Austrian Mobile Prices Rise Significantly After Consolidation

As much as consumers legitimately enjoy low costs, or ultra-low costs, for products they buy, it sometime is possible that prices are too low. One might argue that prices are too low when they imperil the ability of an industry to keep supplying better versions of products consumers really want.

Ironically, significant price increases in mobile markets that have recently consolidated from four to three suppliers might be instances where substantially-higher prices are needed to allow an industry to keep investing.

Some might point to similar strategic issues in the energy industry. Ironically, low oil prices suppress the development of alternative energy supplies and demand for all-electric or hybrid vehicles.

Global oil prices that are too low suppress the development of domestic energy supplies. So, sometimes, price increases arguably are a good thing for consumers, long term. Consider the Austrian mobile market, long among the most-competitive in Europe.

Tariffs for mobile service in Austria grew substantially in 2014, according to a report by the Arbeiterkammer Wien, the Vienna Chamber of Labor. The analysis deals only with posted tariffs, and does not appear to analyze which plans people buy most. But posted prices are higher.  

Retail plan costs increased 29 percent to 78 percent from September 2013 to December 2014, the group says. Of course, some would note that Austria has had ultra-competitive prices that are unsustainable over the long term.  

The average price rise for voice-only prepaid subscriber information modules (accounts) was 29 percent. The average increase in postpaid voice-only contract plans was 56 percent.

Prices for mobile Internet plans for frequent users grew 58 percent. Higher mobile Internet access prices in Austria are a result of the market consolidation, some argue, and other studies also show a 60 percent increase in mobile Internet plan prices in 2013 in the Austrian market.

Some argue the Austrian market remains highly competitive, even after the increases, where it earlier had been “ultra competitive.”  

Also, some argue it is the presence of an attacker dedicated to competing on price that matters most, not whether the number of leading providers is three or four.

Tariffs for voice and text, but no mobile Internet service grew 78 percent, according to Arbeiterkammer Wien. In certain cases, rates had even doubled, the group said.

Some will say the price increases are a direct result of consolidation of the Austrian mobile market to three facilities-based providers, from four. Others argue prices will be better, longer term, as investments are made in facilities and spectrum.

Consumers will benefit from the consolidation of providers from four to three, a study prepared for the GSMA suggests. Other studies suggest consumer prices will increase when a market consolidates from four to three operators.

But as many as 16 new mobile virtual network operators are set to enter the Austrian market, potentially promising more pricing changes.

The Arbeiterkammer Wien said that registration fees have risen by about 40 percent at A1 Austria Telekom, T-Mobile Austria and 3 Austria.

Prices have been falling in key parts of Europe’s mobile industry for some time, and also revenue, so some might argue a sustainable industry requires higher prices. That is never a popular idea.