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No, U.S. smartphone costs aren't highest in the world

Leah Yamshon | Aug. 7, 2013
Sure, our phone bills are high, but so are everyone else's. We compare smartphone costs and plan rates for several countries around the globe.

These additional plan charges seriously level (and in some cases countertilt) the playing field. But no matter where you live, your mobile bill covers both the service and what Hays calls the "cost to serve," meaning the cost of new towers, construction, labor, and other behind-the-scenes backhaul infrastructure.

How we pay for phones
Despite the general similarity of smartphone prices worldwide, the way devices are paid for constitutes a big piece of the billing puzzle. Most U.S. subscribers receive a hefty "discount" on a new phone if they sign up for a two-year contract with their carrier. Carriers here anticipate recouping that loss through plan cost—and when you factor in that monthly plan, the overall prices even out a bit.

But the subsidy model that's familiar to U.S. smartphone users is common mainly here and in the U.K. In most other countries, consumers have to purchase the device at full price at the outset, or make monthly payments on the phone until they've paid it off.

"There's a tremendous amount of diversity on how plans are priced," said Hays.

Starting with the basics, all plans are either prepaid or postpaid. In the United States, postpaid plans are the norm: We use our phones at will, and then we pay the bill at the end of the month to cover all of our transactions. Contracts designate a set amount of voice minutes, text messages, data, and constraints on who you can communicate with and when within the confines of your plan, so you're usually paying a set amount every month. You can exceed your allotment, but you'll be smacked with additional charges if you do. According to Hays, this model is typical in Canada, Japan, the U.K., and Western Europe.

Most of the rest of the world operates on a prepaid cycle. Customers pay as they go, putting money toward their phone and adding more when the remaining amount of service they've paid for gets low. Cash goes toward a catchall pot that covers messages, voice, multimedia, and data. And that's what we're seeing in emerging markets.

Emerging markets gaining pace
Developed countries aren't the only nations experiencing a mobile boom. In fact, emerging nations are seeing more-rapid growth than Western nations are. Six of Mobi Thinking's top ten mobile markets (measured by number of active mobile phones) are in developing nations: China, India, Indonesia, Brazil, Pakistan, and Nigeria. (The other four countries on the Mobi Thinking list are the United States, Russia, Japan, and Germany.)

Because these countries have extremely large populations, mobile carriers and manufacturers have a lot to gain by making mobile devices affordable to the public—millions and millions of subscribers means millions and millions of dollars in the bank.


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