Sunday, June 26, 2022 8:20 pm

Why Are Phone Plans So Expensive In The US? (UPDATED- 2022)

why are phone plans so expensive in the us

A mobile bill is a recurring cost that impacts your budget every month. If you live in the United States, where phone contracts are costly, you will often feel the pinch. 

So why are phone plans so expensive in the US? 

In short: 

Firstly, only a few telecom companies exist, so competition is not severe. 

Secondly, as the nation is vast, infrastructure costs are substantial. 

Finally, taxes on wireless services are surging up every year, and these are passed on to the end consumer.

It is possible to drive down your mobile bill if you carry out in-depth research before settling on a plan from any carrier. 

However do keep in mind that the cheaper the package you pick, the fewer the features you’ll get! 

To really reduce costs, you can also look into cutting your phone insurance, conserving data usage, and choosing auto-payment options where available to save even more dough. 

Whatever you decide to go with, know that not paying your phone bill isn’t a good idea in the long run. 

If you don’t pay your mobile bills for an extended period it can impact your credit score, which is essential for a financially-secured future.

What Is The Average Cell Phone Bill In The US?

What Is The Average Cell Phone Bill In The US? 

While the numbers vary, most reports say that an average American citizen pays anywhere between $90-$110 a month on their phone bill. 

According to J.D.Power, a customer insights company, an average American spends $127.37 on his mobile bill every month!

Even the most basic and cost-effective of plans cost about $50 a month. 

However, such plans usually have heavy constraints on the number of minutes you can make for a voice call (though texting is usually free). Also, in many of these minimally priced plans, internet access is not included.

On the plus side, most telecom firms do not charge for calls if they are within the same carrier. 

Remember that most of the basic plans that companies advertise will be per phone line. 

You may need about two to four lines for your family, which will cost almost two to three times the advertised cost. 

For instance, Verizon’s Play More plan will cost $80 a month for one line. However it will cost $180 for four lines, which is what a typical family requires.

Also Read:- Should I Get A New Phone Or Replace The Battery? (Best Advice- 2022)

Multiple Layers Of The Phone Bill

It isn’t easy to precisely pinpoint the monthly cost of a cell phone plan. 

This is because the final bill has several layers, such as the regular monthly fee, the charge made upfront, the taxes paid, and the booster packs when we exceed limits. 

The multitude of various plans with hidden costs prevents us from estimating the average amount that Americans spend on mobile bills.

Your average monthly bill will also depend on the internet usage that you are consuming (unless you’re on an unlimited data plan). 

In the past decade, there has been a dramatic increase in the amount of people using the internet on their smartphones. As a result, the number of hours of data usage also spiked significantly.

Data traffic continues to surge with the proliferation of on-demand streaming platforms. 

Telecom companies made sure to take advantage of the situation and created new avenues to earn more revenue in the data business.

Why Do Cell Phone Companies Charge So Much? 

Why Do Cell Phone Companies Charge So Much? 

In short, telecom companies like AT&T and Verizon have to pay a truckload of money to buy “spectrum” from the government. 

Spectrum is a band of radio frequencies owned by the government and is necessary for mobile phone communication. 

Due to heavy competition, the firms spend a lot of money upfront buying this resource. 

They, in turn, pass this on into the mobile bills of their customers to compensate for the spectrum charges.

Apart from this, phone firms spend a lot of money building the telecom infrastructure needed for mobile communication. 

The cell phone towers, radios, antennas, and fiber optic cables which carry the signals are the most basic support systems required.

As a company expands their coverage and customer base, they also need to increase the number of towers in use. 

Similarly, as technology improves, companies need to upgrade their equipment to support the new system.

Moreover, this important equipment needs regular maintenance, requiring a skilled labor force. All these expenses become part of your monthly bill!

Also Read:- The Pros And Cons Of Changing Your Phone Number In 2022

Tax Adds To The Burden

Your bloated phone bill is not just the result of evil telecom companies charging you an extortionate price.

According to the Tax Foundation, a think tank that publishes data on US tax policies, the taxes collected on your wireless mobile bill have increased by 50%(!) over the past few years.

The government’s taxes, fees, and surcharges currently make up a whopping 23% of your total phone bill!

Additionally, taxes vary widely within the US as the local and State governments collect them separately. 

For example, in Illinois, wireless taxes range between 32% to 34%- the highest in the country.

And if it wasn’t not for the Internet Tax Freedom Act, which prevents taxes on data access, your mobile bill would be even higher!

Usually, competition in an industry drives down the prices. 

Unfortunately in the United States, there are only three major telecom players- Verizon, T-Mobile, and AT&T. As such, the customers only get to choose among the very limited choices on offer.

How Can I Pay Less For My Phone Bill? 

How Can I Pay Less For My Phone Bill? 

If you want to keep a scrutinous eye on your monthly phone bill, choosing a prepaid option is the way to go. 

Having a ceiling on the amount you can spend every month will serve as a constant safeguard. 

Of course on the flip side of this, you may run out of balance just before making an important call!

It’s very important also to stay alert about your data usage limits. 

Use Wi-Fi whenever it is available. For instance, if you go to a mall or a park that offers free Wi-Fi, switch to that network. 

Penalties for going over the data usage limit are severe. Many apps consume your data even when you are not using them!

Therefore, it’s a good idea to make use of the data usage controls option in your phone settings and revoke permissions accordingly.

Another thing that can help reduce your overall mobile expenditure is to reconsider paying insurance for your phone. 

Analyze your monthly phone bill and calculate the amount paid for insurance in the past year. If that exceeds the cost of a new phone, it’s time to cancel the insurance payment!

Finally, make sure you are choosing the auto-pay option if that’s available. 

