Yesterday the largest mobile service provider in Austria, A1, announced that they will indeed be offering the iPhone 4 in the coming weeks. Now, up until this point, only two operators had the agreement with Apple to sell the iPhone and many thought that would be that - Apple doesn’t typically do things to harm those with whom they have exclusive agreements. The Austrian market seems to be something of an exception, though, and it’s not just in the way Apple is doing business.
The provider market in Austria is dynamic. Volatile would also be a good choice of words, but volatile implies instability in the sense of companies on the brink of failing - far from the truth here. A few years ago one of the smaller operators, One, was bought up and changed to Orange adding Austria to one of the many countries in which Orange has its fingers in. When they bought One and rebranded the entire company they came out with sales that were absolutely staggering. Sales that you really only ever see when a company goes out of business and has to get rid of all their stock so they have a hope of paying most of their debt off. Again, not the case here. The response from the other providers was equally breathtaking: everyone began slashing prices and Orange, one of the smallest of the big boys, began to set the pace in pricing. Customers left in droves to go to the new network and unfortunately, Orange’s network quality suffered a great deal. The coverage itself is never the best across the country and it lacked the infrastructure to take on all these new customers and their data requirements (they also offer mobile Internet plans and those were being sold off like hotcakes, too). The whole thing reminded me of AT&T but I’ve not seen quite the same issues in Austria that AT&T had to deal with, but then Austria is a much smaller country and doesn’t have so much land that needs to be covered and supported, but I digress…
The past two years or so have been a constant price war. Those that are PC enthusiasts might remember last years fight between NVidia and ATi (now AMD Graphics). Cards that normally cost upwards of $200 were now for the average buyer more than affordable. It all seemed to happen overnight. The same thing has happened here in Austria. With every provider you can get about 1000 minutes, 1000 SMSs and a 1GB data plan with just about every provider for between €15-25 and typically a free smartphone, usually an Android or a Blackberry device. Ludicrous! Not even a year ago you would have paid twice that amount! This brings me to the whole US vs Austria part.
In the United States you would pay easily twice this amount, even after currency exchange. Don’t believe me? I’ll prove it. Let’s take the largest and highest quality network in the United States and compare them. Obviously since each company is the fattest cat in each respective country the prices will be skewed more to the highest side because let’s face it, quality doesn’t come cheap. I’m taking the most expensive, though, so we can at least have a price ceiling to work with here and the smaller providers will obviously be beneath this ceiling. For the United States we have Verizon Wireless and for Austria A1.
For Verizon, we’re going to take the Talk and Text plan with 900 minutes that costs $79.99. That’s unlimited receiving (yes, in the US you are charged for receiving a text message - ridiculous, I know) and sending of text messages within the United States to any phone number. Obviously since you’re not cool unless you have a smart phone, we’re going to pick a data plan. Verizon requires you to buy a data package of at least $29.99. Now, the most expensive package they have is $29.99. Little crooks. The upside here is that the plan has unlimited data included in the plan, so that’s pretty nice. Though given the plethora of wireless networks in the US, it’s relatively easy to latch onto an open network and not have to worry about ever touching your data plan. There have been rumors flying for a while that the American providers are going to introduce tiered pricing similar to Europe, so hopefully costs will go down here. Right now we’re up to $110 (about €79.58 with approximately €1 = $1.38) for our American plan. Wow. Let’s see what the Austrians bring to the table, though.
For the Austrian plan I’m going to shoot a little on the high side here to show you guys exactly what I am talking about. I’ve chosen the Smart 2000 plan that includes 2000 minutes, 2000 SMS’s and 2GB of data. Currently there is a sale running for €39 per month, but we want the regular price of €45 (about $62.19 with the same exchange rate mentioned above). There are a number of differences in these plans, but nothing that I would consider very large for your average consumer.
The American plan includes unlimited messaging as part of its Talk and Text plan. Unlimited SMS, video message, voice messaging and instant messaging (some of these should really be included in a data plan) and this includes receiving. It also includes unlimited text messaging to participating networks in Canada, Mexico and Puerto Rico, but I doubt this little bit is of great concern to the majority of Americans since Americans only speak American - anyone from Canada is evil and anyone that doesn’t speak English is evil. On to the Austrians then. The Austrian plan has more minutes than the American plan but in theory has fewer SMSs allotted to it and a smaller data plan. Now, I don’t know about you guys, but I’ve tried to scratch the 1GB data limit on my plan and I can’t. Usually if I need bandwidth, I just latch onto my home wifi network or the nearest open network. Given the amount of free wifi coverage in the US, I’m pretty sure most Americans would make due with a 2GB data plan. The Austrians also don’t charge for receiving messages from foreign countries whereas Verizon does. Not sure why, probably just because it’s another hole to bleed you from.
As I mentioned above, the Austrian cell phone market is in a costant state of shift concerning the pricing among competitors, so finding a good deal is really not that hard, especially if you live near a metropolitan area where coverage among the various providers is roughly equal and you’re really only worried about price at the end of the day. The United States is a wee bit different, though. The prices really don’t fluctuate all that much, maybe $10 at the end of the day, maybe a bit more. You also don’t have the price wars there that you have in Austria. The biggest reason of why things are so cheap in Austria (and this applies to Europe in general) is because the EU has mandated that providers can’t charge an arm and a leg for simple services such as SMSs. There is a price ceiling and they sure as hell don’t charge for receiving of said messages (not sure if that’s by EU mandate or because the market developed that way). I personally think that this is awesome, especially given the monopolistic nature of the providers in the US. Sometimes prices vary even by region so if you have only one provider in your area and you need a mobile phone, you have only one option at the end of the day and the provider knows it and will take full advantage of it. This doesn’t happen all too often, though, but it does happen.
A little bit of competiton never really hurt anyone, though, and consumers are those that almost always benefit from it. One reason why I would love to work for one of the mobile companies in Austria: I’m sure it would be an awesome place to work given the constant state of change that the market is in.
So at the moment I think we’ve got a score count of Austria - 3 and US - 1. Not looking too good back home…
Looking at the current score, though, it’s still quite close. Austria is currently leading with 3 wins and the US with 2. Not sure if this blog series will ever stop and if keeping score is really even necessary, but keeping score is always a nice thing. As always, I’m open to requests for comparisons between Austria and the US. If you have something you’d like to see, just drop me a line on Twitter!
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