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Wednesday, February 12th, 2014

Time Event
3:21p
I Indulge In Digital Burgernomics
Broadband and Burgernomics: Is the Netflix Rankings the Digital Big Mac Index?
http://www.wetmachine.com/tales-of-the-sausage-factory/broadband-and-burgernomics-is-the-monthly-netflix-rankings-the-new-big-mac-index/

In this blog post, I explore the question of whether the monthly "Netflix Ranking" can provide the same sort of rough guide as to whether a provider's broadband is "overvalued" or "undervalued" in the way the Economist magazine "Big Mac Index" indicates whether currencies are overpriced or underpriced relative to each other.
This is fairly long and wonky to explain why, in the aggregate the objections people are going to raise should cancel out. The notion of using a standardized "basket of goods" to compare currencies is the idea behind the Big Mac Index. Here, the idea is that Netflix, because Netflix is so broadly distributed and the subscriber base of the largest ISPs should have roughly the same user habits, serves as a usefully proxy for downloads of all high-bandwidth content. As a result, we can tell roughly whether an ISP's speed claims are "overvalued" or "undervalued" in the same way the Big Mac Index tells us whether a currency is overvalued or undervalued relative to other currencies as measured by purchasing power.

Comments welcome.

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