The GSMA has released the Mobile Wireless Performance in the EU and the US report. According to the industry association, the mobile wireless market in the European Union (EU) is underperforming relative to other advanced economies, including the US.
The report further states that the EU wireless market is trailing behind the US in the deployment of next generation wireless infrastructures and the advanced services they accommodate.
This can be attributed to the existing regulatory policies in the EU, which have resulted in a fragmented market structure. This prevents carriers from leveraging beneficial economies of scale and scope and impacts the growth of the mobile wireless ecosystem.
The GSMA recommends reforming and harmonising spectrum policies, permitting efficient levels of consolidation, and promoting innovation by fostering competition.
Key highlights
Prices and output
On an average, customers in the EU pay less per month for mobile wireless services than their counterparts in the US. The average revenue per user (ARPU) which stands at $69 per month in the US is higher than in any EU country, which is at an average of $38.
While customers in the EU pay less per month, their counterparts in the US use mobile services more intensely, spending more time on the phone and downloading more data than in the EU. Customers in the US use 901 voice minutes per month, which is more than five times the European average of 170 minutes.
However, while customers in the US pay more per month, they pay less for per unit of usage. For example, as per Merrill Lynch, the average revenue per minute of voice usage in the US is lower compared to any European country and less than a third of the European average.
Meanwhile, both the US and the EU markets have registered a long-term secular decline in cost (per connection). The average revenue per connection (ARPC) in the EU has decreased by 45 per cent since 2000, from over $40 per month to just over $22 per month at end-2012, while the ARPC in the US declined by 18 per cent, to $45, over the same period.
However, customers in the US are inclined towards connecting more data-intensive devices to the network per subscription than in the EU.
As a result, the revenue per subscription in the US is increasing, while the revenue per subscription in the EU continues to decline.
Between 2008 and end-2012, the ARPC was approximately $22 higher in the US than in the EU. Meanwhile, in terms of ARPU, the gap between the EU and the US was less than $20 in 2008 but increased to over $31 by 2012. In both cases, subscribers were spending less per connection (and far less per unit of usage) at the end of the period than in the beginning, but customers in the US were opting to purchase more connections.
Quality and choice
According to the GSMA, an important aspect of mobile wireless quality is the connection speed for mobile data services. While the EU and the US average connection speeds have been comparable for many years, the more advanced deployment of LTE networks in the US is now beginning to create a gap, which is expected to widen in the immediate future. According to Cisco, the average speed of mobile data connections in North America in 2012 was about 75 per cent faster than in the EU (26 Mbps compared to 1.5 Mbps). Going forward, this gap will increase further and by 2017, the average speed of a mobile connection is projected to exceed 14 Mbps in North America, compared to 7 Mbps in the EU.
The slow deployment and limited reach of LTE networks in Europe has led a few handset manufacturers to focus their device portfolios on the requirements of large-scale US operators, thereby limiting the choice of LTE devices for EU consumers. Most notably, Apple elected not to make its 4G-enabled iPhone 5, released in September 2012, compatible with European 4G networks utilising the 800 Mhz and 2.6 Ghz bands which are prevalent in Western Europe.
Investment and innovation
The deployment of new telecommunications infrastructure depends on investment. The report highlights that investments in mobile wireless networks in the US has outpaced the EU.
The level of wireless capex in the US has increased by over 70 per cent since 2007, while declining in the EU.
The divergence in network investment has directly affected the pace of LTE network deployment. Network deployment in the US has increased at an ?unprecedented? pace. To illustrate, since their initial deployments in December 2010 (Verizon Wireless) and September 2011 (AT&T), the two operators have extended coverage to over 273 million points of presence (PoPs) and 170 million PoPs, respectively. Verizon Wireless? LTE network now covers over 85 per cent of the US population, and is already carrying 50 per cent of the company?s total data traffic.
In fact, even smaller US operators, such as Sprint, US Cellular, Leap Wireless, etc, are in the process of deploying LTE networks on a large scale.
In contrast, although operators in some EU nations launched LTE services relatively early, deployment has proceeded slowly, and LTE coverage and uptake has remained quite limited.
