US Wireless Data Prices Are Among the Most Expensive on Earth

US consumers pay “excessive” prices for mobile data, research firm warns, adding that with looming mergers—it could soon get worse.

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Nov 20 2018, 5:13pm

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A new study has found that US wireless consumers pay some of the highest prices for mobile data in the developed world. According to a new study from Finnish research firm Rewheel, the US mobile data market has the fifth most expensive price per gigabyte smartphone plans among developed nations, and was the most expensive for mobile data overall.

While the report notes that mobile data prices have dropped 11 percent during the last six months in the States, US mobile data pricing remained significantly higher than 41 countries in the European Union and the Organization for Economic Co-operation and Development.

Normally, having four major wireless carriers helps boost competition, in turn lowering prices. But the Rewheel report was quick to note that the often stunted level of competition seen in US wireless is more akin to countries where there’s just three major players.

“Even though there are 4 mobile network operators present in the market, US gigabyte prices are not competitive,” the researchers said. “The US is an outlier four mobile network operator market with much higher prices that are typical to three mobile network operator tight oligopoly markets.”

While competition from T-Mobile recently helped drive carriers like AT&T and Verizon back to “unlimited” data plans and away from more tightly metered options, genuine price competition in the US market tends to sometimes be theatrical in nature.

Meanwhile, a monopoly over business data connectivity generally keeps consumer mobile prices high. According to the FCC's own data, 73 percent of the special access market (which feeds everything from ATMs to cellular towers) is controlled by one ISP. This varies depending on the market, but it’s usually AT&T, Verizon, or CenturyLink.

These high prices to connect to cellular towers then impact pricing for the end user and smaller competitors, those same competitors and consumer groups have long argued.

These critics have also argued that Ajit Pai’s FCC recently made these problems worse by lifting price caps on this uncompetitive sector, something he justified by literally weakening the very definition of competition. Monopolies nobody wants to fix and regulators beholden to an industry they’re supposed to hold accountable go a long way toward explaining the US ranking.

All told, the study found that US mobile data pricing was four times more expensive than prices in many four-competitor European Union countries, and sixteen times more expensive than large, competitive four-competitor European markets.

The firm noted that while smartphone data pricing was high, mobile hotspot pricing was significantly worse. For example, Rewheel noted that while Verizon charges users $710 per month for its 100 gigabyte mobile hotspot plan, that same plan costs between €10 and €20 (between $11 and $23) per month in several European countries.

The group was quick to note that the problem could actually get worse as the country’s third and fourth largest carriers (T-Mobile and Sprint, respectively) push a merger nobody really asked for.

While both Sprint and T-Mobile have claimed the merger will somehow increase jobs, boost competition, and lower rates, consumer groups have charged that historically the opposite happens. Redundant jobs are quickly eliminated, and any incentive to actually compete on price is reduced proportionally as the market drops from four to three primary carriers.

As such, the research firm argued the United States might want to be wary about any potential mega merger “synergy” promises being bandied about by Sprint and T-Mobile executives.

“Judging from the excessive gigabyte prices, US operators are charging today for 4G mobile broadband...merger promises concerning affordable 5G home broadband should be critically reviewed and if verified must be made binding,” the research firm warned.

With the government currently taking a more rubber stamp approach to telecom oversight in the Ajit Pai era, that isn’t likely to happen.

Pai’s recent repeal of net neutrality—if it survives next February’s court battle—is likely to open the door to entirely new, creative surcharges and penalties on what’s already some of the most expensive mobile data plans in the world.