Why are call plans so expensive in the USA?

[whitedragon101]

I am watching the CES coverage and there are many adverts for an AT&T call plan for unlimited calls for $45 and that doesn't even include unlimited data . They say it as if thats amazing. (I am from the UK).

In general it seems from watching various adverts the call plan prices are crazy. Again bafflingly they all talk as if these prices are incredible steals.

"Yes you too can pay double the cost of a UK,German,French,Australian,Italian plan but to make you feel better compare it against the eye watering price we were charging last month."

I did some googling and found this map that shows the USA pays more for its call plans than any other country (except for a couple of developing African nations).
http://www.androidcentral.com/us-mobile-data-prices-among-most-expensive-world

Anyone know why this is? Have the companies just decided to keep prices high because no-one is driving them lower? Or something else?

 

[CEmajr]

Lack of competition. The US market is effectively almost a duopoly controlled by AT&T and Verizon. There are lower price options if you look beyond the major carriers though.

 

[madsci954]

I boil it down to corporate greed and land area. Like compare the size of the US and the UK, a lot more towers to maintain.

 

[Nolander07]

One other thing is that the big phone companies subsidize the phones. So, you get a $700 phone for $200, but end up paying them $2000 more over the next 2 years. It can be very frustrating, and usually the companies doing this have very lousy customer service if you ever do have a problem.

 

[cxc273]

I agree with the other posters. The country is effectively an AT&T-Verizon duopoly that limits competition, though T-Mobile has done some interesting things from a pricing perspective to shake things up.

The other thing about the U.S. market is that the vast majority of users are on two-year contracts where the bulk of the phone's cost is subsidized. Therefore, monthly costs are generally higher as customers pay back the subsidies. Plans that allow customers to bring their own devices and pay a lower monthly fee are more difficult to come by.

Not to get off on a tangent, but I would love to pay for an iPhone outright in exchange for a lower monthly fee from Verizon or AT&T. If that were the case, I'd probably be still using my 4S instead of upgrading to the 5s last fall.

 

[PsstGreek]

That's why I'm a big fan of prepaid service now. I'm done with the 2 year contracts.

 

[maflynn]

That's why I'm a big fan of prepaid service now. I'm done with the 2 year contracts.

This is probably why T-Mo has been gaining so many new customers as well.

 

[T5BRICK]

Anyone know why this is? Have the companies just decided to keep prices high because no-one is driving them lower? Or something else?

As a couple of other posters have already pointed out, it is likely because Verizon and AT&T have a duopoly.

Additionally, most people in the US choose to subsidize their phone and sign a 2 year contract with the carrier. I don't think that people realize that they'd actually save money if they paid full price for the hardware and choose a less expensive carrier like AIO or StraightTalk.

 

[jav6454]

I have two main reasons:

1. US cell companies have a very large coverage area to maintain (geographically)

2. US cell companies like to have large margins (as if they were another commodity).

I can accept the extra charge due to the first reason, but the second reason... well, lets say I'm not sold on it.

 

[maflynn]

if they paid full price for the hardware and choose a less expensive carrier like AIO or StraightTalk.

Coverage and support is a major factor for carriers like these. I'm not familiar with them, but I'd be less likely to sign up as I'd be concerned about coverage and support

 

[jamezr]

That's why I'm a big fan of prepaid service now. I'm done with the 2 year contracts.

I am curious....can you bring an existing phone to a prepaid plan? That would be very nice.....

 

[T5BRICK]

Coverage and support is a major factor for carriers like these. I'm not familiar with them, but I'd be less likely to sign up as I'd be concerned about coverage and support

AIO operates on AT&Ts network and has the same coverage. In fact I'm pretty sure AIO is a subsidiary of AT&T. As for support, I really don't know. I have a corporate discount with AT&T and I haven't had a reason to switch so far.

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I am curious....can you bring an existing phone to a prepaid plan? That would be very nice.....

Depends on the phone and the prepaid plan, but in a lot of cases you can.

 

[gnasher729]

I am curious....can you bring an existing phone to a prepaid plan? That would be very nice.....

What makes you think they would charge less?

The other thing about the U.S. market is that the vast majority of users are on two-year contracts where the bulk of the phone's cost is subsidized. Therefore, monthly costs are generally higher as customers pay back the subsidies. Plans that allow customers to bring their own devices and pay a lower monthly fee are more difficult to come by.

Subsidies are the same in the USA and the UK. The difference is that in the UK, you get a "free" phone, and pay £25 a month for the phone and £10 a month for the plan, while in the USA, you pay $30 a month for the "free" phone and $100 a month for the plan.

In both countries, most continue charging for the phone after 24 months if you don't change your contract even though it is fully paid now. (Exceptions T-Mobile in the USA, O2 in the UK with certain plans).

