I have always assumed that the outrageous prices for global roaming on telcos is the problem of double marginalisation. Each of the monopolists takes their cut and here there’s your domestic carrier and then the others in the other market. Perhaps there are some other carriers along the way. But this doesn’t seem to me to explain more than a tiny bit of the extraordinary prices. And there are some very big telcos in the world with investments in many countries. They could span countries and overcome double-marginalisation.
It’s perhaps plausible that businesspeople pay the outrageous charges. Thus for instance one finds oneself paying a dollar or so per megabyte which is a markup of the cost you can get locally of ten thousand per cent or so. And tourists just don’t pay the prices – they get local SIMs. But in any event, it’s not a monopoly. So even if this is the profit maximising price, it should be easily undercut.
It’s not so bad in the US – you toss T-Mobile $60 odd and your right for a month with a gig or so of downloads and unlimited calls – including to a country of your choice for an additional $5 or so. But Europe? Well it’s more balkanised than banking it seems. And there’s a good reason for banking to have trouble as it’s all domestically regulated. Telecommunications is (I presume) also domestically regulated in Europe, but there’s no need to regulate it to so constrain the law of one price. Is there really regulation saying that Lebara in the UK can’t give its Oz customers access to Lebara’s network in the UK?
And there are plenty of merchants trying to arbitrage the market. So much so that Woolies is into it. But their prices hardly tempt one to let them do the arbitraging. They charge 45 cents a megabyte of data which makes 2 Gigs cost $900. Lebara will sell it to you for £12. Woolworths offering is pretty standard. After an hour of looking I found some that charged around 35 cents per megabyte.
Seriously does anyone know why this problem is so bad?