Americans pay way more for data than others, and it could get worse, experts warn

Sprint and T-Mobile have reached an agreement to merge

Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.
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Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.

You’re not crazy — or cheap — if you think your cell phone bill is high.

In most of the developed world, monthly wireless bills are far lower than bills in the United States, experts say. Americans pay almost three times more each month than Germans on average, and Italians pay even less, according to Purdue University researchers.

The average U.S. phone plan was $67 a month in 2015, while the average monthly plan was only $31 in Denmark and $23 in Germany, Purdue and University of Chicago researchers wrote in a 2017 working paper. That means Americans would save $65 billion — yes, billion — each year if prices were comparable to Germany.

In at least one respect, American cell users get less for their money, too: A U.S. phone user spending $35 a month for 4G wireless plan in October could get 10 gigabytes of data at most, according to research from Rewheel, a Finland-based firm that studies mobile data pricing. Compare that with 30 gigabytes for $35 in Germany, 100 gigabytes in the United Kingdom and unlimited data in Switzerland, Mexico, Korea and a handful of other countries.

But why the wild differences in pricing — and in what cell users get for their money — across countries? Researchers suggest it comes down to politics.

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“The difference in prices we observe across countries depends on the extent to which regulations protect existing operators,” says Mara Faccio, a Purdue finance professor who wrote the 2017 working paper. “In countries where political connections are more prevalent, regulations protect incumbents and are associated with much higher prices.”

Price levels in the U.S. could get even worse if Sprint and T-Mobile, two of the country’s four giant mobile carriers, end up merging, according to Rewheel. That consolidation without another carrier entering the fray “will lessen the already weak competition” in the U.S., the report says.

Lack of competition in the U.S. isn’t a new problem, according to experts.

“The United States lacks meaningful competition in its cellular market sector, which leads to higher cell plan prices than a growing list of other countries,” Sascha Meinrath, founder of the Open Technology Institute, explained in 2014, according to The New York Times.

Faccio says a T-Mobile merger with Sprint is a real possibility given the U.S.’s lax approach in recent years to mergers that would run afoul antitrust laws — and be blocked to preserve competition — in European countries.

Such a merger would continue a longstanding trend.

“In 2000, the two largest mobile phone carriers in the U.S. controlled about 35 percent of the market, while in early 2015, they controlled more than 65 percent,” Faccio says. “This increasing concentration is due to mergers.”

Opponents of a Sprint merger with T-Mobile have argued it would cut competition, eliminate jobs and raise prices for consumers, the Kansas City Star reports.

“T-Mobile and Sprint’s vague promises to create jobs and provide better service to rural America do not meet the public interest test for approval of the merger,” said Debbie Goldman of the Communications Workers Association, Reuters reports. “The data and the companies’ own track records demonstrate how the merger would hurt U.S. workers and consumers.”

Both companies have argued the opposite, saying a merger would be a job creator. Marcelo Claure, Sprint’s chief executive, said the merger “allows this company to offer the best product at better prices, lower prices,” The New York Times reported when the merger plan was announced.

Four years ago, when Sprint tried to buy T-Mobile, analysts expected T-Mobile’s CEO John Legere would run the merged companies. Now that T-Mobile’s buying Sprint, Legere’s back on Sprinters' horizon.

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