Box 3: The death of cellular monopolies in Western Europe

December 1998 was a landmark in the evolution of the mobile cellular industry in Western Europe. Switzerland became the last country in the region to adopt mobile cellular competition when the first new market entrant, diAx, commenced commercial service on 24 December 1998. The lack of competition had expressed itself most visibly through high tariffs, with Swiss mobile cellular prices among the steepest in the world. Tariff options were limited with no bundling of free minutes or handset price subsidies. DiAx introduced the concept of including free minutes with its tariffs. With a special promotion (that has proved to be ongoing), diAx effectively doubled the number of minutes that could be purchased for the same price. As a result, diAx’s tariff for 100 minutes of use is half that of Swisscom’s and among the lowest in Europe. Orange entered the market as a third competitor in June 1999; in response both Swisscom and diAx lowered their prices. Swisscom, which had only changed its mobile prices once between 1995 and July 1998, has made three reductions in less than a year (including the introduction of lower rates for mobile-to-mobile calls).

Despite historically high tariffs, Switzerland has achieved a fairly high mobile penetration rate (around a quarter of the population at the end of 1998, ranking it 19th in the world) although this is much lower than would be predicted by its relative wealth. With lower tariffs as a result of competition, demand will rise (diAx gained 300’000 subscribers in the space of just six months), and the Swiss penetration rate could eventually reach the level of the Nordic countries.