Mon, Nov 16, 2015 - Page 15 News List

US users pay more for mobile data


Perhaps everything is bigger in the US, as the old saw goes, but when it comes to mobile phone calls and data usage, US consumers are certainly paying big, sometimes nearly as much 20 times as Europeans.

If you live in France, you can pay as little as 20 euros (US$21.54) per month for a monthly package featuring 50 gigabytes (GB) of data, unlimited domestic and international calls to more than 100 countries and unlimited text messages.

In the US, that much data could cost you US$390 per month from one national operator.

While the above comparison might be the extreme, it dovetails with an International Telecommunications Union report last year that found US data to be up to 19.5 times more expensive than in Europe when corrected for purchasing power of consumers.

The result is that while US companies might be the pioneers with online video streaming services like Netflix and Hulu, users in the US have been asked to pay much more for what it takes to use them on a smartphone, which is rapidly becoming a popular platform for catching the latest episode of your TV show.

However, that might be changing, as another US operator recently dropped its unlimited calls and data package from US$180 to US$80 per month.

So why has there been such a huge difference?

“The fundamental reason is competition,” said Steven Hartley, practice leader for Service Providers and Markets at telecoms and IT consultancy Ovum Ltd.

France and Britain — where you can get an unlimited data plan for as little as £27 (US$41.13) — each have four national mobile operators. The same goes for Sweden, where the cheapest 50GB plan is roughly US$46.

Meanwhile in the US, the handful of so-called national operators do not really fully cover all of the country. At any given location only one or two might be present, plus a small regional player.

“Of course, where you have less choice you are going to have higher prices,” Hartley said.

The situation is in some ways ironic, given that the US is generally seen as the paragon of free competition, which is supposed to lead to lower prices, while the EU ties companies up in red tape, thus causing higher prices.

However, in this case “the EU has gone out of its way to encourage more competition and to regulate prices, and to regulate them down,” which has benefited consumers, Hartley said.

Sylvain Chevallier, an associate at consultancy BearingPoint, which specializes in telecom, agreed that competition is the issue, but believes the problem is in Europe.

“It’s not that the US market isn’t competitive, but I would say that in fact the European market is way too competitive,” which has resulted in plunging prices, he said.

Companies need a certain number of subscribers to cover their costs of building and operating their networks, he said.

In the US, “you don’t have this constant life or death struggle for a sufficient number of customers,” Chevallier said, calling it a “competitive, but reasonable market.”

However, he believes that in certain European markets, such as France, there are too many operators for the number of customers, noting that revenue per customer fell by nearly one-third when a fourth operator started business.

“To survive, the operators must get as many clients as possible, but to do so cut prices,” Chevallier said. “It’s a hellish circle that results in the market losing its value.”

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