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> The BBC report, citing a UK-based price comparison site, said that 1 gigabyte (GB) of mobile data cost $0.26 in India (£0.20), compared with $12.37 in the US, $6.66 in the UK, and a global average of $8.53.

According to OECD, the Purchasing Power Parities (PPP) for India is 17.729 , UK is 0.691 and US is 1.0 [0]. That's a huge difference and hence, ignoring the purchasing power will not give you a full picture about the "cost".

[0] https://data.oecd.org/conversion/purchasing-power-parities-p...

5 comments

Mobile telecom prices are just a pure licence to print money. The cost base (infrastructure and regulatory costs) is insignificant and the asking price maxed out - depending on the market.

Prices could be mitigated by competition but usualy we have oligopoly, by regulators (EU and roaming charges) or by taxation (licences to operate).

I always laugh when similar company with similar shareholders charge 15 times more in one country then in another.

Digi Malaysia extending prepaid for 1 year 68 ringit 15$, dtac Thailand 1$. Both owned by Telenor.

I hate mobile companies as much as anyone else but that's like saying that once you're past the hard part of software development the rest is easy.

The bread and butter of mobile operators is infrastructure and spectrum licensing. FWIW I think there's a fair amount of competition, at least more than you see in the ISP space. Building towers is usually much more straightforward than trenching fiber/cable.

Towers are connected through fiber.

Mobile companies in general don't compete with each other at all and just continuously raise prices until too many customers starts leaving or regulators and politicians start to notice.

Depends on the company/tower. Quite a few use high gain RF links.

My local WISP uses AirFiber[1] for all their backhauls, mobile can be different but nothing is an absolute.

[1] https://www.ui.com/products/#airfiber

T-Mobile has some AirFiber deployed in west NJ and PA for connecting towers.

There are remote towers that actually have satellite backhaul. You can tell when you're on UMTS/HSPA or LTE and the latency is like 700ms. The companies are trying to eliminate them as they are costly to operate.

In many countries, mobile bandwidth licenses were auctioned for ridiculous sums, which were probably bid based on what they expected the market to be able to bear. That made the expected profit part of the cost.

There was a bit of a scandal back then because of the way the Dutch government handled that auction and tried to squeeze as much money as possible out of the various bidding companies.

True. But it is just the government trying to get a slice of a pie. regulatory cost.

It makes sense that the government wants to only hand out this extremely limited resource to organizations that will actually use it. And there is some sense that if someone pays a half a trillion dollars for the spectrum that they'll be highly motivated to use it to recover those costs, but in the end it basically guarantees that the service will be expensive because they have to make back that investment.

But the only other solution I can see is to have the government just pick a company and hand them the license, and that's effectively guaranteed to be breathtakingly corrupt since the incentives to cheat are overwhelming. At least with the market solution the money goes into the government's general fund instead of into the pockets of the party official in charge of making the decision.

> but in the end it basically guarantees that the service will be expensive because they have to make back that investment

Isn't it exactly the other way around? They bid high because they estimate that they will be able to make back the investment. The sole reason for making that investment is to sell it on to customers.

It works both ways. They bid high because they expect to be able to made back that investment, but having bid so high, they also need to meet that expectation, or they're in trouble.

Either way they're expecting to make that money back in a reasonable timeframe. Eventually the costs need to be passed onto the customers.

Gov can run the network and make all providers MVNO’s

Thats why gov’s should run national network and let MVNO’s just issue eSIM’s and purchase peering/international cables.

It’s a but like broadband and electricity deregulation in UK or NZ.

>Mobile telecom prices are just a pure licence to print money.The cost base (infrastructure and regulatory costs) is insignificant and the asking price maxed out - depending on the market.

The majority of cost aren't spectrum, ( as a few comment below suggested ) or Infrastructure, ( Payment made to Nokia, Ericsson, Huawei, or ZTE ), but rental agreement for all those Base station.

It is not exactly license to print money like Casino, Oil industry. The telecom industry margin are generally quite thin.

Maybe the expensive part is spectrum -- it's pretty limited, and is usually sold at auction. So the cheap bandwidth (double meaning intended) in India is ultimately a reflection on the average customer not being able to afford much.

The customers don't literally participate in the auction, obviously, but the operators bid based on what they think customers will pay. It's like the representative democracy version of an auction.

That’s true, but the cell towers are probably going to be of a similiar cost in India vs US. Lower (because wages are lower) but similar because the actual equipment is going to be the same price.

PPP is only relevent for things that have different prices in different countries (housing, food, etc). There are many things that cost roughly the same wherever you are: oil, macbooks, cell towers, etc.

As a general rule, the easier something is to arbitrage, the less PPP matters. The cost of arbitrage includes transport costs, taxes, and depreciation schedules (vegetables would be cheaper in India vs US because they are hard to transport, for example).

Of course this is only relevent if the US companies aren’t making crazy margins (I don’t personally know, but I suspect it’s possible).

