Our Cell Phone Costs are Too Damn High

When it comes to cell phone coverage, we’re simply paying too much.

Firstly, the cost of plans in the US is significantly higher than in other developed countries. For example, a study by the New America Foundation found that the average cost of a mobile phone plan in the US is nearly three times higher than the average cost in Europe. According to the study, in 2020, the average cost of a mobile phone plan in the US with 2GB of data, 200 minutes of calls and 200 text messages was around $40. Compare that with European countries such as France, where a similar plan could be purchased for around $20, or in Germany where a similar plan would cost around $25.

Data from the Organization for Economic Co-operation and Development (OECD) found that the United States had some of the highest prices for mobile broadband among the countries surveyed.

Secondly, many of the plans offered by American cellular providers are not transparent and often come with hidden fees. These fees can include taxes, surcharges, and other charges that are not included in the advertised price of the plan. This makes it difficult for consumers to compare plans and choose the best option for their needs. Examples of fees that can make it difficult for consumers to compare plans and choose the best option for their needs:

1. Taxes and surcharges: These are government-mandated fees that are added to the advertised price of a plan. They can include sales taxes, regulatory fees, and universal service fees. These fees can vary depending on the state and the carrier, and they are not always included in the advertised price of the plan.
2. Activation and upgrade fees: Many cellular providers charge a fee when a customer activates a new plan or upgrades an existing one. These fees can range from a few dollars to several hundred dollars, and they are not always disclosed upfront.
3. Roaming and international charges: If a customer uses their phone outside of their home network, they may be subject to additional charges for roaming and international calls. These charges can be expensive, and they are not always included in the advertised price of the plan.
4. Early termination fees: If a customer cancels their contract before the end of the term, they may be subject to an early termination fee. These fees can be substantial, and they are not always disclosed upfront.

Thirdly, American cellular providers have a virtual monopoly on the market, which allows them to set prices at a level that maximizes their profits. Without competition, consumers have little choice but to pay the prices set by the providers, regardless of whether they are fair or not. The telecommunications industry in the United States is dominated by a few large companies, such as AT&T, Verizon, T-Mobile, and Sprint. These companies control a large portion of the market and have a significant influence on prices and services offered.

The Federal Communications Commission (FCC) has reported that the top three wireless carriers in the US, AT&T, Verizon, T-Mobile/Sprint, control about 90% of the market share for wireless service. This high degree of market concentration means that there is little competition and consumer choice is limited. Arguably, the T-Mobile/Sprint merger can provide more competition to the top two carriers, but it reduced the number of national carriers down to three. Smaller carriers and MVNOs (Mobile Virtual Network Operators) such as Boost Mobile, Metro by T-Mobile, Cricket Wireless, and others are also present in the market, although they have a smaller market share and are often themselves owned by the national carriers.

Mobile prices in the US are significantly higher than in other developed countries, lack transparency, and are subject to hidden fees. The lack of competition in the market also allows cellular providers to set prices at a level that maximizes their profits, rather than benefiting consumers.

Is there anything we can do to address it? Yes.

The first thing we can do is increase competition. If three companies are going to control most of the cellular towers, it makes sense to draw tight regulations to prevent them from favoring their own MVNAs. We could even consider forcing a split between their tower operations and their retail operations. That way we can still have robust national networks while having a lot of competition on the ground between minor players. Who doesn’t want to break up AT&T all over again?

Alternately, we could have the government take a more active role in tower infrastructure so that our networks are not as reliant on the profit motive as they currently are. They could invest in research and development or even develop their own tower network. A different sort of public option. Less aggressively, the government can mandate standards so that going forward all of the networks are compatible with one another in order to remove barriers to exit.

We could also go straight for the gut and regulate prices. The ordinary concern here is that the participants in the marketplace might leave it, but given that we’re dealing with what is essentially a public utility that could provide the government an opportunity to enter if it came down to it.

Lastly, the government can address the hidden fees and ambiguity surrounding billing. The listed price should be the price, minus the usual prices.

Our cell phone bills are too high. Let’s fix it!