4G costs carriers less to deliver than 3G, so why does it cost more?

May 12, 2014

AT&T 4G LTE Logo

Did you know that when you upgrade your phone to your wireless providers’ 4G network, you are actually helping your wireless provider financially? Wireless providers’ 4G networks are cheaper to deliver for cellular carriers. So, why do you end up paying more for using the 4G network than on the slower 3G service?

ReadWrite did a fantastic story detailing the way that wireless providers have blatantly lied (with help from the International Telecommunications Union) about what a 4G phone actually gets you as the “real” definition of 4G are download speeds of 1 gigabit per second in a fixed location and 100 megabits per second while in motion.

LTE Open Signal QzProd

Although the story goes into great detail about the difference between 4G and 3G networks, the bottom line is that carriers are delivering significantly more speeds at half the cost/effort.

Foremost, the ability to slap “4G LTE” onto devices helps sell smartphones and make fun television commercials. Second, consumers want “4G,” even if they don’t actually know quite what that means. The carriers are delivering faster service with higher margins, and pocketing the rest of the money from users who think it’s a deal. After all, doesn’t it just make sense to you to pay as much or more for better service than you were getting? – ReadWrite.com

People in the United States pay considerably more for cellular plans with just 500MB of data than almost every other country.

Essentially, the U.S. carriers are able to gouge consumers even though the cost per bit on their networks is technically going down over time. The carriers will contend that they need to charge what they do because they investing in the infrastructure of the country. But once all the base stations are built, all the backhaul is optimized, will prices actually go down? – ReadWrite.com

smartphone average monthly bill cost Business Insider

The chances of consumers paying less for their services in the future are slim to none. Most, if not all, of the big players in the wireless industry have put millions into lobbying in Washington DC. Verizon and AT&T seem able to convince many that their manufactured spectrum crisis is about to pull down the economy unless they can merge with rivals companies.

So, while our wireless networks may not be the fastest or cheapest, they do make more money than any of their overseas counterparts. A report by analyst Chetan Sharma shows that in 2014 the United States will become the first nation to cross the $100 billion mark in annual mobile data revenues. The report also notes that 2013 was the first time data revenues exceeded voice revenues ($24.8 billion in the fourth quarter).

Comments

  • http://www.youtube.com/#/mrjlwilliams J. Williams

    Sad that it’s like that over here in the US. If I had a choice, I’d rather pay full cost every time I need a new phone with a monthly bill of $9 to $20 for LTE like overseas. Than to pay less for a phone, and have a HIGH monthly bill. Over here, we are doing both. Full COST, and HIGH bills. Crazy that this is allowed to go on.

    I however do have T-Mobile, which has the best price plans to match service right now. But if I decide to finance a phone, I am paying full cost in the end. So same difference…lose/lose pretty much.

  • Sean Harris

    the answer is greed. pretty simple question

  • DirkDigg1er

    Network infrastructure would be a good reason. These companies spend billions of dollars annually maintaining and upgrading sites.
    Another reason would be that companies are still operating 2g/3g/4g.

  • Victor Who

    I don’t understand what the problem is, here. If the Wireless Carriers are making more money with lower cost and charging high prices, then good for them.

    LOL…I said this about a year ago, when T-Mobile was starting their “uncarrier” campaign, that there will be absolutely no difference in price structure between a subsidized phone and a contract phone. That it’s actually better to buy a subsidized phone rather than buying a brand new one at cost. There is no difference. T-Mobile has lower rates than the other providers for one reason: trying to get your business. There is only one way get lower rates for 4G and that is to encourage competition. There simply needs to be some form of deregulation in the wireless industry for competition to occur in order for rates to go lower.

    And for heaven’s sake…people need to stop thinking that “subsidized” phones are bad.

    • cycle454

      while i agree that competition is good, im not sure that deregulation is the way to get there. though i dont know what the current regulations are. this needs to happen for the cable industry as well.

  • MasterMuffin

    You should really do an article of all the positive sides of US carriers (if there are any), I’m starting to hate them even though I live thousands of kilometers away from them :D

    • Mur

      Most of us here love T-Mobile! :D

      • MasterMuffin

        If they keep losing money, they won’t be able to keep the uncarrier thing for long!

        • joser116

          I think that uncarrier thing was a good investment. In the coming months, the will reap what they have sewn as those millions of new customers pay their bills and become happy, loyal, and longtime customers.

          • MasterMuffin

            Hopefully. They may have found a perfect balance between money and customer satisfaction!

