From Iceland — The Telephone Consumer’s Guerrilla Handbook

The Telephone Consumer’s Guerrilla Handbook

Published August 24, 2007

The Telephone Consumer’s Guerrilla Handbook

Though a single telephone call costs just a few crowns, most people I know here in Iceland have monthly phone and Internet bills of five to ten thousand ISK. Even this may not seem like much, but multiplied by twelve, it becomes like buying a luxury washing machine or refrigerator every year. Indeed, a new report reveals that Icelandic households spend more on phone and Internet service than in any other OECD country.

With so much money at stake, take a few minutes to rethink whether you’re getting the best deal. In this second of two articles about consumer phone costs in Iceland, I focus on high-speed Internet service and on landline calls abroad.

Internet Service
Four companies now offer broadband Internet access (called ADSL) in Iceland: Síminn, Vodafone, Hive and Sko.

Service plans vary depending on the speed of the connection (in Mbps), the amount of permitted foreign downloading per month (in GB), and the extras that are included, such as e-mail accounts and fixed IP addresses. The foreign download amount is probably the most crucial figure, particularly if you need to transfer large files.

Most companies’ cheapest Internet plan is in the 4000-ISK-per-month range. At this level, Síminn offers 1 GB per month at 4 Mbps. Vodafone offers 2 GB per month at 6 Mbps. Hive offers 4 GB per month at 8 Mbps. Sko offers unlimited downloading at 4 Mbps.

The only company to offer a lower-priced package is Sko: unlimited data transfer at ½ Mbps for 2490 ISK/month. This is a very basic package, without various extras. But many people don’t need those extras. (It’s unwise to have an e-mail address through your Internet provider, as it locks you into that provider. A fixed IP address is of use to advanced web users only.)

Don’t get overly focused on connection speeds. They are only theoretical maximums, and you probably don’t need all those megabytes per second. My Hive connection, advertised at 8 Mbps, tested out at roughly 860–1300 Kbps on download and 90–400 Kbps on upload to Icelandic and American servers (1 Mbps = 1000 Kbps). This is more than fast enough for me. Spend your money on extra foreign downloading instead – but not more than you need. I’m online a lot, but rarely go over 1 GB a month and never over two.

Make sure to ask if the advertised price includes all necessary services. For example, Hive adds a billing fee of 199–245 ISK per month. Sko has no billing fee if you pay by credit card, but charges 250 ISK if you want to pay through your bank. Also, you usually get a discount if you have more than one service (phone, Internet, or GSM) through the same company. Cheaper Calls Abroad
One thing has not changed since I last reported on Icelandic phone service in 2005: Síminn and Vodafone are still charging ridiculously high, and disappointingly similar, rates for calls abroad from your landline. Through either company, a call to a British landline costs 19,9 ISK per minute, and to the Czech Republic 39 ISK per minute – plus a connection fee of either 4,75 or 4,9 ISK per call.

My parents, who live in the United States, pay roughly 3,5 ISK and 7 ISK per minute to call the same two countries. I see no justification for the degree to which Icelandic rates exceed the American ones. Both Síminn and Vodafone do offer a calling plan which discounts these rates a little, but you have to sign up for it specially, you must dial a special code before every call, and the discount is nothing to write home about.

More and more people have switched to making international calls over the Internet. Skype, a so-called voice-over-Internet-protocol or VOIP program, is the simplest solution. You download Skype for free from com, install it on your computer, and plug in a headset or USB phone. Calls to other Skype users are free (just get your friends and family to download the program too).

Calls to landlines worldwide are very cheap through Skype – currently about 1,5 ISK per minute to Britain or the Czech Republic, plus 3,5 ISK per call. You pay with “SkypeOut” credit that you purchase in advance. In effect, with Skype you are leveraging the money that you pay for your Internet connection to get phone calls either for free, or at a tiny extra cost if they have to be routed over a legacy phone network. Unlike movies, VOIP calls take up very little bandwidth, so there’s little worry about going over your Internet traffic limit.

