Mo­bile in­for­ma­tion su­per­high­way ex­pen­sive in US than Europe

Kuwait Times - - TECHNOLOGY -

PARIS: Per­haps ev­ery­thing’s big­ger in Amer­ica, 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 20 times as much as Euro­peans.

If you live in France, you can pay as lit­tle as 20 eu­ros ($21.50) per month for a monthly pack­age fea­tur­ing 50 gi­ga­bytes of data, un­lim­ited do­mes­tic and in­ter­na­tional calls to over 100 coun­tries and un­lim­ited text mes­sages. In the United States, that much data could cost you $390 per month from one na­tional op­er­a­tor.

While the above com­par­i­son may be the ex­treme, it dove­tails with an In­ter­na­tional Telecom­mu­ni­ca­tions Union re­port last year which 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 may be the pi­o­neers with on­line video stream­ing ser­vices like Net­flix and Hulu, Amer­i­cans 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.

That may be chang­ing though, as an­other US op­er­a­tor re­cently dropped its un­lim­ited calls and data pack­age from $180 to $80 per month.

Less choice, higher prices

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.

France and Bri­tain-where you can get an un­lim­ited data plan for as lit­tle as £27 ($41) — each have four na­tional mo­bile op­er­a­tors. The same goes for Swe­den, where the cheap­est 50 gi­ga­byte plan is roughly $46.

Mean­while in the United States the hand­ful of so-called na­tional op­er­a­tors don’t really fully cover all of the coun­try. At any given lo­ca­tion only one or two may be present, plus a small re­gional player.

“Of course where you have less choice you are go­ing to have higher prices,” said Hart­ley. The sit­u­a­tion is in some ways ironic, given that the United States is gen­er­ally seen as the paragon of free com­pe­ti­tion which is sup­posed to lead to lower prices while the Euro­pean Union ties com­pa­nies up in red tape, thus caus­ing higher prices.

But 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, said Hart­ley.

Hellish cir­cle

Syl­vain Che­val­lier, an as­so­ciate at tel­coms spe­cial­ist Bear­ingPoint con­sul­tancy, 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 United States “you don’t have this con­stant life or death strug­gle for a suf­fi­cient num­ber of cus­tomers” said Che­val­lier, call­ing it a “com­pet­i­tive but rea­son­able mar­ket”.

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

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

While Euro­peans may enjoy low prices now, the ques­tion will be whether op­er­a­tors will be will­ing to in­vest the mas­sive sums needed to up­grade and ex­pand their net­works. In­deed, the need to re­coup in­vest­ment costs is the main ar­gu­ment ad­vanced by the US mo­bile in­dus­try to ex­plain its tar­iffs.

Low in­come house­holds bur­dened

But such an ex­pla­na­tion is just “smoke and mir­rors” said Linda Sherry, a spokes­woman for Con­sumer Ac­tion, a US con­sumer ad­vo­cacy group that takes is­sue with a num­ber of prac­tices that stick con­sumers with higher bills.

In Europe, if you ex­ceed your data al­lowance you’ll see your speed re­duced, but in the United States you’ll find an ex­tra charge from some op­er­a­tors.

Long term con­tracts with sub­sidised phones make it dif­fi­cult to change op­er­a­tors to take ad­van­tage of a bet­ter deal. The im­por­tance of ser­vice charges for smart­phones is about more than pay­ing a pre­mium to catch the lat­est episode of Em­pire.

A US Cen­sus re­port last year found that mi­nori­ties and low-in­come house­holds are more likely to only have hand­held de­vices to ac­cess the In­ter­net, which is in­creas­ingly be­com­ing the gate­way for many ser­vices. “We see why peo­ple feel this is a crit­i­cal ser­vice,” said Sherry. “It eats up a much larger per­cent­age of their in­come, but as it is nec­es­sary, mi­nori­ties and low-in­come fam­i­lies bite the bul­let and pay. They are go­ing with­out some­thing else,” she said. — AFP

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