Sometimes the big ISPs do something that leaves me shaking my head in disbelief. The latest is an absurd report from USTelecom that supposedly demonstrates that the price of broadband has been dropping while almost every other commodity that we buy has gotten more expensive. The report doesn’t just suggest that broadband got slightly less expensive, but that “the price of the most popular tier of broadband service declines by 7.5%” last year.
It’s clear why this report was written. It wasn’t written for the general public because every consumer knows that the price of broadband has been increasing. This article was written to provide cover to politicians who will try to protect the big ISPs from re-regulation by the new FCC. It provides a false talking point that the big ISPs are already taking care of us and that regulators shouldn’t meddle with a market that is working so well.
Let’s start with a few demonstrable facts. Comcast and Charter together serve more than 50% of the broadband customers in the country, and their broadband prices have risen significantly in the last few years. Just this past January, Comcast raised the price of its most popular product Performance Plus Internet by $3 to reach $76. Additionally, the Comcast WiFi modem went from $13 to $14. Comcast also raised the broadband product by $3 in early 2019. Charter raised the rate for basic broadband by $5 in each of the last two Decembers.
Think just for a second how preposterous it is to say that rates for the industry dropped 7% in 2020 when half of the broadband market instead saw rate increases. For this article to be true implies that all of the other big ISPs had significant rate cuts to offset the Comcast and Charter rate increases. Raise your hand if Verizon, AT&T, Cox, Altice, or Mediacom slashed your broadband bill during the last two years.
If this was a legitimate article, it would be accompanied by tables of data so that people could verify the assertions. Instead, the language that describes how the rates decreases were calculated is so fuzzy so that it’s impossible to know what the author is comparing from year to year. USTelecom will never publish the raw data because I’m sure it would show that the author is playing a sleight of hand of some sort.
I also have to wonder how anybody can get accurate pricing data for the big ISPs. They all offer different prices to different customers. The cable companies still offer exceedingly low promotional prices that are given to new customers that migrate from DSL – but these prices disappear in a year or two and go back to list prices. Many of the big ISPs grandfather some customers on older speeds and prices – these are prices and products that are stuck out of time like an ancient bug stuck in amber. Most confusingly, a large percentage of broadband customers of the big cable companies buy a bundle of services, and customers have no idea what they pay for each component of the bundle. The only way to find out what you are being charged for broadband is to drop cable TV to find out how much you’ll pay for what’s left.
There is one class of customers that have seen a price decrease – those buying the fastest products. When Comcast first introduced the gigabit broadband product it was priced at $121 and was only available in a few markets. Over time as that became a real product, the company lowered the price to entice people to upgrade. But you can’t say that there has been deflation in the price of fast broadband – instead, the early pricing was set to dissuade people from ordering what Comcast couldn’t deliver.
The report shows a decrease in the cost paid per megabit of data, and I am sure that has dropped over time. Over the past decade the cable companies have unilaterally increased speeds on basic broadband from 30 Mbps, to 60 Mbps, to 100 Mbps, and now to as high as 200 Mbps. This was done without big price increases – so the price per megabit would drop as speeds are increased. But we can’t believe the percentage decrease cited in the article if the calculation is based on the same numbers used to show that overall prices are dropping.
Finally, the report goes on to assert that American broadband is less expensive than broadband in Europe, which again is completely absurd. There are numerous reports that show that broadband prices in Europe and the far east are as much as half the cost of US broadband, due to both competitive market pressures and also strong regulation of broadband.
I don’t think there is any consumer in the US who thinks that prices are dropping at big ISPs. There are markets where new competitors appear and prices get lowered a bit, but this unfortunately only happens in a small percentage of the overall market. I understand that the real purpose of this report is to allow the big ISPs to provide talking points for the politicians they fund, but even those politicians know that the monthly checks they write to ISPs for broadband have gotten larger every year – the proof is in their checkbook.