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November 16, 2015

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Telecom competition benefits European consumers

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 (US$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 US, that much data could cost you US$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 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.

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

Meanwhile in the US 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 US 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.

Sylvain Chevallier, an associate at telcoms specialist BearingPoint consultancy, agreed that competition is the issue.


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