          • Generalkidd

            I honestly don’t see the benefits of switching from Verizon to T-Mobile. There’s not too much of a difference between pricing and T-Mobile no longer does the 2-year contract where I pretty much get a free or low-priced high end phone every 2 years. I still don’t like the idea of monthly payments on my phone or full price upfront on top of the monthly bill.

        • Michael Samsara

          “Losing money” is a relative term within this context. Before T-Mobile shifted their strategy and business paradigm and became the Uncarrier, they were losing customers as though they were the carriers of the black plague and bleeding money on the road to ruin just like Sprint.

          Then, the earth moved under their feet as someone who is extremely prescient took the helm of their corporate ship and set it on a course into previously feared and uncharted waters. Necessity is the mother of invention.

          Now, they are acquiring new customers at a rate the others can’t help but envy – and naturally would want to put a stop to it before “things get even further out of hand” – and they have to actually work to compete.

          Is T-Mobile’s profitability being negatively impacted by doing things like paying off Early Termination Fees; so as to free the captives of indentured servitude the the other carriers have been holding hostage – somewhere to the tune of $112,000,000? Yep – but, hey, you gotta break a few eggs to make an omelet; and it wouldn’t be the first time the naysayers said something that couldn’t work did – very well, thank you very much.

          The seemingly profound ideas, the truly revolutionary concepts are not usually far out, wild and crazy things – but merely the intelligent application by someone with the brain power to see an opportunity well considered insights pertinent to a given situation in a way that results inan exponential, synergistic effect that is all out of proportion to what the individual elements – if taken alone – would be expected to add up to To put it simply. sms

          I think we would be extremely ingenuous of us to think that basically the current scenario/situation – temporary low profit levels – was not something that had already been gamed every which way it could before the mention of the word “Uncarrier” even appeared and that it was anticipated and measures to contend with it then put in place to await the moment of the arrival of their need.

          It is said that Napoleon had the power to conceive almost countless different scenarios as to how a battle might evolve and then interrelate all of them into a nebulous – usually fatal to his enemies – plan and set of contingencies that basically allowed him to – no matter which way his adversaries moved – to already there, ready to meet them and defeat them – and not just be there but already have in place several layers of plans JUST for that eventuality already designed and ready to be implemented on the spot.

          It is this almost unbelievable level of mind power, and the ability to command it effortlessly, that is what genius is about and why it is so admired by those who are supported by said genius’ efforts; and conversely and feared – by those whose ire and destain the genius has decided to focus his efforts upon stopping or simply to save having to swat them again later – eliminating completely with extreme prejudice – so that they cannot ever be a threat to him or his again.

          If I were Verizon, Sprint and AT&T, I would not be very happy right now because for the FIRST time they are actually facing a competitor who is applying the principles of Guerilla warfare to their market; a competitor who realizes that size wise they can’t go head to head on a battlefield and have any hope of surviving, but who also realizes that wisdom is the better part of valor and that time is on their side – so long as the opposition is slow and cumbersome but they can “Float like a butterfly and sting like a bee”.

          Quote thanks to Muhammad Ali.

          • MasterMuffin

            O_O I’ll read this later

      • sluflyer06

        Unfortunately with them kissing corporate discounts goodbye they’re no longer cheaper than AT&T which after 12 years I was about to switch to Tmobile from in December. Can’t say I’ve had anything but excellent service with AT&T with awesome LTE speeds of 25-40Mb

    • Shark Bait

      I totally agree , americans seem to be getting screwed by the carriers.
      I hate them too, but I don’t care I only pay ÂŁ5 a month!!

      • MasterMuffin

        How much data though and is it 3g or 4g or true 4G LTE?

        • Shark Bait

          Unlimited data, and its 3G, however the speeds I get in town are faster than those “4G” speeds in the graph

          • MasterMuffin

            :O That’s a great deal. I also have unlimited 3G, but it’s ~ÂŁ15 a month >:|

          • Shark Bait

            Better than the land of the free right???

          • Aadil

            Which network are you on?

          • Aadil

            Do you know that whats called 3g(H+) in UK is called 4G in US? Thats why you get better speeds than those in the graph.

          • chanman

            Nah, they’re only referring to LTE here. Android Authority knows better than that. It was just marketing from carriers when some didn’t have LTE yet, but now they all do (even if Sprint almost universally sucks)

          • Aadil

            Actually I read an article a while back (but dont remember where) which said that US carriers want to advertise 4G LTE Advanced as 5G and IEEE did not like how they had been misinforming people previously as well becuase according to ITU certification methods only 4G LTE Advanced can be called 4g.
            US carriers may have 4G LTE now but deceiving their users is definitely a norm.

