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Analyzing prices for mobile phone usage, in his posting on July 2nd, Robert Nemeth asked an interesting question: “How could the same multinational telecom company cut prices by more than 50% in Austria, while keeping the same price in HU and SK and increasing prices in CZ?” Here is my explanation. This answer applies to the Czech Republic, but it’s also a warning for other countries.

The problem was described in the Commission’s 14^th implementation progress report, published in March this year. Among other benchmarks, it used an OECD basket of mobile usage and calculated the cost in various EU countries – in October 2007 and October 2008. The results are what Robert mentions: a drop of around 50% for Austria, of 10% for the EU average – but an increase of 24% for the Czech Republic.

This struck me too, so in March I looked more deeply into the issue and wrote an article about it (available here, but only in Czech). My findings can be summarized as follows:

• Half of the increase for the Czech Republic (12% out of 24%) can be attributed to variations of the exchange rate between the Czech crown and the Euro. The two currencies did change accordingly between October 2007 and 2008, when the benchmark was evaluated. But there is also a strong contra-argument: other comparisons in the same Commission’s report do not reflect the change in exchange rates at all. Maybe because different parts of the report were produced by different people using different methodologies.
• The other half of the increase (the remaining 12%) can be attributed mainly to the changes in call charging. Between 2007 and 2008 our mobile operators silently completed their switch to variants that maximize their revenues. Mainly to 60+60, which is now the standard for national mobile calls, and also for roaming.

Continue reading ‘How did mobile prices rise by 20% in the Czech Republic?’

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