How much does it really cost the networks to send data to and from your phone? Are mobile operators fleecing the public with their myriad data tariffs?
These are the questions at the heart of one of the biggest obstacles to a proper mobile internet experience, in which a fair price is charged for a decent quantity of data.
Sadly, the mobile networks don’t want you to know the answers, and they won’t tell us (anyone would think they had something to hide).
Not only do mobile companies see data as a cash cow, their high prices can also act as a tool to stave off the need to upgrade their networks
But just compare the cost of a basic broadband package from BT over its copper ADSL services to the price for mobile data and you’ll find the difference is staggering.
On BT Total broadband, £18 buys you 40GB of data per month, which works out at 0.045p per MB of data over a fixed line. A £3 internet bolt-on for Vodafone buys 100MB of data at 3p per MB, while Orange’s £1 for 25MB works out even more expensive at 4p per MB.
Each bit of data is thus 66 times more expensive to send via Vodafone and almost 90 times more on Orange. That’s before we even start looking at the ludicrous charges for using the web overseas.
The suspicion among consumers is that the mobile companies are profiteering – making hay before the regulators clamp down on high prices or competition forces prices down.
“Some cash cows in the mobile networks have had their throats slit, with things such as the EU regulating on mobile roaming charges,” said Michael Phillips of ConsumerChoices.co.uk, which monitors data prices.
“They were making huge margins on those and they’ve been taken away. This is a new area and they feel they can charge more, and they do. Regulators tend to be a step behind the pricing models of the mobile companies that see this as a good area for revenue.”
Given free rein to set prices, phone companies are exploiting the public’s ever-growing appetite for mobile data. They justify their inflated prices by comparing tariffs among themselves, even though tariffs are divorced from the actual cost of providing the data.
“The companies could create almost a monopoly in a similar way that the six main electricity companies have done,” said Owen Cole, technical director at bandwidth management company F5 Networks. “They all say ‘I’m the cheapest, I’m the best’, but they’re all far more expensive than they should be. When they make a profit, they make the banks look insignificant.”
The companies certainly made huge profits last year. Vodafone, for example, reported profits of £11.5bn in the year to March 2010, with data revenue exceeding £4 billion and making up 10% of service revenue. Telefónica – which owns O2 – managed a measly €10.5 billion (£9.2 billion). And this from companies that tell us they need more money to invest in infrastructure.
Not only do mobile companies see data as a cash cow, their high prices can also act as a tool to stave off the need to upgrade their networks to higher speed services, such as HSPA+ and LTE.
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