          • Shark Bait

            T-Mobile and dredding the day I have to switch to EE and pay more ……

          • Aadil

            Heard EE have really poor customer service and now they have even joined up with 3 to further ruin the service.
            Now that I had a good look at the graphs,you are right with respect to speeds. I am on T-mobile as well though the service has gone real bad recently as now I dont receive good H+ reception in my home. Dont know how and why EE have ruined such good service from T-Mobile.

    • sy

      Sad to say but It all comes down to greed here in the US.

  • xyge

    to be honest 9$ is still quite a high estimate for india :P
    as a student my usage barely exceeds 6.5$(400 rs) a month with voice calls and data….and know of many more who make do with less than that.

  • ScottMTuggle

    Than to pay less for a phone, and have a HIGH monthly bill. Over here, we are doing both. Full COST, and HIGH bills http://num.to/8845-7247-2991

  • Joe Butler

    Nice article, thanks.

  • Benjamin

    https://www.singtelshop.com/mobile/plans.jsf
    https://www.m1.com.sg/personal/mobile/plans/databundledplans
    http://www.starhub.com/personal/mobile/postpaid-plans.html
    My friends out there, just sharing this: There are only 3 telcos here in Singapore. Not really sure about other country’s offers, in comparison are Singapore telcos charging more?

    • abazigal

      Coming from Singapore, I do feel that the Red, Orange and Green (Singtel, M1 and Starhub respectively) do offer fairly reasonable rates, compared to the stunts US Carriers like Verizon are trying to pull. Not saying they don’t have a lot to improve on, but they are not the worse, it seems.

      Using their corporate plan for civil servants, I get a 25% off my monthly phone bill (so I pay $45 instead of the usual $60). For an iPhone at least, the subsidy works out to about $30 a month, so in actual fact, I am paying just $15 a month for 2gb of data and voice/sms (at least, until that $10.70 tax for 4G kicks in). When I sold my 4s last year, the money I got from it helped pay off a substantial chunk of my new 5s, so it was almost free in a sense. Bear in mind, this is all Singapore dollars, so you need to divide everything by 1.3 to convert to US dollars.

      The only downside (which seems to be a perennial issue with any oligopoly everywhere) is unequal coverage, crap customer service (Singtel’s staff is polite, but forget about getting anything done; I have been complaining about zero reception at my workplace for years, to no effect), and network overcrowding (forget about using 3g/4g at peak hours at crowded places like train stations). So basically, they are more apathetic to our plights than plain malicious. :P

      Just my general observations.

  • namesib

    Wow, Americans are getting ripped off like crazy. $93 a month?!

  • RH

    Well, when the carriers in the USA, see people standing in line for WEEKS, just to get “the new iphone”, they laugh all the way to the bank, knowing people are financially stupid. I use straight talk, get to use at&t’s service, same voice quality, same network speed (my note 1 international doesn’t have LTE), I rarely use 2 gig a month, mostly voice, email, and it only costs me 50 bucks a month.

  • TJ

    i have Tmobile/Metropcs and i love them all i pay is 60.00 and iget 4GLTE and it cost lot less then other people do.

  • Bambang Hermanto

    I pay $5 for a year of data with a total quota of 5.5GB. Bandwidth is lousy, but can’t complain.

  • Mali

    I Can honestly say.. With unlimted everything with 4G LTE.. And on a phone installment plan.. I am paying. Exactly $95 a month.. But when that’s paid.. I’ll be down to $65 a month. It’s for sure a two fold.. I couldn’t just walk into the plan.. It was a required change in the service if I wanted to upgrade.. Basically.. Making me pay full price of phone.. No Contract.. Lower my monthly bill and give me unlimted everything.. But the twist was.. Well you gotta pay us almost 800 for the phone in monthly payments to get the deal… Granted I can pay what I want over the installment plan. But Ya it’s a two fold.. I also am glad I don’t have a contract.. Also with the jump plan.. I can trade in my phone for credit towards the upgraded model.. So my note III in September when the 4 is out.. I can get it with hopefully a breeze.. I’m sure they will try and jip me hella on the trade.. But I guess I will wait and see…. But to talk on the article.. I’d rather pay more for a phone then pay on a service.. Before I couldn’t get unlimted everything.. As to where now I can.

  • duy anh

    In Vietnam, i use 3G for about 2.5 bucks a month, and free wifi is everywhere, i.e supermarket, coffee store, bar, … . And speed is, well, not so bad. I play clash of clans mostly.

  • Oli72

    We live n capitalism here USA. That’s the bottom line.