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The Numbers Behind Wireless Data Roaming Rates

February 24, 2010

Just back from the Mobile World Congress event in Barcelona, where almost 50,000 of us wireless industry people gathered for perhaps the most expensive week of business in our industry. The high-priced hotels, the slick pickpockets who accompany us to Barcelona, and exorbitant airfare are all a part of being at the center of the industry last week. Yet, of all the extra costs, the one that makes me angry is my phone bill. Despite juggling multiple phones, multiple SIM cards, and turning off data on the phone in as many ways as I could, I still have unexpected and random data charges on my local phone bill. With prices that are out of touch with reality.

There were many other attendees with multiple phones, and many local shops sold out of prepaid SIMs due to the MWC attendees. Obviously, some delegates just use their phones, and let the company pay the bill, but lots of us were actively trying to manage our roaming charges.

Voice roaming rates are a big gouge by carriers, and data roaming is even worse. Data roaming rates are beyond gouging, and into something almost criminal.

Figure that an average U.S. carrier charges about 8 cents per minute for domestic cellular voice service. They charge about $1.30 per minute in Western Europe. That's a 16x multiple for using voice abroad.

Now figure that the average U.S. carrier has a 5 gigabyte data plan for phones at about $30 per month. That's about $0.006 per MB for domestic data use. Typical data roaming rates are $0.02 per kilobyte, or about $20 per MB. That's a 3,413x multiple for using data abroad. Yep, go ahead and check my numbers.

While data roaming is relatively new, people have complained for years about the high prices of international voice roaming. That’s why European Telecoms regulator Vivianne Redding (in)famously imposed caps for European carriers limiting the price they could charge visitors (which sadly, only applies to E.U. travelers, not U.S.-based visitors). The complaints and regulations stem from a 16x multiple, which is a 1,600% markup.

So what do carriers do with information? They institute a 341,300% markup on data roaming for travelers. Honestly, it goes far, far beyond the pale. If there is competition in the cellular industry, it certainly doesn’t seem to be in international roaming.

I’m not advocating any particular course of action here; I just ran the numbers because my back of the envelope calculations in the airplane on my return flight just didn’t seem right. By having confirmed the numbers, it seems like a good time to start a discussion about whether a 341,000% markup is a reasonable way to treat your customers.

by Derek Kerton
Principal Analyst, The Kerton Group

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