U.S. Consumers Pay More for LTE, But What Does it Mean?

U.S consumers pay more for their Long Term Evolution service than consumers in other markets, a study by the GSM Association shows. 

LTE data is pricier in the United States than in Europe, according to a recent report from London-based GSM Association subsidiary Wireless Intelligence. 

On average, Europeans pay about $2.50 for 1 gigabyte of data downloaded on an LTE, or Long Term Evolution network, according to Wireless Intelligence. 

 In contrast, Verizon Wireless charges $7.50 per gigabyte  in an unlimited shared data plan and $5.50 per gigabyte in a regular, data-only plan. 

Analyst Roger Entner argues that scarce spectrum explains the pricing differences.

	USA	Germany	France	Spain	UK	Italy	South Korea
Subscribers in millions	322.8	109.8	63.2	57.3	75.7	91.2	51.8
Spectrum Assigned in MHz	409.5*	615	375	625	375	270	270
Potentially Usable Spectrum in Pipeline in MHz	50	Recently auctioned 350	250	59.6 and recently auctioned 250	310	250	120
MHz/million subscribers	1.3	5.6	5.9	10.9	4.9	3.0	5.2
* Figure includes AWS‐1, 700 MHz spectrum not yet in use and 55.5 MHz of spectrum at 2.5GHz

Source: 4G Americas, Bank of America Merrill Lynch, regulatory and company websites, press reports and Recon Analytics



Others might argue that mandatory wholesale policies account for the retail price differences. 

Even if you think U.S. wireless data prices are “too high” today, the competitive process should work, over time, as it has with other services. 

Consider the competition for wireless voice services, which has played out over a decade. 

According to Merrill Lynch, the United States enjoyed a lower price for voice services on a per-minute-of-use basis ($0.03) than France ($0.10), Germany ($0.08), or the UK ($0.08) in the fourth quarter of 2011.

Still, as a rule, retail service prices are priced in some direct relationship to costs of creating the underlying networks. And costs are higher in the United States. 

Others have argued that "lack of competition" has in the past accounted for higher prices. 

  Broadband Service Speed and Price (High Tier)

Country	Downstream	Upstream	Price
Canada[3]	25	7	$67
Denmark[4]	40	2	$72
Finland[5]	24	1	$67
Hong Kong[6]	100	Unlisted	$38
Japan[7]	200	100	$60
South Korea[8]	100	Unlisted	$29
Sweden[9]	100	100	$46
Taiwan[10]	100	5	$37
U.K.[11]	50	Unlisted	$57
United States[12]	50	20	$145

Some have noted that in 2010, for example, he United States was the most expensive of the ten countries surveyed for high tier broadband service. 

The broadband services available internationally include prices as low as $26 a month for a 100 Mbps connection in South Korea and speeds as fast as a 200 Mbps connection in Japan for $60 a month.

While broadband service with speeds of 100 Mbps is available in Taiwan for $37 a month, $38 a month in Hong Kong, and $46 a month in Sweden, broadband is half the speed for over three times the price in the United States,  where 50 Mbps service costs $145 a month. 

Other countries surveyed joining the U.S. in the slower half of high tier speeds cost less than half the price

Country	Downstream	Upstream	Price
Canada[13]	2	800 Kbps	$31
Denmark[14]	2	512 Kbps	$30
Finland[15]	1	512 Kbps	$36
Hong Kong[16]	1.5	Unlisted	$13
Japan[17]	1	512 Kbps	$34
South Korea[18]	8	640 Kbps	$26
Sweden[19]	1	1	$19
Taiwan[20]	3	768 Kbps	$14
U.K.[21]	10	Unlisted	$30
United States[22]	1	1	$35

When comparing the low tier broadband service offerings of other countries the United States has in the past faired slightly better with prices closer to the middle of the pack but often for slower speeds. 

The United States was among the most expensive of the countries surveyed when comparing the price per megabit for low tier broadband service. 

All of those arguments have some merit. Still, one still has to account for the relative level of retail prices in markets around the world, as well, as well as the "cost" of products as a percentage of income or discretionary income, for example. 

The absolute level of prices across different countries might be less significant than the relative cost of communications goods in terms of consumer purchasing power. 

In other words, one country might have costs per megabyte that are twice as high as another country, but average income might also be twice. 

Finally, retail pricing might also reflect the underlying cost of construction or operations, inlcludin such matters as government subsidies or funding.