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PPI | Trade Fact of the Week | October 4, 2006
The Average Cost of an International Phone Call Has Fallen 90 Percent Since 1980


Editor's Notes: The PPI "Trade Fact of the Week" is a weekly email newsletter published by PPI's Trade & Global Markets Project. To sign up for a free subscription, click here. (Just make sure to check the box next to "Trade & Global Markets.")

Original links are included though some may have expired.


The Numbers:

Year No. of Int'l calls
from the U.S.
Total minutes
of calls
Avg. cost
per minute
1970 n/a 0.1 billion $2.43 per minute
1980 0.2 billion 1.6 billion $1.34 per minute
1990 1.9 billion 8.0 billion $1.00 per minute
2000 5.7 billion 30.1 billion $0.53 per minute
2004 10.9 billion 63.6 billion $0.14 per minute

What They Mean:

In 1980, when wires were copper and phones came with dials, international calls, on average, cost $1.34 per minute (dividing phone company international receipts by minutes on international lines). The era's 230 million Americans made 200 million international calls and spent 1.6 billion minutes on international telephone calls.

By 2004, with wires made of glass (or satellite beams) and phones turning into computers and fashion accessories, the cost of an international call had dropped to 14 cents per minute. An American population approaching 300 million made nearly 11 billion overseas calls and spent nearly 64 billion minutes talking with overseas friends, relatives and business partners. ("Overseas" in the general sense of "abroad" -- about a quarter of the calls went to Canada and Mexico; the United Kingdom, Germany, and India rounded out the top five calling destinations.)

The explanation for the price collapse is principally technological. Call prices drifted down through the 1980s and early 1990s; then, in the late 1990s,deployment of a million miles of submarine fiber-optic cable, plus the launch of dozens of new communications satellites, and most recently early experiments with Internet-based calls, the drift turned into a plunge. Business competition, though probably secondary, is also important: By the mid-1990s, international services had risen to 20 percent of carrier earning, and in 2004, 72 carriers sold international telecom services from the United States.

The future economic effects, in general terms, will presumably combine lower phone bills with more telephone time, lower-cost operation of multinational businesses, and rapid growth in services exports. Import competition gets most attention at the moment, but a wire always runs in both directions. American statistics do not yet say much about use of telecom systems to export services, but overall data show that U.S. commercial service exports (i.e. total services exports minus travel and transport revenue) rose from $144 billion to about $216 billion between 2000 and 2005, and should approach $240 billion this year. Commercial services imports also rose, but only from $71 billion to $123 billion; overall the American services trade surplus, offshoring or not, continues to grow.

Further Reading:

The Federal Communications Commissions Telephone Trends 2005 report (see p. 40 for summaries of calls, minutes, and average prices since 1980):
http://www.fcc.gov/Bureaus/Common_Carrier/
Reports/FCC-State_Link/IAD/trend605.pdf

More from the FCC -- page 18 of "Trends" report takes you back to 1964, though without the number of calls:
http://www.fcc.gov/ib/sand/mniab/traffic/
files/ITRND01.pdf

And:
http://www.fcc.gov/ib/sand/mniab/traffic/

The price of a call depends on the place, time and carrier. The OECD says that in 2002 the standard calling rates per minute at peak times to the United Kingdom were $2.05, and $2.52 for France; a peak call to New Zealand could cost as much as $3.65; a call to Mexico was only $1.86. The least expensive rates dropped at the time to 45 cents per minute for the United Kingdom, and 14 cents for France, New Zealand, and Mexico:
http://www.oecd.org/dataoecd/52/9/23901905.pdf

A path-breaking 1980 telephone:
http://www.telefonmuseet.dk/telefonmuseet/
webimages/b0034.jpg
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