Let’s hear it for U.S. wireless carriers.
For so long we’ve heard how American operators lag behind their European counterparts in the wireless world. I think U.S. carriers are doing just fine, thanks.
The Federal Communications Commission reported earlier this month some surprising statistics. U.S. wireless customers use their phones more than European wireless customers, about 76 minutes more per month. The commission, relying on analysts’ data, estimates that Americans are talking on their phones about 221 minutes per month this year, compared with 145 minutes for all Europeans. Even in the most penetrated market in the world, Finland, customers only use their phones 132 minutes per month.
Why are Americans talking more? Pricing is the most simplified and cheapest in history. With the majority of plans consisting of buckets of minutes that eliminate roaming and long-distance fees, customers feel more comfortable talking-anywhere. Just look at the significantly higher ARPU, revenue and minutes of use carriers report every quarter because of this phenomenon. Penetration will grow significantly. U.S. carriers have created a product the American consumer can’t seem to live without.
It’s not that Europeans haven’t. The continent’s penetration rate is considerably higher than America’s, especially because of factors the United States doesn’t have, like a shabbier landline system, calling party pays and widespread prepaid plans. Yet, many European customers still face more expensive service, which includes a monthly fee, a per-minute price and unpredictable roaming charges.
There is, however, a strong move in Europe toward flat-rate pricing similar to what U.S. carriers are offering. Finland is approaching fixed-rate pricing faster than any European country, and carriers there are seeing MOUs increasing, say European wireless market experts.
MOUs are important. Airtime is like empty seats in the airline industry. Money is lost once the airplane takes off. Moreover, anecdotal evidence suggests that many American customers use more than their bucket of minutes and upgrade to the next higher plan.
There is one thing European and U.S. carriers have in common. They need to convince their prepaid customers to use more minutes each month. Prepaid is the bulk of new business for European carriers, which surely contributes to its lower comparison to the United States, and a select few American carriers. Though it is used as a tool to penetrate new market segments, the cost and roaming capability remain major barriers to its use on both continents.