The cell tower cost is not similar at all. I also used to think that the actual telecom equipment was the biggest cost and then your statement would be true. But generally installation cost and raising a tower is many times more expensive than the equipment.

Digging down power and fiber to a tower is not cheap.

Is the bulk of cell tower cost going towards equipment? My understanding was that a significant chunk went towards labor/construction costs and land rent, both of which are probably much cheaper in India.

You are missing the core point - the income for an average person in India is significantly lower than the US or UK. Therefore, you can not directly compare prices of products across countries regardless of the costs of the product itself.

Some metrics to look at

GNI(PPP) Per Capita in Int$ : India - 6,980 / UK - 42,560 / USA - 60,200 [0]

GDP (nominal) per capita in US$ (World Bank) : India - 1,940 / UK - 39.720 / USA - 59,532 [1]

One of those countries, is not like the other two.

[0] https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(PPP)...

[1] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

Are you suggesting that someone would sell a product for a lower price than what it costs just because people are poor where he sells it? PPP isn’t magic and you have to understand why some products are cheaper in 3rd world countries and why some products are the same price or even more expensive.

It’s about arbitrage. Just quoting some PPP stat from wikipedia is irrelevent and missing the point.

Why do you think PPP is different in different places? It’s not some magic wand you can just wave around.

> Are you suggesting that someone would sell a product for a lower price than what it costs just because people are poor where he sells it?

Yes and it happens regularly. One example :

Apple Music - USA $9.99 per month, UK £9.99 per month, India 1.74 US$ / 1.32 GBP

However, This was not always true. Mobile data used to cost 5$ a GB. It was made possible by a company called Jio with a vision to provide internet for everyone. Then other companies followed their concept. Purchasing power alone didn't bring this change. India had expensive internet like all other countries.

This. I pay €35 for T-mobile unlimited. Cheap enough for me but not the average Indian citizen I'm sure. Companies can only price what the market can bear.

Exactly. Lower income = lower labor cost = lower consumer cost.

Who knows if that accounts for all of the difference, but excluding that factor makes the whole thing useless.

It's also a cultural thing. The consumers won't pay a huge amount. They are very used to negotiating for nearly everything and anything.

They may be used to it, but they also hate it.

Consumers would rather go to a big box store where they know they’ll pay an okay price all the time instead of a market where they’re expected to mentally calculate the actual value of every good and negotiate down to a magic number.

Even EBay couldn’t keep the auction concept alive.

Auctions (effectively what these negotiations are) are great for one thing: unique and expensive objects.

It’s a pain to have to spend hours a year negotiating every $50/month that goes out of my pocket. That’s a lot of unproductive hours against a machine with thousands of employees working against me.

When you say they, who are you talking about? Western or Indian consumers?

Auctions aren't the same as bargaining. Auctions have a lower price that is constantly going up. It just helps to reveal the max that a buyer will pay.

Both groups.

Bargaining is a waste of time if you have alternatives that don’t require it to get a good price.

Auctions has buyers that are willing to pay more up until a point. Negotiating at the market has a seller that is willing to pay less up until a point.

The same rules largely apply.

Isn't India data cheap because one person who owns one giant telecom decided he wanted data to be cheap in India? Similar to the original Google Fiber philosophy.

Ah, per other comments: Jio

That one person was Ambani, owner of Reliance Petro Chemicals, & started Jio mobile, funfact: mirror reflection of Jio is almost oiL.

Yup. Mobile data was a lot more expensive 2-3 years ago. Then one company started a massive race to the bottom.

See my above comment on why this is a fallacy. PPP isn’t magic, it only affects goods that are difficult to arbitrage.

This is why oil is the same price pretty much everywhere in the oil. Because if oil was cheaper (including taxes and transport) in one place, someone would buy it and sell it somewhere else.

When everyone is doing this, it equalizes the prices. This is because arbitrage drives up the price of cheaper oil and drives down the price of the expensive

Difficult to arbitrage? You just proved the opposite of your own argument.

Oil is the same price for many reasons (least of them being OPEC), but largely because of your point - there is a global market.

How exactly is the US or UK supposed to export cheap data from India?

The point is that the cell towers are going to be the same price regardless of location. So PPP isn’t a good justification for why data is cheaper in India. That is all I’m saying.

Labor cost is insignificant. More so the cost of building infrastructure - BTS towers.

And labor cost are significant when building the towers. The actual cost for the equipment is much smaller than the tower installation cost.

And how is building infrastructure not impacted by labor costs?

Lease, monitoring, insurance, real estate taxes, site maintenance.

From the report [1]:

Tower cost in India (40-60k$) due to low land rent cost. Tower in Latin America (120-180k$)

Tower in UK - 200-400k£ [2]

[1] http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...

[2] https://www.ft.com/content/981f7084-c515-11e5-b3b1-7b2481276...

If anything that is supporting my argument. Yes, all of those costs are less in India. Why would that possibly be?

Because land lease and related cost are significantly lower in India. Not due to labor costs.