Why do calling rates vary so much?

On 15 Feb 2004 03:14:01 -0800, johnofchristchurch@yahoo.com (John
Smith) wrote:

>Can anyone tell me why it costs US$16 to get 700 minutes per month
>plus voice mail and caller ID from Orange Hong Kong (2.3 c/min),
>whereas it costs US$132 to got 700 minutes per month from Orange
>United Kindom (18.6 c/min). This is a ratio of about 1:8, which is
>quite a difference.
>
>Thanks!

The network build out costs in Hong Kong are a lot lower. There is a
lot more of the UK , and the calling area you get for your HK minutes
is a lot smaller.

That and something called fierce competition.

matt weber <mattheww50@cox.net> wrote in message news:<47u2309dqqsualgipjiiomrngq3oiamoma@4ax.com>. ..
> On 15 Feb 2004 03:14:01 -0800, johnofchristchurch@yahoo.com (John
> Smith) wrote:
>
> >Can anyone tell me why it costs US$16 to get 700 minutes per month
> >plus voice mail and caller ID from Orange Hong Kong (2.3 c/min),
> >whereas it costs US$132 to got 700 minutes per month from Orange
> >United Kindom (18.6 c/min). This is a ratio of about 1:8, which is
> >quite a difference.
> >
> >Thanks!
>
> The network build out costs in Hong Kong are a lot lower. There is a
> lot more of the UK , and the calling area you get for your HK minutes
> is a lot smaller.
>
> That and something called fierce competition.

I can accept that it is easier and cheaper to set up a service in a
small area, with a large population density, a few questions remain.
Because each cell site can only have a certain number of concurrent
calls, the number of cell sites would be relatively similar per minute
of calling. Of course, they would be much lower in cost, since they
are smaller. But would that really make up for the 8:1 ratio? Wires
to the cellsites would be a factor as well, but would it make up the
difference?

Suppose cellphone calling costs reduce by 20% for each doubling of
population density. That would mean that 0.8^x = 0.125, x = 7. 2^7 =
128, so we'd be looking at density of 128 times UK values.

Using http://www.demographia.com/db-dense-nhd.htm for urban population
density figures, urban London (say) is around 18,000 per sqkm, Hong
Kong is around 60,000 per sqkm, New York is at 30,000 per sqkm.

As for competition, I can't see that making up the difference.

The Gross Domestic Product of Hong Kong is around that of western
countries, so it's not cheap labour that's producing the difference.

The numbers just don't add up.

johnofchristchurch@yahoo.com (John Smith) wrote in message news:<d986c0d9.0402171549.ac5f65c@posting.google.c om>...

> I can accept that it is easier and cheaper to set up a service in a
> small area, with a large population density, a few questions remain.
> Because each cell site can only have a certain number of concurrent
> calls, the number of cell sites would be relatively similar per minute
> of calling. Of course, they would be much lower in cost, since they
> are smaller. But would that really make up for the 8:1 ratio? Wires
> to the cellsites would be a factor as well, but would it make up the
> difference?

Why not? In the US, we have small carriers that service just one
metropolitan area offering unlimited service for $30US/month, while
"nationwide" carriers offer 250 minutes or so for the same $30. The
metro-only carrier only needs a small number of towers, and the
service is priced so inexpensively that users put up with any dropped
calls due to congestion during peak usage times.

> Suppose cellphone calling costs reduce by 20% for each doubling of
> population density. That would mean that 0.8^x = 0.125, x = 7. 2^7 =
> 128, so we'd be looking at density of 128 times UK values.
>
> Using http://www.demographia.com/db-dense-nhd.htm for urban population
> density figures, urban London (say) is around 18,000 per sqkm, Hong
> Kong is around 60,000 per sqkm, New York is at 30,000 per sqkm.
>
> As for competition, I can't see that making up the difference.
>
> The Gross Domestic Product of Hong Kong is around that of western
> countries, so it's not cheap labour that's producing the difference.
>
> The numbers just don't add up.

Not surprising since you're using assumptions like "20% reduction for
each doubling in population density." The real savings isn't the
difference in density between HK and, say, London or New York, but the
difference in density between HK and the English countryside, or
upstate rural NY where the population is only a few hundred per square
mile, yet they have wireless coverage.

In addition, most US carriers also play a "subsidy" game- they entice
new subscribers with "free" phones, and have to recoup the costs of
those phones in the monthly charges/tarrifs. Do either British or HK
carriers offer subsidized handsets?

On 17 Feb 2004 15:49:22 -0800, johnofchristchurch@yahoo.com (John
Smith) wrote:

>matt weber <mattheww50@cox.net> wrote in message news:<47u2309dqqsualgipjiiomrngq3oiamoma@4ax.com>. ..
>> On 15 Feb 2004 03:14:01 -0800, johnofchristchurch@yahoo.com (John
>> Smith) wrote:
>>
>> >Can anyone tell me why it costs US$16 to get 700 minutes per month
>> >plus voice mail and caller ID from Orange Hong Kong (2.3 c/min),
>> >whereas it costs US$132 to got 700 minutes per month from Orange
>> >United Kindom (18.6 c/min). This is a ratio of about 1:8, which is
>> >quite a difference.
>> >
>> >Thanks!
>>
>> The network build out costs in Hong Kong are a lot lower. There is a
>> lot more of the UK , and the calling area you get for your HK minutes
>> is a lot smaller.
>>
>> That and something called fierce competition.
>
>I can accept that it is easier and cheaper to set up a service in a
>small area, with a large population density, a few questions remain.
>Because each cell site can only have a certain number of concurrent
>calls, the number of cell sites would be relatively similar per minute
>of calling. Of course, they would be much lower in cost, since they
>are smaller. But would that really make up for the 8:1 ratio? Wires
>to the cellsites would be a factor as well, but would it make up the
>difference?
Actually you have a lot of cell sites in the UK that don't get a lot
of traffic. If you are say 65 miles West of London on the M4, you
have coverage, in fact you have them on all of the major motorways,
but most of those cells have very limited capacity. So you have the
all the costs of a BTS, but very little revenue is actually generated.

HIgh density makes for lower costs. Imagine what the cost of the
buildout in the City of London area is verus a Buildout throughout the
UK. Hong Kong represents a small geographical area (and I wouldn't be
surprised if there was no coverage at all in some of the New
Territories areas. In most areas you get relatively high demand from
each BTS. You don't have rural Hong Kong the way you have Rural UK,
yet the customers expect coverage in Rural UK along the major rail and
road links. You spend a lot of money on BTS's that don't generate
much revenue or volume, but competitive pressure makes you build them,
in the end the customer has to pay for them somehow.

Hong Kong kind of mirrors Singapore for the same reason, small
geographic area, high density cells.

*snip*
> In addition, most US carriers also play a "subsidy" game- they entice
> new subscribers with "free" phones, and have to recoup the costs of
> those phones in the monthly charges/tarrifs. Do either British or HK
> carriers offer subsidized handsets?

UK operators subsidise their phones very heavily. And you get a free phone
upgrade every year if you extend your contract for another year. If you are
really curious look at www.carphonewarehouse.com or www.thelink.com.

Cheers
ES