I use an iPhone 3GS as an iPod replacement (32GB of music, plus it has a camera, GPS, can play games, and if I really want to it can even make phone calls) with a pay-as-you-go plan, £1 a day if I need to use the internet, £0.35 per phone call - but as I said, it isn't used for that except in emergencies. In the USA, that kind of use seems impossible.

 

[PsstGreek]

I am curious....can you bring an existing phone to a prepaid plan? That would be very nice.....

I did. I started with tmobile with the Uncarrier plan then switched to the $30/month prepaid after I paid off the EIP. My iPhone is also unlocked now if I wanted to switch to another carrier.

 

[jamezr]

What makes you think they would charge less?

Subsidies are the same in the USA and the UK. The difference is that in the UK, you get a "free" phone, and pay £25 a month for the phone and £10 a month for the plan, while in the USA, you pay $30 a month for the "free" phone and $100 a month for the plan.

In both countries, most continue charging for the phone after 24 months if you don't change your contract even though it is fully paid now. (Exceptions T-Mobile in the USA, O2 in the UK with certain plans).

I don't know thats why I asked the question. If i brought say an iPhone 5 that was previously on AT&T to a T-Mobile prepaid plan....would that work? I am not sure.

 

[zorinlynx]

How is it a duopoly, when we also have T-Mobile and Sprint?

 

[jamezr]

I did. I started with tmobile with the Uncarrier plan then switched to the $30/month prepaid after I paid off the EIP. My iPhone is also unlocked now if I wanted to switch to another carrier.

See that is the best of both worlds.....

 

[HeyKatie]

I think plans are even more expensive in Canada then in the US, most plans start at $70 and you only get between 200-500mbs of data.

 

[PsstGreek]

I don't know thats why I asked the question. If i brought say an iPhone 5 that was previously on AT&T to a T-Mobile prepaid plan....would that work? I am not sure.

It will work yes, but you won't get the full T-Mobile "network" if your iPhone isn't the AWS one. Of course your iPhone would need to be unlocked.

 

[nebo1ss]

I have two main reasons:

1. US cell companies have a very large coverage area to maintain (geographically)

2. US cell companies like to have large margins (as if they were another commodity).

I can accept the extra charge due to the first reason, but the second reason... well, lets say I'm not sold on it.

I don't buy the argument about a larger area to maintain. Surely larger area also equates to more customers to pay for the service.

A lack of real competition is probably the main reason. The same problem exist with home plans. I lived in the US for a number of years and was paying almost $100 per month for home service with calls and internet which maxed out at 1.5M download.

I am now paying for a home plan in the UK with calls and internet at 5M download for the equivalent of about $30 per month. i have a choice of about five carriers for my home service in the UK. In Connecticut where I lived there was only ATT.

 

[DBZmusicboy01]

Is the 2 year contract the most ridiculous thing about owning an iphone?

By being forced to pay $70+ for 24 months? T-Mobile is moving to the right direction but it would be great if they can offer a basic $30 plan that gives us limited minutes and Internet.

 

[old-wiz]

Lack of competition. The US market is effectively almost a duopoly controlled by AT&T and Verizon. There are lower price options if you look beyond the major carriers though.

The prices include the cost of the phone itself. Suppose you buy an iPhone from Verizon for $ 190 with the real cost actually 690 (just imaginary amounts). That leaves $ 500 The monthly bill pays off the $ 500 over the period of your contract plus the cost of the service. At end of contract, the cell companies continue to charge the same amount, so the amount that previously went to pay off the phone cost now goes into the cell company profits. You would think the phone plan cost would go down since you're no longer paying off the phone, but it doesn't.

And people pay it.

Plus the cell companies own enough members of congress and the FCC to make sure there is no real competition and to allow them to continue practices that make it extremely expensive to switch carriers. Bribery works wonders to get control of politicians.

 

[Mrbobb]

And people pay it.

They have no choice.

Blame Apple for making a smartphone fashionable.


But sensible people can always go pre-paid as mentioned.

 

[alent1234]

the US cell carriers invest a lot more money into infrastructure. LTE is new around the world, but in the USA its already old news. cheapo phones are on LTE now and the area of coverage with small population densities is at least as large as europe itself

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I don't buy the argument about a larger area to maintain. Surely larger area also equates to more customers to pay for the service.

A lack of real competition is probably the main reason. The same problem exist with home plans. I lived in the US for a number of years and was paying almost $100 per month for home service with calls and internet which maxed out at 1.5M download.

I am now paying for a home plan in the UK with calls and internet at 5M download for the equivalent of about $30 per month. i have a choice of about five carriers for my home service in the UK. In Connecticut where I lived there was only ATT.

cows in rural areas don't pay for cell phones. people here expect to drive on a highway with no people for miles around and have cellular service. verizon covers an area the size of europe that is mostly unpopulated

 

[KevinMac]

I agree that some of the expense is due to lack of competition.... Also, I think that the U.S. is helping to subsidize phone expansion into under developed countries in order to keep their plans cheaper to say places like China, etc.