OT - Cell Service - How They Do It in Europe

[Lennart Sorensen]

On Fri, Feb 29, 2008 at 11:39:16AM -0500, Ivan Avery Frey wrote:
> Lennart I agree wholeheartedly with your message and I have had the same 
> experiences in Italy.
> 
> There are 4 main cell phone providers in Italy (TIM, Vodafone, Wind, and 
> 3 or tre). They all use GSM/GPRS across Italy (no CDMA, TDMA crap). All 
> four offer UMTS in the major cities and TIM offers EDGE across Italy.
> 
> TIM was offering unlimited Internet in off peak hours (5 in evening to 8 
> next morning weekdays and all day weekends) for ?25 a month.
> 
> Now, granted in Europe, population density is greater, so we should 
> expect to see a greater cost here. But I still think the setup stinks here.
> 
> Consider that my Italian cell phone works everywhere in Italy without 
> roaming charges. Only when you exit the country does roaming kick in.
> 
> I wonder if there is a way to lobby the powers that be for a more 
> rational market in cell phone services.

In general north america assumes that a capitalist market will work
things out and that if something is being overcharged someone else will
come in and start a competing cheaper service, but instead any upstarts
are generally just bought out for a one time cost to elliminate the
problem.  None of the anti trust regulations seem to ever actually work
to prevent monopolies or at least an oligopoly from taking over.

Companies want to make money and you can make a lot more money if you
can agree on a price with your competitors (either explicitly or just by
evolution) than by trying to underbid your competirors to try and take
over the whole market.  After all if there is 1 million customers in a
given market and 4 companies service it then you each make more money if
you can service 250000 at $50 each than if you can service 1 million
yourself at $10 each.  Now it may be that at $10 each you could have 5
million customers, but at some point you run out of potential new
customers.  Just look at the pricing of Windows over the years as
Microsoft managed to secure just about the entire OS market.  Once you
have the whole market you have to start increasing prices or cutting
down on pirating in order to keep increasing profits at the rates
shareholders have become accustomed.  Eventually that greed will destroy
the market and something else will take its place but it can take a long
time and in the mean time the consumers in the market bear the cost of
it.

It seems strange that the phone market in europe is much better in the
private hands (although roaming charges are insane and being looked into
by regulators), while it was inefficient and expensive when it was
government run.  In north america privatization seems to have made
things worse in some cases, although not all.  It's not an overall
improvement in many cases though.  For some reason competition doesn't
seem to work out very well here.  It may just be the low population
density that is the problem.  It costs too much to startup a nation wide
service with not enough potential customers.

--
Len Sorensen
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