One problem in the states is that Telcos are often required to charge the same amount for a service within a state (and sometimes a region). This means they can't give lower cost service within a city (where infrastructure charges are less). They have to develop a cost model for their entire network (including rural areas) and come up with a uniform charge. Basically, the urban customers subsidize rural connectivity. This is offset a little by the "universal services fund" which is a defacto tax collected on every phone bill in America that helps subsidize connectivity to schools and rural areas.
This is an example where the government (while trying to do a good thing and keep costs low in rural areas) in affect forces prices in cities higher than they could be.
Slashdot Mirror
One problem in the states is that Telcos are often required to charge the same amount for a service within a state (and sometimes a region). This means they can't give lower cost service within a city (where infrastructure charges are less). They have to develop a cost model for their entire network (including rural areas) and come up with a uniform charge. Basically, the urban customers subsidize rural connectivity. This is offset a little by the "universal services fund" which is a defacto tax collected on every phone bill in America that helps subsidize connectivity to schools and rural areas.
This is an example where the government (while trying to do a good thing and keep costs low in rural areas) in affect forces prices in cities higher than they could be.