At the recent House hearings on wireless innovation, there was lots of discussion about how the U. S. cellular networks rank with respect to European networks. I believe that the U. S. networks compare very favorably on a number of dimensions. Every market has strengths and weaknesses so I am not saying U. S. markets can’t be improved to serve the customers better. But on the whole, we have lots to be glad about when it comes to the U. S. cellular market. That is not the impression you would have gotten if you had listened to the hearing. I prepared a table below that offers some comparisons. I’d welcome comments and criticisms.
United States
Europe
Subsidized Phones and Customer Contracts
Contract (presubscribed) subscribers account for over 90% of U.S. mobile subscribers. Only 10% of U. S. customers use prepaid phones. In this context, U.S. operators have to provide more subsidies to their customers than their counterparts in Europe, who still have a large prepaid subscriber base.
In Europe, the proportion of prepaid subscribers ranges from about 20% to 70% of the market depending on the country. Phones on average cost more in Europe than in the U. S.
Customer Choice
Ninety-eight percent of the total U.S. population lives in counties with a minimum of three different mobile operators. In some parts of the U. S. up to nine carriers compete.
Only three European mobile carriers compete in most Western European markets. Regional carriers do not exist.
Prices
On average, European operators’ per minute pricing is much higher than that of the U.S. As a result, Americans make four times the number of cell phone calls as do Europeans. Americans get the benefits of “bundles of minutes” packages, free weekends and free evening calling.
Europeans still pay for cell phone voice calls predominantly on a per minute basis. Major parts of cell phone service in Europe are regulated and there are high costs for roaming in Europe as well. This is not true in the U.S.
Network Speeds and Enhancements
U. S. carriers have deployed 3G technology more widely and aggressively than the Europeans and have a lead today over Europe in 500 Kbps speeds over wireless. Europeans have been more aggressive in text messaging due to voice services being priced on a usage basis but American consumers have had a wider array of data services available – such as TV over wireless – than the Europeans.
While European wireless carriers are deploying 3G, their primary success in the data market has been with text messaging. This has traditionally not been priced on a usage basis and because voice service is, text messaging took off earlier than in the U. S. But recently, U. S. carriers began to aggressively reprice text messaging services and text messaging is now growing at a rate of 70 percent per year.
Advanced Data Technologies
There are over 150 different wireless phones available to consumers in the U. S. market. Contract services (as opposed to prepaid offerings) tend to drive differentiation in the market place with regard to handsets as well as networks and services. Mobile phones today now incorporate better cameras, video capability and especially good music management and downloading capability.
Most European networks could not until recently handle video on the scale that has been available in the U. S. for at least the last two years. For example, almost forty percent of Verizon customers have phones that are 3G (EVDO) capable. 3G phones are starting to penetrate European markets but they have not reached this level of sophistication in many European countries.