Recently the Swiss Competition Commission („Weco“) announced their intention to increase pressure on the telcos to lower the wireless interconnect charges – the price charged by one carrier to another for receiving a phone call.
The optimal interconnect price is zero. That’s right: CHF 0.00/minute. For the carriers, for the customers and for the economy.
I spent two years monitoring cell phone usage in the USA. I watched the prices go down, roaming charges fade away and national plans become increasingly prominent. I also watched volumes take off and people switching from land-lines to wireless for their primary phone line.
Image being able to talk for 900 minutes a month, from anywhere in Europe to anywhere in Europe for about CHF 75/month? That’s a typical deal offered in the USA these days. And call on Nights and Weekends would be free as well as calls within the same carrier.
The same usage from Orange would cost CHF 720 to CHF 900 per Month (at the published CHF 0.80 to 1.00 / Minute) plus monthly fees. Even if all the calls were in Switzerland, it would be on the order of CHF 300. 4 times the price in the US. (We won’t even talk about what happens if you’re calling from outside Switzerland to somewhere else in Europe.)
Ever notice that it costs the same to call a wireless number in the US as a land-line? That the cheapest rates to call the US are cheaper than the cheapest calls within Switzerland?
Why this huge price difference? There are two reasons:
- No interconnect fees.
- Trully national (continental) carriers
The North American Numbering Plan did not allow the creation of special area codes for cell phones. (In Swiss terms, there was no 077 or 079 prefix, just 01, 061, etc). With no special area code, it was not possible to charge interconnect fees.
This meant that the subscriber had to pay the cost of both placing and receiving phone calls. Initially, this slowed development of the wireless business in the US, but later, as competition heated up, it had a tremendous advantage: the entire price of using the cell phone was negotiated between the consumer and the carrier.
So prices went down. And lo, volume went up. And so did revenue. Last time I looked, T-Mobile USA had better ARPU (Average Revenue per User) than say, Orange, in Europe.
Interconnect fees are established by the carriers without input from the consumers. As there is no competition, there is not much incentive to lower prices. High prices discourage usage.
So let’s do away with the 07x Area Codes, do away with complex fee structures and let the prices come down to a reasonable level.