I don't understand, why is it that it costs less than $1 in countries in Asia for a GB of mobile data but costs ~$15 for the same in the United States?
Can someone with knowledge of the industry please explain the reasons for this discrepancy to me?
Can someone with knowledge of the industry please explain the reasons for this discrepancy to me?
EDIT: On the "US is big" point, it's notable that pricing doesn't really follow population density in Europe. The UK has four times the population density of Ireland, but only fractionally cheaper data. Germany has similar population density to the UK, but far more expensive data (though I wonder are they looking at all extant contracts or something; data recently got a lot cheaper in Germany).
All three countries have comparable household earnings. Sweden has a third the population density of Ireland (less than a tenth that of the UK!), slightly higher average data cost, _cheaper_ minimum data cost, and comparable household earnings.
In general, any attempt to explain this via recourse to population density, income or GDP fails in the developed world.
And if there is no competition, you no longer charge competitive prices, you charge what people are willing to pay. The whole promotional plans they offer are used to figure out how much you are likely to pay. Once the promotion expires and you don't call to get it extended, you are basically saying that you're ok with increase. Once enough people don't do that, the price will go up.
If you compare Australia and New Zealand for instance, there’s some very obvious factors that could explain that difference. Australia has a lot more outbound submarine bandwidth than New Zealand has, with New Zealand also being much further away from the rest of the world. Most of Australia has either no service or terrible service. New Zealand has approx the population of Sydney, while having more than 20x the land area. Australia has about 5x the population of New Zealand, so all of your fixed prices per customer are going to be less in Australia.
For any two countries you’re going to get an incredibly long list of factors that influence price. Population density seems like it should have a significant impact on the cost of building and maintaining mobile infrastructure for example. The US has close to 10x the population density of Canada, and Europe has over 3x the population density of the US, which I would expect is a non-trivial contributor to the reason that Canada is more expensive than the US, which is more expensive than Europe.
Also I'd say puts to rest arguments about wages/regulation being the issue.
- Ban on SIM-locking of phones to one provider
- Allowing users to change providers without losing their phone number
- Ban on "exit penalties" for customers leaving a contract
- Forcing existing infrastructure providers to share their infrastructure with virtual or not-yet-fully-deployed new providers
However, it’s great the Israel has made it possible for infrastructure to be shared as a utility, allowing new players an easier entry. That will keep things competitive for a long time.
One reason is labor costs. Imagine how much it costs to build and maintain one tower in Norway with its high standard of living for everyone vs in Myanmar where people will work for much less, and with lower safety standards.
And obviously providers will charge more if they can, less if they have to.
- speed
- overall saturation of tower (# users per tower)
- population density (full coverage of an area may be difficult)
- technology; https://en.wikipedia.org/wiki/Comparison_of_mobile_phone_sta... which could affect federal regulatory licensing costs, technology licensing and acquisition costs and competitiveness of market to provide technology, tower density, total user capacity
This is my laymen's interpretation. For instance, to blanket the US (9.834 million km² and 36 people per Km2) in LTE would be a significantly harder challenge then blanketing Myanmar (676,575 km² and 83 people per Km2) or even Norway (385,203 km² and 15 people per Km2).
Just look at the stats for Myanmar, 86 people per Km2, and I might be able to get most of them within 300-500k km2. My subscriber base is excellent!
And as I said, there are other reasons such as consumer surplus (rich people can pay more, so they do).
When prices are based on ability-to-pay rather than cost of provision, then that means there's a competition problem.
While Norway may have more expensive labour, I'm sure they farm out as much as they can offshore.
I wonder if Ericsson or Nokia charge lower prices for the same equipment in poorer countries.
Median income India - $2k
Median income USA - $60k
So something like 10x difference
There is also strict requirements on uptime and huge fines for telcos in western countries if the service goes down, even for just a moment. Needless to say that creating a resilient network costs a lot more.
I'm not sure where you get $15. The linked site says $8:
"with 1GB costing an average $12.55 in Canada and $8.00 in the US."
Nor do I get why you think all of Asia is inexpensive. South Korea is far worse than the US, despite a far lower median income, at $10.94 average. If you adjust that to the US, it's more like $24 (200% higher than the US). And Japan is fairly bad vs global prices as well when adjusted for income levels (around $6 to $6.50 equivalent in US terms).
Why are US prices higher than they should be? Two primary reasons. First, the two big telcos initiated (and held) the market at a very high price point from inception. The US was the first large cellular and smartphone market. It has taken limited competition, primarily in the form of T-Mobile, more than a decade to drag those high prices downward.
Second, wealth / income adjustments. Consider the Ukraine example. The US has ~20 times the GDP per capita of Ukraine in a typical year. Their $0.46 cost is comparable to more like $9.20 with a US adjustment, which is higher than the US cost. US median disposable incomes are among the highest, only comparable to smaller affluent countries like Australia, Sweden, Norway, Denmark and Switzerland.
You also can't sell 1gb for $10 in Ukraine, it's not a very good business model. The people can't afford those prices. The telecom operators in countries like Ukraine do not make very much money selling mobile plans.
Most telecom operators around the world operate at very thin margins with low profits. Verizon by itself generated $30.4 billion in operating income in 2019. AT&T generated $29.4 billion in operating income. T-Mobile generated $5.7 billion in operating income.
So between the three US telecom operators, that's $65.6 billion in operating income every year (best compared to Apple or Microsoft in size). The entire rest of the world has nothing remotely like that profit bonanza, outside of a select few large operators.
Look up PPP.
Simple simple simple.
But because you can’t just add more wires to the airwaves, there is a limited amount of bandwidth no matter what you do. So that’s fair.
They offer unlimited tethering still 512Kbps.
Another will be to bring down quality of service level. A couple of years back I was india and area where my mother lived had service down for like a week. That area must have a population of at least few 100Ks.
Third to have very little customer service staff. People here have legitimately said why the hell do I care about 1000s of customer service/call center staff. I want my service cheap. In countries like India they have done that. Social media call these companies evil but I think they are just trying to run cheap service.
Fourth is to spend much less on network equipments and field testing. Service is announced at much cheaper price point but backend systems are severely overloaded so one gets much more network/call drops.
In Canada they do that and keep the extra profits. Koodo is one of Telus’ flanker brands (for the illusion of competition) and even though they’ve increased phone and plan pricing a fair bit over the last couple of years they’ve gotten rid of the ability to directly call customer support.
The Canadian government has been promising us action in the mobile industry for ages, but year after year after year our prices go up and up and up.
A good starting point would be legislation that Israel enacted to get competitive markets as described by rvp-x:
> - Ban on SIM-locking of phones to one provider
> - Allowing users to change providers without losing their phone number
> - Ban on "exit penalties" for customers leaving a contract
> - Forcing existing infrastructure providers to share their infrastructure with virtual or not-yet-fully-deployed new providers
(and $80-100 for the big bucket)