Low prices are great for consumers, but not at too high a cost

The UK telecoms regulator Ofcom published a very comprehensive report (PDF) this week that provided an update on the country's position compared to other Western European countries and the United States. Several interesting points were raised, including the statement that consumers in the UK. pay a great deal less for their mobile services than do U.S. consumers, for example.

In fact, UK mobile phone deals are significantly cheaper than in other major European countries and almost three times less than what U.S. consumers pay, Ofcom said. As an example, Ofcom said a typical handset with 200 minutes, 50 texts and 200 MB of data costs on average £14 ($22.80) per month in the UK. "In the US, this would cost £57 ($92.90)– four times as much," the regulator added.

Ofcom compared eight mobile phone usage profiles, ranging from a basic handset with a low call allowance, to a premium smartphone with a large call, text and data allowance. The average price across all eight of these profiles fell by 23 per cent for UK consumers during the year, the regulator said.

James Thickett, Ofcom's director of research, further noted that not only have bills fallen for overall communications services but consumers are also getting a lot more for a lot less.

France also comes out pretty well in Ofcom's ranking. In the ranking of the top six cheapest countries for communications services, the UK was ranked first and France was ranked third. Italy was in second place, while Germany, Spain and the U.S. filled the bottom three spots. In the ranking of communications as a proportion of living costs, the UK was again in first place with France ranked second.

Operators are certainly to be applauded for making communications services more affordable, even though in many cases they are forced into this position through the competitive actions of others. Research company Rewheel has noted that countries with price aggressors such as Hutchison Whampoa's 3 and Free Mobile in France tend to have the cheapest mobile data prices, for example.

However, while such reports from Ofcom make welcome reading from the perspective of consumers, the industry also understands that a race to the bottom with prices is not a sustainable way to maintain growth. Free Mobile's recent extension of LTE services to its €2 a month price plans, even though inclusive data is just 50 MB, is surely as unsustainable as the €7 price plan that 3 Austria recently abandoned in Austria.

The section of Ofcom's report on LTE network rollouts reminds us that there is still a deal of work to do on this Europe, and for that a great deal of investment is required. The U.S. still leads Europe by a wide margin in terms of LTE deployments. Recent spectrum auctions all over Europe, including a particularly expensive one in Austria, further highlight the imbalance in some markets between competitive pressures and investment needs. Free Mobile itself is under some pressure to prove its coverage will match its aggressive approach to pricing.--Anne

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