[qi:83] This week, San Francisco will play host to the CTIA’s Wireless I.T. & Entertainment convention, an annual gathering of those intimately involved with the U.S. mobile industry — from tiny startups to corporate giants such as Verizon (VZ), Qualcomm (QCOM), Nokia (NOK) and AT&T (T). […]

[qi:83] This week, San Francisco will play host to the CTIA’s Wireless I.T. & Entertainment convention, an annual gathering of those intimately involved with the U.S. mobile industry — from tiny startups to corporate giants such as Verizon (VZ), Qualcomm (QCOM), Nokia (NOK) and AT&T (T).

Many will talk about their vision of the future, and at some point will undoubtedly lament over how far we lag behind Europe. With the help of analyst Chetan Sharma, I decided to pull together a small comparison chart that gives you a sense of what’s fact and what’s fiction.


I would like to point out that the above numbers are subscriptions and not the actual number of subscribers — often a point of contention. It’s also worth nothing that a lot of folks in Europe are pre-paid customers and that people have a habit of carrying more than one SIM card. Lastly, the comparison between the U.S. and Western Europe is going to get more interesting once we have complete information for 2007.

Update: As many of you have noted in comments, subscribers in Europe do not pay for incoming calls. However, the carriers do collect incoming calls revenue form other carriers through settlement procedure. The ARPU calculations include total revenue (subs + settlement) divided by subs. The US settlement regime is based on bill and keep (subs pays for both) and no carrier settlements for incoming calls. Hope this helps!

  1. Spell checker: It’s also worth noting that a lot

  2. thanks T. good catch. sorry about that.

  3. frankly, looking at the data, they definitely show we are doing pretty well. Especially looking at the number of minutes and cost/min. The eu folks appear to be getting ripped off. and check the data pricing – ATT vs orange or vodafone.

  4. This table doesn’t show that US customers pay for both inbound and outbound calls and that EU customers only pay for outbound calls, by the way.

  5. The United States is ahead of the EU when it comes to interconnection and roaming (continent wide). The EU is still on a Calling Party Pays model for interconnection. The costs of terminating a call are a fixed limit on the amount of minutes that can be sold. In The Netherlands the costs of terminating a call on the mobile network are 10 or 11,4 cents/minute. So selling more than 200 minutes for 20 euro will quickly become a loss maker. The effect of these terminating costs are (as you show in your table) a much lower incoming+outgoing usage in the EU than in the US. Regulatory costs of this model are high too, because it requires constant attention of the regulator. A solution could be to terminate the terminating charges :-) This would be similar to the peering and transit model in the Internet world. Great thing there is that it is very competitive.

    An extra effect of the high per minute charge in the EU is that data services are developing slowly. Telco’s are so high on mobile voice and SMS charges that they try to block anything on their data networks that cannibalizes their voice and SMS income. In the US this is less of a problem, because the business model is more based on a fixed charge per month.

    Roaming is just as much a problem in the EU. If you move from one country in the EU to another one, you will be charged 49c/mins. There is no competition possible, since that amount is the fixed retail charge. There is a simple solution (see the link to the blog), where your choice in foreign operator would also determine your retail charge. (Though simple this would be heavily opposed by the operators, because it would cause competition and less free money from foreigners) Yes, US consumers also pay roaming when abroad, but the US is very big and many of them never leave. An EU consumer will roam 2-4 weeks a year.

    OM: I do belief your numbers are not completely correct. The percentages for penetration are probably correct, but the entire EU holds 494,070,000 people (wikipedia) Western Europe is much smaller than that. With regards to data penetration, the interpretation is very hard, since the sale of a UMTS capable phone/sim-card equates to a user with most operators. In reality many users switch off data-UMTS because of cost. It is however fair to say that in most of Western Europe 98% of the population has a mobile phone. Many have two (work and private)

  6. Very interesting, but I have some questions: What’s your definition of 3G penetration? Is it based on actual users? Secondly is a user the same as a subscription or as a subscriber?

    Here in Europe we do get ripped off on the price per minute and cost of sms/mms. These are justified by the providers with two arguments: (1) the high prices they had to pay for UMTS licenses and (2) subsidy on new phones. Luckily we get to see sim-only subscriptions more often. These subscriptions cut prices down to about half.

    I agree with Walt Mossberg recent article where he states providers shouldn’t subsidize the phones as it limits the price competition between phone manufactures . This will also cut down on the costs of the providers.

    Mossberg article: http://mossblog.allthingsd.com/20071021/free-my-phone/

  7. Useful data — and it ensure EU venture could be more lucrative than US, if being target in one effort despite regulation, linguistic and culture hindrance.

  8. @Raindeer are you saying the marginal costs of a mobile phone call are 10 cents per minute? What are these costs based on?

    In the Netherlands there are providers offering calls at less than 10 cents per minute, I don’t expect them to sell below their marginal costs.

  9. @markpith

    The terminating charge for terminating a call on the mobile net are 10 or 11.4 cents per minute (see http://www.opta.nl/download/201479+mobiele+gespreksafgifte%2Epdf page 8/222) When an operator offers a lower per minute charge you will have to look for the following catches.
    1. Sim only: The per minute charge for a sim only is just for what you call within the bundle. Since you get a subsidy from the operator, this per minute charge is lower, but only because they pay the difference with the subsidy that would otherwise have gone to a phone or other goody. Calling outside the bundle is 22 cents per minute (orange) or 25cent (T-mobile NL). Reasoning is quite simple, they hope you go outside your bundle and start paying real money.
    2. Market share of the operator. The bigger the operator, the bigger the chance that the call will be on its own network. So it can sell more minutes because of owning its own network (also terminating to fixed is 1cent/minute
    3. Special deals on its own network. Orange NL offers two thousand minutes to one number on its network for free.

    All in all, terminating charges are king. Free money for the operators. GSM Europe will do everything to protect this just look at this report by Gilbert and Tobin and CRA International http://www.gsmworld.com/documents/ip_intercon_full.pdf
    It’s completely worthless, but it sets the stage. :-)

  10. Take a look at Canada – we have a cell phone user pays sytem where call charges are incurred by the person receiving the calls (polar opposite to Europe/Australia) and yet we do not have unlimited data plans (except for the one just accounced by Virgin in Oct!) and our minutes are not even close to competitive by US standards. So how is that switching to this system will guarantee lower prices for Europe?


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