Earlier this week the BBC web site ran an interesting article asking the question why the price of broadband was so much higher in the US than it is in the UK. Research has found that packages are around three times more expensive than they are in the UK, and that in surveys comparing broadband prices the US is often to be found close to the bottom of charts. Considering the US is the country that is traditionally credited with inventing the Internet, this might well come as a surprise for some.
Traditionally technology tends to be cheaper there and to a large extent that’s still the case. Take the newly 13in Macbook Pro: it’s £999 here in the UK (including VAT), but including a typical New York sales tax costs the equivalent of £815 in the US. Not so broadband, where as you can see in the chats in the BBC article, the US is at the bottom of the list for purchasing power parity for broadband at 45Mbps or above.
The article goes into a lot of details regarding describing the problem, but there’s not much in the way of reasons for the price disparity. The main one seems to be encapsulated in this quote from Susan Crawford, a former special assistant to President Barack Obama on science, technology and innovation policy.
“Americans pay so much because they don’t have a choice.” It’s simple market economics. Where there is little choice, providers are free to charge what they want, to the detriment of consumers.
Of course, all this applies to fixed-line broadband. But how does this compare for mobile packages?
To try and ascertain this I did a quick look at the US prices for mobile packages.
For 4GB or so of LTE data per month on, for example, an iPhone 5C costing $99 discounted, Verizon and AT&T will charge $70 a month. That’s about £44 at current exchange rates but it seems to be roughly in line with UK prices. Vodaphone want $47 a month for 4GB on an iPhone 5c and O2 £42 a month.
In terms of unlimited date Sprint in the US is charging $80, whereas Three in the UK seems to be much better value. It’s the only network to offer unlimited LTE data (and has promised not to charge extra for it when it launches in December), will only charge £37 a month (for 500 minutes).
Of course there are even better deals to be had in the US – US Cellular is currently offering an unlimited data plan for only $40 a month, but it’s limited to 24 months only, after which it will cease. And you have to be in a US Cellular coverage area to take advantage.
Of course, this isn’t exhaustive and coverage and network performance isn’t taken into account, but it seems that in the LTE market the US is roughly on par with the UK.
Of course the most cost effective approach is to avoid the operator discounts, buy the phone outright and choose a SIM only plan – but unless you can afford the upfront payment that’s not possible.
The message though is that competition certainly improved things for the consumer, with EE increasing data bundles in response to the launch of the O2 and Vodafone network, and the latter extending its bonus 4GB double data bundle for 24 month contracts and I would not be surprised if all three responded again when Three launches at the end of the year.
Naturally operators are going to feel the pressure of having to lower prices rather than charge a premium for LTE and the topic will be thoroughly discussed in the LTE monetisation track at the LTE North America summit, taking place in a few weeks on the 21st-22nd November 2013, in Dallas, Texas, USA. If you’re not already prepped to go – be sure to download a brochure.