Thanks to the widespread use of smartphones and mobile data plans, we are no longer limited to using the internet at home or on a desktop computer. With apps like Facebook, Instagram, and Snapchat, we have become accustomed to using the internet for entertainment on the go. That means we’re consuming more data than ever (and consequently paying more for it).
Due to less direct competition in the mobile data market in the US, prices are the 5th highest in the world. America’s varied topography and size account for a portion of this discrepancy, but the United States is the most advanced country on the planet.
Mobile data is undoubtedly costly in the United States. In this article, you’ll understand why mobile data is so expensive compared to other countries, leaving you with a pretty good idea of whether or not you’re being charged fairly for your data.
Factors Affecting Data Plan Costs
Before 1991 there was no such thing as a data plan, and people did not have cell phone bills. Today you may be paying $300, $400, $500, or more per month for your family’s cellular and data service. People can have a wide range of options for using their wireless data plan, whether it’s keeping track of their running pace, streaming movies or TV shows at home, or catching up on the latest news worldwide.
As cell phone service providers try to figure out how to make money off the rapidly expanding use of smartphones and tablets, they’re coming up with new ways of charging you for the data essential to using the devices. We also discuss this in our article “High Mobile Data Use Notifications” or “Why Is My Phone Using Data When I’m Not on It?”
When you start shopping for a new data plan, you will find that the prices are all over the place. It can be challenging to determine what is being offered and what goes into determining the price you may be subject to paying.
This guide will provide you with the factors that affect how much you end up paying.
Limited Competition
U.S. cellular service providers don’t always make it easy to determine what factors affect the price of their data plans. Still, you can usually find a way to get the necessary information.
The first thing to know is how much competition there is for service providers throughout the United States. With only three major competitors (Verison, AT&T, and T-Mobile), your only natural choice may be to pay high prices for data plans and other services from the dominant provider.
Data plans can vary significantly across carriers, and many people do not switch carriers or plans when they change phones. They will often just pay the higher rate to keep their same phone number if they know it will cost less to do it that way.
The point here is that service providers have no incentive to cut costs when they are not competing for their customers. When a new carrier enters the market, it creates more competition, leading to better customer deals and, ultimately, lower data prices. But this is hardly the case in the US.
The significant issue here is that it’s relatively complex for new service providers to enter the market for two reasons:
- America’s size and vast topography.
- It’s expensive for new network construction.
- Maintenance of networks is costly.
The above factors have led to little competition between service providers in the US, resulting in very few players in the market (particularly at the national level). This is also why Verizon (ranked second) and AT&T (ranked first) have become most American’s standard data plan providers.
Data Plan Mark-Ups
One of the most vital questions when deciding to purchase a smartphone is the monthly cost of the cellular data plan. While many factors impact how much you will pay for your plan, some you have control over, and others you do not.
When going out to buy a phone or tablet, it’s easy to be distracted by the low upfront costs of a device that come with lock-in contracts between the consumer and service provider.
While you may not recognize this by the upfront cost of the device and its data plan, US service providers have configured a system whereby the more affordable your device is, the higher markups you’ll experience in your monthly contract installments. This means you’ll pay more for your smartphone and its data plan as you get further into your contract.
In other countries, where service providers are more competitive, they’ve been able to circumvent this agreement. However, dominant companies like AT&T and Verizon have monopolized the service and pushed prices as high as possible in the US.
Service Providers Charge Data Plans Separately
Most individuals use cell phones for more than just making calls. Whether you’re texting your friends, browsing the web on your smartphone, or streaming YouTube videos, you’re likely using a lot of data for those activities.
When the time comes to buy a new mobile phone, you have to choose between the different phone models and what kind of plan you’d like. The plan will likely offer unlimited talk minutes and text messages from one provider, but if you need data, that might be another story.
In addition to the base talk and text rates, many providers charge for their data services separately rather than providing an all-inclusive bundle of services. This makes buying the data more expensive because it’s a separate purchase from your base plan.
This is a significant factor affecting the price of mobile data in the US because most major data providers will offer you a package that won’t be sufficient in the first place. This also comes from Data Throttling by your service provider to slow down your data consumption on purpose, which translates into you losing money.
This maneuvering all leads to the need to pay more for separate data plans with increasingly high markup costs. Essentially, this means that providers purposefully provide bundles that are insufficient, especially due to throttling in the efforts to make extra money by implementing the need for the consumer to purchase additional data bundles.
The Statistics
In the 1990s, the US was a powerhouse of wealth, good market conditions, and competition, which generally led to lower market prices. However, over the last 20 years, this situation has slowly begun to reverse.
On the other hand, the European market in the 1990s was far less competitive. But, according to NYU economist Thomas Philippon, they began to indulge in the US’s concept of free market regulations, which, to this day, have resulted in lower market prices and more competition than in the US. h
Although this is not the case in every industry, you can specifically see the ramifications in the cellular service provider industry. Philippon adds that, when looking at the whole of Europe and Asia, it’s a ratio of 1:2 in terms of price per gigabyte. Meaning in the US, you pay twice as much for roughly the same amount of once-off data. as you do in Europe.
Are You Paying too Much for your Mobile Data in the US?
According to Worldwide mobile data pricing 2022, and as shown in the map above, the cost of 1GB of mobile data for 233 countries. The US is the 5th most expensive country in the world to purchase one gigabyte of data at $120.60, and the United Kingdom is half that at $61.52.
When you think about the United States and mobile data, you might feel that you’re paying too much–and you’d be right. These figures from a Finnish study also show that the U.S., the most advanced country in the world, is the 5th most expensive developed country on the entire planet to purchase one gigabyte of data.
The average data plan of 500MB between the three major service providers in the US costs more or less $80. This is a hefty price considering a similar plan would cost consumers a mere $8 in the UK when utilizing the Purchasing-power Parity.
For $80, United Kingdom consumers get more for their money by receiving much more data than U.S. citizens. While $80 in the US will only get you a mere 500MB on your contract, UK citizens would have access to over 5GB of data and unlimited calls and text.
Additionally, while some specific mobile plans by U.S. providers may offer lower prices, consumers can only gain access to the carrier plan if they purchase a phone on contract. This identifies and further highlights the need for competition in the US cellular service provider industry.
Smartphones have multiple built-in antennas for wifi, Bluetooth, cellular communication, and GPS. Click on the “Do Smartphones Have Built-In Antennas?” link to learn more about these built-in antennas, their sizes, and what they do.
Final Thoughts
While for some, it might not be entirely clear what’s driving the price of data upwards, two apparent factors contribute to this trend.
First, most smartphones and data plans are subsidized by mobile carriers, which means they’re not accounting for as much of the cost of the plan program itself as they should be. A network’s construction and upkeep are expensive, also raising consumer prices and reducing the number of service providers available.
Secondly, the wireless market is particularly uncompetitive in the United States; three companies account for almost all US data plan subscribers. This reality ensures that these companies can effortlessly charge higher prices without losing many customers.
We write a lot about data, and you may find some of our other articles interesting, like “Who Has Your Personal Data?” and “Why Does Mobile Data Drain Your Battery?”
References:
- The Verge: Why is American internet access so much more expensive than the rest of the world?
- Vice: US Wireless Data Prices Are Among the Most Expensive on Earth