Sunday, September 25, 2011

Is the USA still a beacon of Capitalism and Free Markets?

Yesterday, we went shopping for cellphones.  As it turns out, my Baghdad Call Center phone is costing me more than I initially expected so, as there are no contracts involved, I'm going to find a better deal.  

First we went to the store named "Saturn", basically Austria's Best Buy.  The guy spoke English, as most do here, and gave us an overview of our options.  Basically, you can go contract or prepaid here.  There are a few main providers that Saturn offers.  T-Mobile has service here, and Christian- our sales associate- recommended them because they offer English-speaking customer service.  However, their contract plans were the most expensive at 15 Euros/month (about $23) and their prepaid plan offered talking minutes but SMS (text messages) at .29 cents per.  As the few people I interact with tend to text me, this would quickly add up.  

The cheapest provider by far was called "Bob."  They offered for 8.80 Euro ($12) per month 1000 minutes talking, 1000 texts per month plus 1 GB of Data.  Unfortunately, they have no store front locations so everything must be arranged online.  Additionally, if there is some problem that requires customer service, you have to call a phone number that charges you 2 Euro/minute and their customer service reps speak only German.  

This led us to a third provider, TeleRing, who has storefront locations and associates who speak English.  Rachel was able to get a package using the phone she brought over from the States.  First, however, she had to unlock it.  My friends Quincy and Karl have been tutoring me in cell phone mechanics.  Apparently, if you buy a phone from AT&T, it is "locked" so that it can only be used on AT&Ts network.  You need a special number to unlock it.  Rachel, however, had chatted with an ATT rep online and was able to get the unlock code number.  While we were in Saturn, the associate lent us a SIM card from a provider here, Rachel inserted it into her phone, when prompted she punched in the unlock code and... Voila, she can now use her phone with the networks here.  

Back to TeleRing, they offered her a deal since she did not need a phone.  13 Euros (about $19)/month with a contract (contracts here last for 2 years) for 1000 talking minutes, 1000 text messages, and 1 GB of Data.  We had to bring certain official docs:  Meldezettel (Residence Proof), Passport, Bankomat Card (ATM card), and our passports.  The processing took 10-15 minutes and now she has an Austrian phone number.  
I plan to go back on Monday and sign up for the same package!

And I've only outlined a few of the potential cellphone packages and providers.  Typically, as in the US, you get a better deal by signing a contract.  The providers who offered contracts were:  T-Mobile, A1, TeleRing, Orange, and 3.

However, should you choose a prepaid plan, there are dozens of options.  Bob, TeleRing, T-Mobile, Yoppi, Woww... At the Tabak shops (kind of like corner bodegas), they offer to recharge your phone.  I have counted at least a dozen prepaid providers. 

Of course, all these experiences make me reflect on how things work in the USA.  By the time we left the country, I was happy to sever ties with most major corporations there.  I hated being in a contract with ATT by the end, along with Comcast and the other providers of basic services.  If you're living in the USA, with no doubt, you have had long, protracted phone sessions with customer service over errors on your bill, your service, whatever.  Personally, I want to spend my free time with my friends, not nameless associates of some big multinational corporation. 

Also, as someone who follows finance news quite regularly, I often wondered about the number of competitors in an industry.  Cable TV= Comcast and Verizon; Satellite TV= Dish and DirectTV; Phone service= ATT, Verizon, and T-Mobile?

In almost every industry I can think of, there are two main competitors.  I'm not an Economist but Econ101 calls that an Oligarchy, one step from a Monopoly.  Historically, Oligarchical relationships have led to price fixing- a practice from which companies greatly profit, consumers not so much.  

Here in Vienna, an arguably Socialist country with massive TAX rates supporting a system of welfare providing public housing, health care for all, a pension system, they seem to have more options for cellphone users than in the States at a much lower cost.  Even on contract, the most people are paying is 20 Euros/mo. ($30).  As mentioned above, Rachel’s plan is for 1000 minutes/1000 texts/1 GB of data per month for around $19.  In the US, my bills were around $60/mo. to ATT providing me with enough minutes (thanks to Rollover mins.) but only 200 text messages per month and no Data transfer.  I know people who have Apple iPhones and want to use all the bells and whistles regularly pay $80 and up/month.   This begets the question:  why is the same service so much cheaper here? 
So this is a Socialist country, but in the cellphone industry, I might argue they are more capitalist than we are.  There are more competitors, meaning they have to continually innovate and offer better services at lower prices to keep their current subscribers and attract new ones.  

Coupling these observations with the insights I've obtained from reading about the financial crisis, I wonder if the USA is as Capitalist, the champion of the Free Markets, as most Americans think it is from politicians' rhetoric: 
Rhetoric vs. Deeds or "Actions speak louder than words"
As the US government funnels more and more "stimulus" (Tax payers' monies) to prop up a bloated financial system that was overleveraged by a factor of 10 to 1 or more, can we continue to say we are an exemplar of free markets?  
Arguably, a true free market economy's government would have stepped back and let the investment firms solve their own problems, so be it if some failed.  Failure has always been a metric of entrepreneurship.  People start businesses that then fail.  Learning from those mistakes, they start anew.  

What I fear is the widening gap between politicians' rhetoric, always pro-USA as an example of Capitalism/Free Market Economics, and the behind the scenes reality of massive government bailouts which teach one lesson:  go ahead and pursue wild investment schemes for, if you fail, we will be here to save you (on the Taxpayer's dime)!  

1 comment:

  1. You might want to consider using Google voice for text messaging, esp. with ppl in the States. It is totally free, I've been using it for sms myself.