U.S. Wireless Economics Beat EU’s Wireless Uneconomics

Published January 12, 2014

A new European study from Britain’s Office of Communications tries to argue that the EU’s wireless regulation approach is better than America’s. The New York Times’ clever headline on the report sees right through it: “Europeans pay less for mobile use, but at a cost.”

In Europe, regulators regularly lower prices and roaming rates for political purposes, ignoring the market economics or economic sustainability of their regulatory approach. The EU’s politics-of-the-moment interest in lower prices, based more on operating costs than total costs that fund long-term investments in infrastructure, ultimately harms consumer value.

The EU’s wireless approach is the equivalent of pushing farmers to sell almost all their current corn harvest to maximize corn supply to maximally lower prices in the short-term, which ignores the obvious need to save enough seed-corn to plant for a successful next harvest. Without market economic thinking and pricing that plans ahead and continually funds infrastructure investment, the EU will continue to fall further behind other countries around the world.

It should be no surprise that that is exactly what’s happening.

Europeans have slower data speeds than America and they know it. EU Vice President, Neelie Kroes, recently said:

Japan, South Korea, and the USA have around the same population, but … about 15 times more 4G. Europe needs to catch up.

France Telecom’s Deputy CEO recently echoed that sentiment:

It’s humiliating – we’re behind. . . . The web was mainly invented by a European, but . . . the fastest networks are in the U.S. and Asia.

The White House knows it too:

In 2012, North America’s average mobile data connection speed was 2.6 Mbps, the fastest in the world, nearly twice that available in Western Europe.

And Europeans should know that their lower-priced wireless services underfund network capacity, so consequently they get less value and productivity from the Internet — in average usage by consumers. Overall Americans use 50.2 gigabytes per month to Europeans’ 23.6 gigabytes per month according to USTelecom 2012 data.

The old adage is true here; you get what you pay for.

Finally, those activists in America who advocate for a more government-driven broadband marketplace, in hopes of the government mandating: common-carrier net-neutrality, bans on usage pricing/caps, and government-owned networks, need to realize that the EU uneconomics model — that they historically have held up as the shining example that America should follow — is badly falling behind and under-performing America’s market economics model.