UK statisticians admit to major error in measuring telecoms

Whoops: UK statisticians admit to major error in measuring the telecoms industry

07 July 2020 | Alan Burkitt-Gray

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The UK’s government statistical authority has admitted that it knows little about what’s happened in the telecoms market over the past few decades.

The Office for National Statistics (ONS) doesn’t quite put it like that, but it admits in a post on its site that it has wildly miscalculated the fall in prices in telecoms services since 1997.

According to the Financial Times (FT), which calls these miscalculations “huge errors”, the ONS’s consumer price index – the national measure of inflation – still measures the industry as providing “telecoms and telefax” services: perhaps an indication of how out-of-date the agency really is.

Its admission on its own site is woven through with statisticians’ jargon, but it says it has identified “two main issues: the under-representation of internet services within the current deflator and an improvement in the handling of access charges for telecommunications services”.

Under the old calculation, it thought the price of telecoms services had fallen from around 223 in 1997 to 100 in 2016 (the ONS doesn’t give real prices, but bases everything on 2016 being 100).

In reality, the ONS, which is based in central London (see picture), has now noticed that landline voice calls and faxes in 1997 have been supplemented by a lot more services, the 1997 figure should have been 1,717 – a figure that is 7.7 times bigger. In other words, the telecoms industry is delivering 7.7 times more value than the UK government thought it was.

“The improved telecommunication services deflator,” as the ONS calls its identification of a 23-year-old error, “better accounts for the technological changes that occurred in this industry over the past two decades such as increasing coverage and broadband speeds that have resulted from infrastructure investment and implementation of superfast fibre optic broadband as well as new generations of mobile cellular broadband.”

The steep fall in prices, which the agency has only just noticed, better accounts “for the technological and associated quality changes that occurred in this industry over the past two decades”.

Now, it says, it needs to calculate how that affects the rest of the economy. The recalculation “would increase the volume of output of the telecommunications sector and will likely increase the headline volume measure of GDP [gross domestic product]”.

It adds: “However, as this improvement also impacts both how telecommunication services are consumed by other industries and are used by consumers it is not yet possible to know what the exact impact will be. Increases in the telecommunication services sector output would be partially offset by impacts to other industries, such that any increase to the volume measure of GDP will be significantly less than that driven by the increased output of the telecommunication sector.”

As well as going back to its pocket calculators the ONS says: “We will look to make further progress on the research programme that has been identified as part of this ongoing piece of work.”