The EU's latest round of mobile price regulation provides a golden opportunity to show how market competition produces much better results for consumers than government price regulation. Ironically, the European Parliament voted this week to lower mobile roaming charges by mid-2014 to levels that will still be much higher than America's competitive wireless market prices are today.
Per New York Times reports, the EU mandated price for making a roaming mobile voice call will be reset from 35 cents a minute today to 19 cents a minute by mid-2014, and the price for receiving a roaming mobile voice call will be reset from 11 cents a minute today to 5 cents by mid-2014. Putting this in perspective, Recon Analytics' research shows that Americans pay 4.9 cents a minute vs. 16.7 cents a minute for Europeans -- ~70% less; and because of these dramatically lower American wireless prices, Americans consumers use more than twice as much wireless as Europeans, 875 minutes of use per month vs. 418 minutes for Europeans. Simply, the EU's ~50% mandated price reductions will still have European consumers paying much more for mobile usage even if one incorrectly were to assume that competition won't further lower the market price for American consumers like it has every year.
By way of important background, the EU's penchant for government intervention has them in the midst of an unenviable downward cycle dynamic where price regulation begets more price regulation. Europeans have high roaming mobile rates because the EU has long over-regulated their landline incumbent telcos with forced unbundling at economically-unsustainable, government-set rates, which destroys the economic incentives to invest in infrastructure, while also discouraging competitors from investing in the deployment of competitive facilities/infrastructure because they can't possibly beat the uneconomic price and cost structure forced on the incumbents.
The EU finds itself more aggressively regulating mobile roaming rates and now mobile Internet rates, because the companies are constantly searching for a service that is not as strictly-price-regulated to raise rates to make up for the under-earning that the rest of their assets and business suffer from. Sadly for Europeans, it looks like the European Parliament may be ensuring that the landline and mobile Internet infrastructures will suffer from the same uneconomics that it has shackled its wire line and wireless voice businesses with.
In sum, the unenviable pickle that the EU finds itself in today is that its shortsighted communications policy of keeping many prices artificially low has starved its companies of the financial wherewithal to fund needed infrastructure modernization, which in turn requires governments to step in to fund communications infrastructure investment when there is scant public money to pay for it.
Thus, the EU has stunted communications infrastructure investment overall by not allowing its companies to be able to invest and earn a return on investment, at a time when Government's can't afford to do it either. EU price regulation has caused a lose-lose public-private dynamic in stark contrast to America's win-win private-public dynamic of promoting facilities-based market competition, which funds multiple 4G LTE national wireless infrastructures with falling prices and robust innovation -- all without any need for Government funding.
