Advocates for digital inclusion have shown that the primary reason that many homes don’t buy broadband is price – homes can’t afford the broadband from the big cable companies. The title of this blog is ‘$100 Broadband’ because we’re on a trajectory for that to become the normal price of broadband in just a few years.
Broadband is already expensive, and the cable companies are now in the mode of raising rates every year. Consider the prices already charged today by Comcast and Charter.
The Comcast basic ‘Performance’ broadband product is priced at $76 starting on January 1, an increase of $3. To go along with this, Comcast is now charging $14 per month for a modem, an increase of $1 per month. This means somebody who is not receiving special pricing or who is not in a bundle is now paying $90 per month for basic broadband. That rate doesn’t include the extra fees being levied on households that exceed the monthly 1.2 terabyte data cap. If Comcast continues to increase rates by $4 per year, then they’ll be at a $98 rate in 2023 and have a base rate of $102 in 2024.
Not all Comcast customers pay this full rate today, but many eventually will. New customers who have switched from DSL probably have special low introductory rates that revert to the list price after a one or two-year contract. A large percentage of Comcast customers pay less than the list price through bundling. Nobody with a bundle knows what they pay for broadband, but they quickly find out that they are expected to pay the list price if they dare to cut the cord and break the bundle.
Charter is not as expensive as Comcast. The company just raised the rates on December 1 for its basic broadband product by $5 to reach a rate of $74.99. In addition, Charter charges $5 for a modem, bringing the standalone price for broadband to $79.99. At a $5 annual rate increase, the company will achieve $100 rates in four years. In addition, Charter has petitioned the FCC to allow it to bill for data caps – something that will substantially increase the rates for homes that are likely working or that have students at home.
I am certain that most consumers don’t know the full price of broadband. My consulting firm does residential surveys and in a few recent surveys in Comcast markets, the average Comcast customer thinks broadband costs around $70. This speaks to the power of hidden fees where the average customer doesn’t associate the ridiculously high $14 modem rate as being a broadband charge. Comcast and the other big ISPs have mastered the art of confusing customers by billing practices that make it hard for customers to see the price of a given product.
Comcast also hides its rates from the general public. If you don’t believe me, search for Comcast rates on the web – all you’ll easily find are the rates being charged to customers that switch from DSL. You won’t find the company talking about its actual rates outside of small-print footnotes – and even the small print won’t mention the modem charge.
I predict that the cable companies are going to start quietly cutting back on special pricing and bundling discounts. Those discounts no longer make competitive sense in markets where the only other competitor is telco DSL. AT&T recently announced it will not be connecting new DSL customers, meaning that a cable company likely has no competition in markets where AT&T is the telco. But the cable companies have largely obliterated DSL in almost every market. It has to be dawning on cable companies that they have won the broadband war and they no longer have to give away deep discounts to get and keep customers. The cable companies are now de facto monopolies in most markets, and they will start acting like monopolies. And that means charging full price for services among other things.
Right now, the FCC has no authority over broadband prices since the agency wrote itself out of the broadband regulation business. But if the FCC never discourages cable companies from continually raising rates, we’re going to be looking at rates of $150 per household in a decade. Monopolies are going to keep raising rates until a regulator steps in and tells them to knock off the nonsense.