully examined.

A good deal of the report focuses on broadband at speeds lower than 256 kbit/s. The OECD makes every effort to ensure that the data we receive from national regulators adheres to our strict reporting guidelines. By way of background the OECD created the 256 kbit/s benchmark to exclude services such as ISDN (128 kbit/s). This was an important criteria for data collection, in the early provision of broadband services, but has been made largely irrelevant by developments in the market place. In France, for example, Market Clarity claim authorities collect data on services down to 64 kbit/s. However, broadband offers slower than 256 kbit/s aren’t even available in the market. France Telecom offers DSL services at 512 kbit/s, 2 Mbit/s, 8 Mbit/s and 18 Mbit/s. Smaller firms in France offer DSL services up to 28 Mbit/s. Notwithstanding this the OECD regularly confers with operators to see if any sub-256 kbit/s offers are available and if they would make a material difference to the reported data.

Market Clarity is inconsistent itself with the treatment of these connections. For example, the report creates an indicator limited to 256 kbit/s and above and actually includes sub-256 kbit/s connections for some countries (e.g. using FCC data at 200 kbit/s for the United States) while excluding sub 256 kbit/s connections for others (e.g. Canada, Norway and the United Kingdom). This breakdown offered by Market Clarity suffers from serious methodological and data consistency problems.

Finally, some of the findings of the report are highly dubious and are likely the result of computational errors and/or a flawed methodology. For example, the final table of the report (Table 10, right column) seems to be an attempt to summarize the broadband penetration rate strictly among households (excluding business connections). The results show New Zealand and Turkey as the two leading countries in the OECD in terms of households with broadband subscriptions. Surprisingly, Turkey’s reported broadband penetration rate limited to households (62.8%) is almost double that of longtime broadband leader Korea (38.7%).

These results are in stark contrast to data on individual, household and business broadband penetration supplied to the OECD from official government sources. Perhaps Market Clarity was unaware that the OECD publishes these usage statistics in addition to subscriber data.

Many of these flaws could have been avoided simply by contacting the OECD and talking to us about our methodology and data sources. The result is a report that suffers from data problems and methodological errors, rendering it incomparable with the OECD’s published statistics.

Further information: Stephen Conroy on (02) 6277 3295 or Tim Watts, 0439 315848 17 May 2007