Americans pay 5 times more than the Dutch for wireless
If you think that your mobile phone bill is out of control, that's apparently because it is. A new Organization for Economic Cooperation and Development (OECD) survey has found that mobile users in the US, Canada, and Spain pay almost five times more for wireless service than their counterparts in the Netherlands, Finland, and Sweden, who pay the least.
More generally, the report nicely ties together a few trends in the telecom industry: texting services have become significant profit centers, and service providers have cut back on equipment spending during the downturn. The striking thing is that, by doing so, they've managed to actually grow profits despite the economic turmoil.
The portions of the report that are available to the public indicate that, across countries, prices ranged from $11 to $53 for a medium usage plan of 780 voice calls, 600 SMS messages, and eight multimedia (MMS) messages. That's a pretty wide range, and North American users are at the top end of it.
As for the reason behind the disparity between US rates and those abroad, the CTIA, a wireless industry trade group, has already released a rebuttal to the report that attributes the disparity to differences in calling patterns.
Since the average US calling profile is nearly three times greater than the OECD's "high usage" basket (and, in fact, the average US calling profile is nearly six times greater than the OECD's "average" usage basket), it is no surprise that most other sources show the price per-call (or price per-MOU) in the United States is the lowest among the OECD countries.
In other words, Americans use way more minutes than customers in other countries, so if you look at the actual per-minute cost, they're lower because the US is buying in bulk, so to speak.
In addition to calls, SMS "continues to be a particularly lucrative market for operators." This news won't come as a shock to governments in either the US or Europe, which have been looking into how wireless carriers price SMS messages for over a year now.
Both AT&T and Verizon recently testified before Congress about their text messaging charges, and the two companies' representatives denied that they colluded to double text messaging prices over the past five years. The reps indicated that their companies were merely responding to Sprint's decision to raise SMS prices, and they also pointed out that the doubling in message pricing only applies to plans that don't include a fixed number of messages for a fee.
The text messaging trend stands in sharp contrast to the cost of voice calls, which the OECD study says have declined by an average of 21 percent for low usage customers, 28 percent for medium usage, and 32 percent for high usage.
The combination of declining voice prices and rising SMS fees fits with the generational change in mobile usage patterns, as younger users prefer text-based forms of communication like SMS and IM. The study notes that many of the carriers are aiming their text messaging packages specifically at younger users.
The report also takes note of a phenomenon that was starkly evident in this latest round of quarterly earnings releases: bandwidth providers across the industry, from Comcast to AT&T, saw profits jump, while network infrastructure makers from Cisco to D-Link saw huge revenue declines.
Clearly, service providers are extracting more money from the use of existing equipment. It's good news for them, but equipment makers are getting whacked for the second time in a decade as infrastructure spending slows dramatically after a period of frenzied investment.
In any case, the report makes it clear that North American carriers have become extremely adept at keeping their income streams growing regardless of what's happening with the larger economy. There may be national differences in usage habits, but the data suggests that service providers would figure out a way to work around them.
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