Europeans ripped off on mobile charges

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Charges for calls to European mobile phones are among the most expensive in the world, analysts have reported.

The average cost per minute in Europe is more than three times the rate in Asia, according to research conducted over the past year by Telecommunications Management Group (TMG).

TMG’s data shows that the average mobile termination rate (MTR), the amount paid by network operators for calls to a mobile phone, is $0.162 per minute in Europe, $0.131 in the Americas, but only $0.048 in Asia, the cheapest region for mobile users. 

Almost all countries in Europe have MTRs higher than the global average of $0.142 per minute, TMG’s research shows.

For example, calls to mobiles in the UK cost network operators an average of $0.167 per minute, and calls to mobile phones in Switzerland are a sky-high $0.279 putting them among the highest in the world.

These higher charges are often passed on to consumers, and amount to billions of dollars worldwide.

Rates vary so wildly from country to country that it is sometimes much cheaper to make an international call in Europe than to call a mobile phone in the same town.

“The rates, and their implicit underlying relation to retail pricing, sometimes defy logic,” TMG’s report stated, noting that higher mobile rates have been explained with a variety of arguments, such as network operators’ need to defray infrastructure costs.

High charges are not certain to generate more income for network operators, TMG found. “Operators in Asia can operate with lower termination rates because their usage is much higher,” TMG research analyst Michael Minges, the report’s co-author, told vnunet.com.

“The rates in Europe are higher because operators there have a philosophy that mobile termination rates are a source of revenue rather than a cost.”

People tend to use mobile phones less where phone charges are higher for both making and receiving calls. For example, in the US, where the recipient pays for the call, users spend almost 600 minutes a month speaking on their mobile phones.

Whereas users in the European Union, where the calling party is charged for the call, use their mobile service an average of only 142 minutes a month.”

However, a direct comparison between mobile rates in different parts of the world may not be strictly fair, according to Stefano Nicoletti, a senior analyst at telecoms consultancy Ovum.

“Asia means everything: Japan, Korea, but also much poorer [countries]. I think the approach to confront MTR across regions is a bit too generalistic,” he said.

“The comparison should be made accounting for purchasing power parity, not purely on rates as there are huge differences.”

However, Ovum does not collect termination rate data for Asia, with the exception of Asia’s wealthiest economy, Japan, which is in line with the average rates in Europe, according to Ovum’s data, although somewhat lower, according to TMG.

Consumers in many countries can expect much more affordable rates by the end of the decade, TMG predicted, eventually making it practical for most to ditch fixed line phones entirely.

In some countries where MTRs are significantly above cost, regulators have imposed a timetable for reductions.

“The average MTR in the world was $0.142 at the beginning of 2005. MTRs among countries that have announced phased reductions are forecast to fall below $0.109 per minute by 2007, a decline of 19 per cent a year,” TMG reported.

In addition new 3G networks, with their much higher capacities, should help push rates down because “theoretically, the ‘cost’ of a call will be close to zero”.

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