Why You're Still Paying So Much to Use Your Phone Overseas
The future of the wireless industry will be shaped at Mobile World Congress next week. But amid all the changes brought on by smartphones, those traveling to the conference in Barcelona may notice that one aspect of their phone bill remains frozen in time: international roaming rates.
The price of wireless Internet access for most Americans going overseas has barely budged in the past decade—since before Steve Jobs introduced the iPhone or Google helped make smartphones mainstream. Mobile carriers have modernized most other aspects of their business to accommodate how people use their phones today, even if it hasn't happened as quickly as everyone might have liked. Cellular plans at home now offer unlimited calling and text messages, as well as more affordable data rates.
It's a very different situation when venturing outside U.S. borders. Carriers typically charge by the minute for calls, fees for each text, and outrageous prices per megabyte. At the largest telecoms, Americans visiting Europe can spend at least $150 for a 1-gigabyte bundle of international data. That's enough to cover some app downloads, a few hours of music on Pandora, a YouTube video or two, and a week's worth of e-mail. Those who forget to plan ahead would pay about $20,000 for the same amount of data, according to the carriers' published roaming rates. Back home, a gig costs about $10.
Every so often, an angry traveler makes a fuss online about her 300-page phone bill, but there simply isn't enough outrage from consumers to push the largest carriers to cut prices, according to Lynnette Luna, an industry analyst at Current Analysis. Transatlantic tourism isn't common enough to be a significant factor when people are pricing out whether to switch phone companies. Many of those who do regularly travel overseas don't care about the costs because they never see the bill—they're on business. The average American going to Europe or Asia for work should expect to spend at least $181 on data roaming, even if they're careful to use the Internet access offered by hotels and cafes when it's available, according to a 2012 report from IPass, a Wi-Fi service provider.
The latest 4G cellular technology rolling out around the world ensures that the technical barriers to roaming are mostly out of the way. But without an incentive, don't expect carriers to voluntarily blow up an insanely profitable side business. Facebook Messenger and WhatsApp have squeezed telecoms' text-message margins, but international fees are a consistent driver of profit that expands as more people become addicted to data-hungry smartphones. "One of the last bastions of really high margins is international calling and roaming," Luna says. "I don't think they want to reduce those rates any time soon."
T-Mobile US, the fourth-largest national carrier, seemed to break ranks with a recent announcement that it wouldn’t charge for roaming. The move had its competitors worried, according to Luna. That fear quickly faded when they discovered T-Mobile's international roaming includes only 2G data, a slow and outdated technology. While business customers can pay $25 for 150 megabytes at faster speeds, Brandy Bishop, a spokeswoman for T-Mobile, argues that the free offering is good enough for Web browsing and e-mail. "Some applications, like streaming music or video, may be more difficult."
So travelers in need of an experience that won't make them want to tear their hair out will have to pony up. At the extreme, 6 gigabytes of data usage, which goes for about $70 a month on a domestic plan, would cost $120,000 at a standard rate of $20 per megabyte. Signing up for an international roaming plan in advance would stave off bankruptcy but still cost about $1,500, an amount closer to what people typically pay for a year of mobile phone service. "It’s a complex system; there’s lots of different layers that determine rates, like regulatory and tax issues in different countries," says Debra Lewis, a Verizon spokeswoman. "Our goal, as always, is to provide the best value."
Americans vacationing a little closer to home can avoid burning through their kids' college fund. U.S. carriers have recently cut the price of roaming to Canada and Mexico, which are more popular vacation destinations for their customers. Some tech-savvy folks traveling outside North America often find it's better to abandon their home carriers for the duration of the trip. In many countries, you can walk into a convenience store and buy a prepaid SIM card from a local mobile operator that can be swapped into certain phones. Going that route requires a degree of technical knowledge and often permission from a domestic service provider to unlock their devices.
High data-roaming prices aren't just a U.S. problem. In Japan, NTT Docomo's rate for international Internet access is similarly absurd, but the country's largest wireless operator caps the daily cost to avoid gouging. Customers get a paltry 24 megabytes for 1,980 yen ($17), but if they go over, they're won't have to pay more than 2,980 yen ($25) a day. In South Korea, SK Telecom subscribers must wade through a web of service plans, including ones for seniors or those under 18. There's also a 99,000 won ($90) per day plan with unlimited 3G data roaming.
Europeans making their way to Barcelona or somewhere else on the continent can get fairly reasonable deals on roaming, thanks in part to stiff competition and regulation. For example, a Brit who subscribes to Vodafone can pay a flat fee of 5 pounds ($8) per day for all-you-can-eat voice and data within Europe. The company recently began offering a package for the same price that lets customers travel to North America, though they must stay within their plans' monthly data allowance.
The high prices risk driving people toward cheaper or free alternatives, as was the case with the rise of messaging apps and Skype calls. Some smartphones offer Wi-Fi calling, which means you can go to a coffee shop and bypass cellular networks entirely. The downside is that it's not a truly mobile experience, because devices can't yet seamlessly switch between hot spots as you wander around a city. When you're outside Wi-Fi coverage, the phone may switch to cellular data and burn a hole in your wallet.
Instead of lower prices, many carriers are adapting to changing mobile phone habits through notifications that provide more transparency about pricing, according to Roger Entner, an analyst at Recon Analytics. "There are now alerts when you land that inform you of how expensive it is—to avoid any kind of nasty surprises," he says. So at least you'll know when you're getting screwed.
—With Scott Moritz and Amy Thomson
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