TELECOM Digest OnLine - Sorted: Re: America the Worst For Cell Rates and Plans

Re: America the Worst For Cell Rates and Plans (
Mon, 7 Feb 2005 14:38:16 PST

(I hope my delayed reaction is forgiven)

Thanks for the very useful link. I certainly stand corrected on my
claim about the cost of calls by cell phone customers being lower in
Europe than here. It is obvious from the chart that this is not the

Interestingly, the correlation between high per minute cost and low
total usage is portrayed as the cause of low usage. I wonder if this
ought to be a greater concern for the operators than for the
users. That is, could they "get more" out of every user if they
lowered the per minute cost of calls?

From the user's side though, the monthly cost seems to be lower for
the European, even at the cost of lower usage (on outgoing calls). An
average American is getting a 10c/min charge because he/she has
purchased minutes in bulk. If he actually used all those minutes, it
would cost about $55 monthly. If not, the minutes actually cost more
(that's why I mentioned my "guess" that high volume users are better
off in the US than in Europe). If you go over, as has happened to me
on occasion, God help you.

Working off the same chart, an average Italian user would have a
monthly cost of about $30, a bit more than half what the American paid
(of course he/she also made a lot fewer outgoing calls).

It seems to me an arguable point, that if there was added value in
talking more, European users would pay more to do so. Since they are
not, can we infer that they have reached the limit of what they are
willing to spend on their mobile service, so lower per minute costs
would not necessarily increase total use? (In light of the research
sited, I think that's not the case. It is likely that the average user
would end up spending more per month if the per minute cost came

Having said all that, I must say I still hate being charged for
incoming calls :-)

Thanks again for the papers.


PS none of the above argues against the main point of Mr Marcus'
report, on the adverse effects of call termination fees (I suffer from
these personally. Whenever I want to call my brother in Europe, I try
to call him on a fixed line so as to avoid the significant extra
charges of calling him on his cell. He never has such a problem when
calling me.)

John Levine <> wrote:

> The reality is that most Europeans have a much cheaper service.

I just came across a most interesting article in the current European
Economic Journal on this very topic. See pages 5-7:

It argues that due to the "termination monopoly" in which anyone who
wants to call you has to pay the price your carrier sets, the average
per minute price for calls in Europe is much higher than in the US,
and a simple chart shows that the lower the per minute price, the more
calls people make. A big advantage of charging all the calls to the
subscriber is that the overall price becomes a competitive issue,
which drives the per minute price down and provides for cheap bundled

In a monopoly environment, prices tend to stay high unless regulated
down, and that's what's happening in Europe, increasing regulation of
termination prices.

He also points out that roaming prices are an even worse problem for
the same reason, they're set by whatever carrier your carrier happens
to have a roaming agreement with, but now there's international
politics added to the mix.

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