Monday, August 12, 2013
A Senior Economist Calls My Comments “Stupid”
I’m just back from a conference in Perth Australia where a major economics professor from a northeastern university headlined. After his presentation he stuck around perhaps allocating a small portion of his considerable intelligence to following a later discussion. A colleague of mine presented a paper comparing wireless policies and market performance of carriers in the U.S. and E.U. He noted that U.S. carriers have some of the highest average return per user, but also some of the lowest rates on a per unit basis. He also noted that the U.S. market has less concentration than many other E.U. markets using the Herfindahl Hirschman Index (“HHI”).
Using the traditional peer review process I mentioned that the HHI score used in the paper was low compared to more recent measures that include additional acquisitions by Verizon and AT&T. I also noted that high volume, plan-based consumers can benefit from world class low rates, but low volume users do not. I made an analogy to the pricy breakfast buffet at my hotel. People like me with a healthy appetite enjoy low cost per gram, but my wife incurs a high unit cost as she consumes less.
Professor x chimed in with the stupid criticism based on his view that the HHI is not worthy of use and the availability of prepaid plans that do not lock in subscribers. I didn’t know what a touchy, third rail topic the HHI is, particularly to researchers sponsored by incumbents keen of making acquisitions while also insisting on how competitive the wireless marketplace is. The Professor noted that 17% of wireless consumers in the U.S. don’t have a plan, but he never got around to acknowledging that these per call and per text users pay far higher rates than the world class levels incurred by consumers who make thousands of text messages monthly.
So the smartest guy in the room offers a clear snapshot of how to act like an ugly American bully in nation adverse to tall poppies. 30+ years as a scholar in both academic and applied telecommunications issues and Dr. Big Shot dismisses my contrary evidence as stupidity. Not smart.