Amazingly, even domestic calls within Iceland, of 3 minutes or less, are cheaper through Skype (which charges 2,25 ISK per minute plus 3,5 ISK per call) than through Síminn (which charges 1,85 ISK per minute plus 4,95 ISK per call).

There’s no doubt that the quality of Skype calls is worse than that of old-style land-line calls through operators like Síminn. But Síminn calls are not sufficiently clearer than Skype to justify Síminn’s high rates. In my experience, Skype calls that are free – those to another Skype user – are those with the best quality. Faxes don’t work well over VOIP, but that doesn’t matter much now that people scan documents to PDF and e-mail them. There are also other VOIP options besides Skype.

Alternatives to Skype
Those who don’t like the idea of talking through the computer can still save on international calls by transferring their home telephone service to Hive, particularly the flavour that Hive calls Heimasími Max. On this plan, a call to Britain costs 4,9 ISK per minute and to the Czech Republic 14,9 ISK per minute. These rates are acceptable, though they are still way higher than Skype. But the good thing about this plan is that it includes free calls to all Icelandic land lines. Heimasími Max costs 1390 ISK a month, or 990 ISK if you already have Hive internet service. This is less than Síminn’s basic subscription, which costs 1445 ISK per month, comes with high international rates, and doesn’t include any free calls.

Now for the down side to Heimasími Max. I was all ready to sign up. But Hive’s computer system can’t (yet) deal with the fact that we have two telephone numbers which both ring on the same line. Also, I suspect that Hive’s sound quality is inferior to Síminn’s, though superior to Skype’s. Like Síminn and Vodafone, Hive’s per-minute charges are an example of “vanity pricing” (all the numbers end in 4,9), which suggests that they could trim their margins and still make money.

For those without a fast Internet connection, the old strategy of “callback” calls – which route all your international phone calls through the USA at American prices – is still worth considering. is one callback company with low rates for Icelandic customers. Prepaid telephone cards, like Atlassími (now owned by Hive) and Heimsfrelsi, also come with lower rates than Síminn or Vodafone.

What Keeps Land-line Rates so High?
How do Síminn and Vodafone get customers to pay such inflated prices? Here’s one theory. Although there is, technically speaking, competition in the Icelandic home telephone market, a stable group of users are unable to take advantage of it in practice. If you are elderly, or not technically savvy, it is really hard to compare complicated telephone service plans. Síminn and Vodafone know that these customers will probably never switch, and that many of them still think of calls abroad as a luxury. So they let them continue paying high “regular” rates.

Síminn and Vodafone do have an incentive to offer special “discounts” (which are not really special) to attract or keep slightly more sceptical customers. But as a recent European Commission press release put it, these lower-priced offers “tend to target certain groups only while general consumers remain unaware.” And even if those “general consumers” only make one overpriced phone call a year – well, it’s a little like if every one of China’s billion residents would eat just one frozen Icelandic shrimp.

Another factor is the large number of corporate and institutional contracts that Síminn and Vodafone sign. Many Icelandic companies cover their employees’ mobile phone charges, which means that the end-customers aren’t paying, and thus lack an incentive to demand value for money. My sense is that many Icelandic firms and government offices would do well to re-evaluate their telephone purchasing.

I know of one Icelandic state institution where desk phones are blocked from calling overseas, including such exotic countries as Norway and Canada. Even the staff who regularly deal with international matters have to order calls through the “bella símamær” at the switchboard. How 1950s! Ironically, these same employees can make unlimited calls to Icelandic mobile numbers, whose termination cost is perhaps five times higher than that of a call to a Canadian land line. Institutions like this should look into opening a Skype business account.

But here’s my advice for your home phone plan. Be sceptical. Read the small print. Choose providers with low, simple pricing. Look at your usage on-line. Don’t buy what you don’t need. And every year, spend at least as much time re-evaluating your phone and Internet service as you’d spend looking for your next refrigerator.

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