The Organisation for Economic Co-Operation and Development (OECD) has published a report (‘Mobile Handset Acquisition Models’) examining the cost of mobile communication services in12 different Western countries. Australia is the cheapest, by a fair margin.

The comparison looked at three different postpaid plans using an Apple iPhone 4S 16GB, as this device was available in all countries, and looked at three plans used incorporating handset ownership and service usage: 100 calls with 500MB of data, 300 calls with 1GB of data, and 900 calls with 2GB of data.

Australia is cheapest for all of them - less than half the avearge of the 12 countries surveyed.  and The UK is second for the first two, and third, after France, for the last. The US becomes cheaper the more you use. At the other end of the scale, Mexico is the most expensive – it is also one of the least competitive markets, with the world’s richest man Carlos Slim’s Tercel enjoying a near monopoly. The data is from February 2012, so is a little out of date, but is likely to still be indicative.

The report also concluded that it is generally most cost-effective to purchase a mobile handset before signing a contract. But it says bundling is a key driver of the market, because there is minimal upfront cost to the consumer.

“The bundled sale of a smartphone device, with a significant upfront discount, together with a mobile communication plan, has been and remains a driver for customer acquisition and retention for many mobile operators. Even though these practices may not prove sustainable under some business conditions and some operators are starting to withdraw them from their offers, they remain common in many OECD countries.

“Arguably, they play a substantial role in users taking up or upgrading their smartphone devices at a faster pace than they would otherwise, and therefore assist the faster adoption of mobile broadband services. They do this by extending credit to users of smartphones who may prefer to pay back the cost of a device over the length of a contract rather than the full upfront cost.”

But in Australia, says the report, bundling is more of a competitive tool than a means of attracting new customers. “Analysis by the Australian Competition and Consumer Commission revealed that, in Australia, handset subsidies increased with the launch of 3G networks, and thus these bundled discounts were not aiming to attract new mobile subscriptions but rather directed to attract customers from competing networks, as well as migrating current customers to the new 3G technology.

In other words, in Australia bundled handset discounts are used as a competitive tool, because we are already close to saturation point. The report also notes that Australia is one of the few countries that separates the amortised payment for the device from the actual service charge in the monthly bill.

The comparisons use the PPP (purchasing power parity) methodology to even out exchange rate variations between countries (see charts on following page).

The report says that the plans (“baskets”) distribute traffic according to different consumption patterns, which can greatly vary across different OECD countries. “Such differences are one reason why the OECD has a range of usage patterns across its baskets. For example, countries with a higher average usage tend to perform better in those baskets with a greater number of calls. By way of contrast, countries with lower usage levels, prices for the higher consumption plans tend to be higher, as the largest providers focus their competitive efforts on the prevailing calling patterns.”

The reports says competition is a good thing, and drives prices down. “Experience has shown that barriers to credit for the purchase of communication services are best addressed by a competitive market. The outstanding success of pre-paid cards, which followed market liberalisation, has provided a business model that has enabled billions of users around the world to gain communication services for the first time.

“The rapid take-up of smartphones, which are significantly more expensive than feature-phones, could be pointed to as a similar example of a competitive market providing ways to address barriers to credit and, therefore, expanding the social and economic benefits that can be associated with the widespread take-up of such devices.”

So the numbers are in. Stop complaining. Australian enjoy good mobile coverage at very cheap rates by global standards. The regulatory system and the technology are working.

The report is available at: https://dx.doi.org/10.1787/5k43n203mlbr-en