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Why are international prices to call mobiles in the USA different from others? September 15, 2010

Posted by themobilephoneconnoisseur in Uncategorized.

I recently got a question from the Operator One customer services to answer a tricky question from a subscriber. He was wondering why it was more expensive to call from a mobile phone in Europe to another mobile phone in Europe, than to a mobile phone in for example the US or India.

One might think this is strange due to the longer distance, but the explanation for the cost to the US lies in the fact that the called up party pays for all mobile calls, i.e. incoming as well as outgoing calls. If you sum it up, the total cost of a call in either direction is roughly the same.

For example:

Assume a price of €0.10/minute to call up or receive a call within the US, and €0.12/minute to call up a European mobile with Operator One. The total cost of the call from the US phone to the European phone is €0.10+€0.12=€0.22/minute.

Assume a cost of €0.10/minute for making a local call with a European provider, and a cost of €0.02 to call up a US mobile with Operator One. The total cost of the call in the other direction works out to: €0.10+€0.10+€0.02 = €0.22/minute.

Over all, the major cost for the mobile networks lies in the usage of frequencies. This reason for this is that the so called bandwidth is limited, and often related to high license fees and/or other requirements (such as geographic coverage requirements) from local governments.

In most countries outside the USA and Canada the principle of Calling Party Pays (CPP) applies, which means that the calling party pays for the cost of the call. The reasoning around CPP is that it should not cost anything to receive a call, since that was not an action taken by the called up party, which seems fair. In the USA and Canada the reasoning is instead using so called airtime, which is related to allocating the usage around bandwidth. And also that the calling party would not know that the called up number actually is a mobile phone number, i.e. to be able to predict the price of the call better, which also seems like a fair reason.

In many African countries the price difference between calling to a landline and a mobile is very little. This is often related to the fact that the infrastructure for the landline networks is poorly developed and that mobile technology is a faster and cheaper way to deploy.

Then there are the regulatory reasons for prices being higher than expected, for example the governments in Pakistan and Ghana have made permanent or temporary fees/taxes for incoming calls from abroad. This is usually considered as a way to tax expats who otherwise are not paying taxes at home.

In countries like India and Thailand the price to send traffic to the mobile networks have dropped significantly over the last years, and this probably related to deregulations in combinations with a high usage and lower hardware and local maintenance costs.

This is a rough overview, and of course there are many details for each specific market, but I believe I have summarized the major reasons here.













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