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Why are call plans so expensive in the USA?
- Thread starter whitedragon101
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The problem is that US citizens DO expect you to put up cell towers where nobody is living. They may not think of it in exactly that way, but when they are driving through an unpopulated area on the highway they still expect to be able to get cell phone service. If they don't, the carrier is claimed to have spotty coverage and their ratings go down.
Lots of generalizations being thrown around there.
I don't think it's disputed at all that it costs more to establish network coverage in a bigger country. But the real question is whether those additional costs are commensurate with the rates that people typically pay here. I don't know, frankly. But I'd wager that the carriers are making quite a large margin.
Do you factor the phone into the plan?
Like I said. My average per line (even after cell taxes) is $52/line per month. Factor in the phone subsidy I get from ATT. It comes out to around $35/line per month for essentially unlimited minutes text and data (throttled after 5GB lte).
Define 'populated.' There aren't many areas outside of the deserts and extreme mountains where there is nobody living... and, as already mentioned, those areas often have drivers/ truckers passing through that would want/ require cellular service.
Size comparison - USA vs. Europe
Population Density of the USA.
Its not mandatory to get a phone subsidy. Unlocked phones can be had from $200 and up.
Not iPhones or even Higher end Samsung galaxy phones (S4 and Note 3).
Hopefully most of us on these forms understand the USA postpaid market.
There are reasons people stay on verizon and ATT. You factor in overall coverage and pricing (like I explained cost per line). There is a reason Verizon stopped reporting revenue per line 18-24 months ago (I am verizon and ATT shareholder). It's cause there revenue per line was around $50/line. Which is much in line which what tmobile charges.
But verizon and ATT are in a pickle. Their "growth" really was fueled by explosion of family lines. So they are their own worst enemies. They give "up to a $450" subsidy even on lines 2-5. Even though those lines may generate as little as $10/month. (People use upgrade, flip the phone on eBay for profit). Keep line for $10/month for grandpa.
That's the REAL REASON for the move towards "mobile share" and "share everything" so they can lock in a higher per line revenue by forcing people into paying for data on fliphones they don't really need.
I understand the USA market extremely well. The ones with 1-2 lines especially the ones with 1 line do indeed get ripped off. But once you are ar 4-5 lines. There really isn't much savings prepay and tmobile USA can offer when you factor in everything.
No, that's not how it works. Even if there are only a few people in the area, they have to put up towers there to cover those people.
And like I said, there are MVNOs that have unlimited plans for $40. If you don't like the service that you can get with an MVNO, then you can pay more and get AT&T or Verizon. You get what you pay for.
So what we have established so far :
1) Mobile call plans are definitely more expensive in the USA. Even the family plans aneftp talked about with subsidy come to $40 ($52-17). And its throttled after 5GB which is not unlimited. A completely unlimited UK plan is $24, no family required
2) There are 3 possibilities why :
a) The USA is bigger and good coverage costs more over a wider area with a lower population density.
b) The companies just want more money
c) Costs are just higher in the USA
I think we can cross option C off this list right out of the gate, so we are left with some combination of A / B.
1) Mobile call plans are definitely more expensive in the USA. Even the family plans aneftp talked about with subsidy come to $40 ($52-17). And its throttled after 5GB which is not unlimited. A completely unlimited UK plan is $24, no family required
2) There are 3 possibilities why :
a) The USA is bigger and good coverage costs more over a wider area with a lower population density.
b) The companies just want more money
c) Costs are just higher in the USA
I think we can cross option C off this list right out of the gate, so we are left with some combination of A / B.
So what we have established so far :
1) Mobile call plans are definitely more expensive in the USA. Even the family plans aneftp talked about with subsidy come to $40 ($52-17). And its throttled after 5GB which is not unlimited. A completely unlimited UK plan is $24, no family required
2) There are 3 possibilities why :
a) The USA is bigger and good coverage costs more over a wider area with a lower population density.
b) The companies just want more money
c) Costs are just higher in the USA
I think we can cross option C off this list right out of the gate, so we are left with some combination of A / B.
Red hot hammer meets nail.
This post has my seal of approval
So what we have established so far :
1) Mobile call plans are definitely more expensive in the USA. Even the family plans aneftp talked about with subsidy come to $40 ($52-17). And its throttled after 5GB which is not unlimited. A completely unlimited UK plan is $24, no family required
2) There are 3 possibilities why :
a) The USA is bigger and good coverage costs more over a wider area with a lower population density.
b) The companies just want more money
c) Costs are just higher in the USA
I think we can cross option C off this list right out of the gate, so we are left with some combination of A / B.
aneftp's example is not the norm and is more extreme example because he/she has a huge discount on their plan and also has a grandfathered plan that is no longer available.
It's mainly b. The wireless industry (especially AT&T/Verizon) have insane profit margins. Combine that with the fact that those two companies are also the only two with the spectrum and resources capable of providing that coverage and you come up with the fact that they have a large competitive advantage and can pretty much price the market however they wish. Our market simply isn't very competitive compared to other countries.
Under the most favorable of circumstances, a family of 4 on a Verizon Share Plan with 4 iPhones sharing a paltry 2GB of data would amount to about $55 ($63 if you factor in ~$8/mo for the subsidy) per user. The risk of $15/GB overages are very high as well with iPhone users so that could add up too. That's very high compared other countries. Even with a smaller carrier like TMO a family of 4 with a total of 2GB of data would be paying around $25 per user ($52 factoring in 4 iPhones). Well above the $24 example you gave.
Even now investors are concerned about T-Mobile potentially creating a price war here by lowering prices not because it would hinder the other 3 from building and maintaining their networks, but because it would eat into their huge margins. It's that simple.
If the US carriers all used the GSM standard and no phones were locked to any mobile carrier, it would go a long way towards driving down prices and spurring competition.
I have friends in other parts of the world that pay way, way, way less than we do over here. It just seems clear as day that these companies are taking advantage of us! But i guess what can you really do.
A quick browse of Verizon's site and, for a family of 4, it recommended sharing 8GB of data with unlimited text/ calls for $250 ($62.50 each).
From there, subtract the $18.75 subsidy ($450 over 24 months) and you're looking at $43.75.
Still not the best, but cheaper than what you quoted and has 4 times the data.
The subsidy is not $8/month per line. It's close to $400-450/phone divided by 24 months.
Example S4 and iPhone 5 S are around $630-650. You buy those phones are anywhere between $100-200 on contract. That's why it's $400-450 subsidy. And it comes out to around $15-17/line per month subsidy.
Most people (88%) are on family lines and have crop discounts. So it's not an extreme example. I currently get a 24% discount. That's little high in the discount side. But I can easily get a 20% discount at hospital I work at also.
"AT&T reported in July that 88% of its wireless subscribers are on family or business plans"
http://m.us.wsj.com/articles/BL-DGB-24841
Honestly. I don't know anyone with less than a 12% discount on verizon or ATT or sprint. Many of my friends have 20-25% discounts.
Heres a link to an unscientific poll. Close to 80% have some type of corporate discounts on their cell phone bill.
http://cellphones.about.com/gi/pages/poll.htm?linkback=http%3A%2F%2Fcellphones.about.com%2Fb%2F2010%2F01%2F04%2Fhow-to-receive-a-corporate-cell-phone-discount.htm&poll_id=2645637352&poll=5
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