Most carriers will give a small discount if you allow them to debit the month’s bill from your account automatically.

Also Read:- Why Do Uninstalled Apps Keep Coming Back On My Android Phone? (2 Strange Reasons!)

Multiple Lines, International Calls, And More

If your family members are all willing to use the same telecom company, it will save you money overall. 

Instead of opting for only one line, you can typically save on costs if you decide to go for package deals that include up to (or even more than) four numbers. 

For example, AT&T’s unlimited starter plan costs $65 for one line with autopay, whereas the same pack costs $140 for four lines. Similarly, Verizon’s unlimited package costs $70 for one line and $140 for four lines.

Some carriers will charge a lot for international calls.

Therefore, before returning a call to someone that’s not on your contact list, make sure that you are not dialing a foreign number. 

Top tip: Try calling new numbers using Whatsapp or other internet calling applications to avoid international charges.

Finally, before locking in any plan, carry out in-depth research! Reach out to your friends and read what other people are saying on online forums. 

As the initial cost of signing up for a connection is not usually prohibitive, many customers go on a whim and sign up with a certain carrier only to regret their decision later on.

Remember that your phone bill is a recurring expense and may well be the most expensive product in your household by the end of the decade!

What Happens If You Stop Paying For Your Phone Plan?

What Happens If You Stop Paying For Your Phone Plan?

The first consequence of forgoing payment for your phone bill is that your telecom service provider will remove your ability to receive or make phone calls! 

However, they will usually try to inform you about the suspension of service before doing so. 

If you pay again at this stage they will resume your services immediately, though your next bill will likely have a reconnection fee attached to it.

If you do not pay your phone bill for more than 90 days, it will impact your credit score. 

A reduced credit rating can negatively impact your life in various ways. For instance, banks may refuse to lend if you have a poor credit score, and potential employers may turn you down. 

Additionally, utility services will sometimes check for your creditworthiness before providing a new connection.

If a bill goes unpaid for too long, the most drastic measure that telecom firms can employ is to transfer your debt to collection agencies. 

These agencies are notorious in their approach; they will mail, call, visit your place and relentlessly pursue until you pay the bill. To add insult to injury, you’re likely to pay way more than the initial debt when they finally get to you!

How To Escape The Harassment

Most carriers do assess your payment history if you miss a deadline. 

If you had regularly paid your bills prior to this missed payment, the consequences are likely to be much less harsh. 

For instance, Verizon allows its regular users to cancel the payment arrangement or start one afresh if they miss a deadline. Their Android app will automatically inform the user whether they qualify for this lenience or not.

Some carriers also allow you to voluntarily suspend service for some months if you cannot pay. 

For instance, Verizon offered not to suspend services if you couldn’t pay due to reasons related to the recent pandemic. Again, you can use their app to access this service. 

Thus, by taking advantage of these leniencies and by using apps (such as Hangouts or Facebook Messenger) that allow calling and messaging over the internet, you can avoid bills for quite a few months! 

However, this still remains just a temporary measure as the companies will inevitably activate your connection again after a few months- after which you would need to start paying again.

Why Are Phone Plans Cheap In Europe?

Why Are Phone Plans Cheap In Europe?

According to data collected by Cable.co.uk, European countries feature on top of the list of nations with affordable mobile data. 

For instance, Italy has the fourth cheapest data plan globally, with 1 GB of data costing only an average of $0.27! (What?!!)

In addition, several other European countries feature in the top 50 nations on the list: Moldova (7th cheapest), France (11th), San Marino (14th), Poland (26th), Denmark (37th). 

In the list of 230 countries, the US features in a paltry 154th position.

The primary reason behind cheaper monthly mobile bills in Europe is competition. 

There are many telecom firms to choose from, and there is no monopoly or a duopoly in the telecom industry

Thus, the companies have to undercut their competitors to retain customers, which naturally leads to lower prices.

Companies in European countries also spend a relatively smaller amount on infrastructure services as their coverage area is less. 

In contrast, a telecom company in the US has to make sure that its customer’s phone rings across the country’s length and breadth, so they spend billions in setting up the required infrastructure. 

Moreover, as European countries are smaller, the firms’ capital investment is also relatively minor. As the difference in capital spending gets reflected in our phone bill, this plays a significant factor in lower prices as well.

According to a New York Times article, Europeans’ mobile bills are approximately two-thirds less than US customers. 

However, the reduced cost is not all good news. The report also states that companies in Europe are scaling back on investments in new technologies due to decreased revenue.

This type of approach will ultimately impact the user experience in Europe, as other regions of the world continually invest in future-ready technology such as 5G.

Final Thoughts

According to the Pew Research center, only 3% of the US population does not have a cell phone. 

As such, costly mobile bills are a pan-nation problem that impacts every American citizen. 

Unfortunately, higher prices are here to stay for the foreseeable future because the newer network providers are still finding their feet and are not yet ready to challenge the incumbent giants.

If you want to take the economical route, buy the cheapest option available first!

If you can survive about three months without significant disruptions in your life, then you don’t really have the need to upgrade.

Once you do enter into a contract with a telecom company, try your very best not to break it as much as possible. 

Doing so will weaken your credit score, and you will run into all sorts of trouble. Even worse, the companies may transfer your debt to collection agencies that resort to harassing you until you pay.

Instead, talk to the carrier company that you’re with and see if there’s an alternative solution that you can work out with them.

Frequently they’ll have the ability to be flexible with you- especially if you’ve been a loyal customer with a good track record of payments for a number of years. 

To save costs in the meantime: Share your phone plan with family members, keep an eye on data usage, and stay away from international calling!

The latest smartphone technology got you feeling amazed? Click HERE for a deep dive on the State of the Smartphone in 2022 (and beyond!)

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