Feature Article

December 20, 2012

Mobile Calling Now Cheaper than Fixed Network Calling in Many Markets

There’s a relatively simple reason people prefer to use mobile for voice globally. In many markets, mobile is the only way to make a call. In 2010, about 90 percent of total call volumes in Brazil, Russia and China occurred on a mobile device.

In other markets, where both mobile voice and fixed voice are available, mobile is cheaper than using fixed services. In these markets, retail pricing and packaging, not just user preferences, drive usage. In addition to convenience, where mobile calling is cheaper than fixed calling, there is less incentive to use the fixed network.

On the other hand, where fixed network calling is quite cheap, users tend to use the fixed network more. 

Image via Shutterstock

France and Spain were the only countries where the mobile premium, compared to fixed network calling, increased in 2010. In France, the cost of mobile calls relative to fixed voice calls has been increasing since 2006, while in Spain this has been true since 2008, Ofcom, the U.K. communications regulator, says.

In both countries, the average cost of mobile calls also has been falling, meaning that the increase in the mobile premium is a result of the rate of decline in fixed prices being greater than that of mobile calls.

That, Ofcom suggests, might be part of deliberate service provider pricing strategies. In France, where fixed network VoIP is quite popular, and competition is severe, service providers have been compelled to drop fixed network calling prices aggressively.

So even as mobile calling got cheaper, fixed network calling got cheaper even faster.

Still, the price trend has been downward, for mobile calling in all the nations. And that is spurring a shift to mobile calling.

On average, across 13 nations (France, United Kingdom, Germany, Italy, United States, Canada, Japan, Australia, Spain, the Netherlands, Sweden, Ireland, Poland, Brazil, Russia, India and China) for which full data was available, 68.3 percent of voice call minutes were made from mobile networks in 2010.

In some nations, such as China, 96.2 percent of call minutes were made from mobile networks in 2010, compared to 34 percent in Germany, for example.

Even within Western Europe there is significant variation: 65 percent of call minutes originated on mobile networks in the Netherlands in 2010, 31 percentage points more than in neighboring Germany.

In France, mobile telephony’s share of total voice minutes grew by just 4.1 percentage points between 2005 and 2010, whereas in Sweden it increased by 33.3 percentage points over the same period, while in the UK the figure was 17.9 percentage points.

In 12 of the 16 countries, the average per-minute cost of mobile voice call was lower than that of a fixed voice call in 2010, where that was true in just two countries in 2005.

The United Kingdom  was one of the four countries (along with France, Germany and Spain) where the mobile premium was positive in 2010, with the average cost of a U.K. mobile voice minute being 16 percent  more than that of a fixed voice minute.

Ofcom notes that retail packaging has a role. For consumers with “unlimited” domestic calling, for example, the perceived incremental price of each call is zero, and the “per-minute” charge is statistical, depending on how many minutes a person actually talks, compared to the flat fee for access.

The lowest-cost mobile calls relative to fixed calls were in China, where the average cost of a mobile minute was just 13 percent of the cost of a fixed network call.

Under those conditions, it is hard to separate consumer preference (mobile is viewed as more convenient) from simple necessity (mobile is the only way to make calls).

In nations where both fixed network and mobile network calling are available, the lower cost of mobile calling now seems to have a clear effect, even if “convenience” was the initial driver of adoption.

Edited by Brooke Neuman

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