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Regulation - What is it Good For?

Add Affordability to the Definition of Broadband

We spend an inordinate amount of time in the industry fixating on whether broadband connections meet certain speeds. There are rural communities all over the country asking residents to take speed tests right now hoping to prove that their broadband is inadequate. What I find sad is that every community that is doing this already knows the answer before they start gathering speed tests – they know their rural broadband is inadequate for the way that people want to use it.

I was glad recently to be reminded by a survey from the Leichtman Research Group survey that showed that 45% of homes have no idea what broadband speed they are supposed to be getting or are getting. I’ve seen the same thing in the numerous surveys we’ve done – people don’t fixate on Internet speeds and most just care if their home Internet works.

The surveys we coordinate for communities show one other issue that people care about, which is the price of broadband. In the hundreds of communities where we’ve done surveys, we almost always see that at least half of respondents think broadband is too expensive. In some communities, more than 90% of residents tell us that broadband is too expensive. When we ask people why they don’t have home broadband, the primary response in every survey is the cost of broadband.

I’ve had a half-baked idea floating around my brain for some time that might help address this problem. I’ve been wondering if prices shouldn’t be part of the definition of broadband.  There is a lot of discussion about setting a new definition of broadband speed at 100/20 Mbps. But I’ve learned in working with dozens of communities that there is a huge difference between a 100/20 Mbps connection that costs $55 and one that costs $85. As far as the public is concerned, these are not the same product – but we pretend that they are.

We know that as broadband prices increase, households are forced to drop broadband or downgrade to a slow-speed but cheaper alternative like DSL. One thing I’ve learned through surveys is that people in cities keep DSL because it costs less. People are not happy with the inferior performance of DSL, but they choose to spend $50 for a slow DSL connection because they can’t afford a 100/20 Mbps connection from Comcast or Charter.

Some of the new federal grants pay lip service to affordable rates, but none of these rules have any teeth. In fact, the giant BEAD grant legislation specifically prohibits the NTIA from suggesting broadband rates. (Any bet that this language came from the cable companies?) Some grants reward applicants for having a low-income broadband product, but they don’t insist that ISPs put any energy into marketing a low-income plan.

I don’t have specific metrics in mind, but there must be a way to weave affordability into the definition of broadband. Perhaps it’s something like the following. If 100/20 is the speed definition of broadband, then maybe connections under $60 would be considered as served, priced between $60 and $80 might be underserved, and prices over $80 would be considered as unserved. The price tiers I’ve chosen are arbitrary and open for debate, but the concept is that grants and subsidies ought to favor ISPs with affordable rates.

I know that real life is a lot more complex than my simple example. The big cable companies disguise broadband prices by hiding them in bundles. ISPs have jacked up the cost of the modem so that the basic broadband price sounds cheaper. In those markets lucky enough to have competition, the big ISPs offer special low rates for those willing to ask, while still billing the full rates to everybody else.

There is nothing that scares the big cable companies more than talking about regulating broadband prices. This was the main motivation for deregulating broadband at the FCC – cable companies don’t want regulators looking too closely at broadband prices. But prices matter at least as much as speeds, and for millions of homes, price is everything.

I know the big ISPs will say that the new Affordable Connectivity Program (ACP) will take care of this issue – but it doesn’t. Not all ISPs are going to take part in the program, and many of the ones that do will not market it to customers. Besides, how good a deal is it to get $30 off the basic Comcast broadband product that costs $90? The price after the ACP subsidy is still out of reach of many homes and is still more expensive than urban DSL – and many of the homes without broadband today can’t even afford DSL. Besides, there is also no guarantee that the ACP program won’t die in a few years when the funding runs dry.

I have no easy answer for this issue, but I hope this blog might plant a seed with somebody who can figure this out. I know that we have to stop ignoring the fact that prices matter. I’ve said for years that the big cable companies are on a path towards $100 broadband, and they are getting closer every year. Let’s stop pretending that $90 or $100 broadband is the same product as $50 or $60 broadband – even if the speeds are the same.

4 replies on “Add Affordability to the Definition of Broadband”

Here’s an ugly question :
What is the wholesale cost of the various modems (cable / DSL / fiber) in quantity (1K / 10K / etc.) ?

Maybe the truth-in-advertising legal cudgel could be used to force a change in wording from “modem rental” to something like “no fault replacement insurance premium & sneaky profit” which is a lot closer to the truth. I’ve got DSL (< 10Mb/sec.) so I have my share of bovine fecal matter coming to me each month in my bill. But I put up with it because it's more hassle to order modems from Tiger Direct or NewEgg and then get into compatability issues with my ISP.

P.S. I would be VERY surprised if the modems cost over twenty dollars (US$20) in quantity. When compared to the annual rental the word GOUGING should come to mind (it has for me based on my guesstimate)..

I think this is a major reason why home internet plans from the wireless carriers are becoming popular where they are available. The service is definitely substandard, especially if you are trying to watch a video during prime usage time, but the price is typically about half of what the cable company charges (give or take) and the advertised price is typically the price you pay (often there are no sneaky hidden fees).

I think the cell phone industry learned an important lesson from their “wireless telephone” experience – in the early days cell phone service was often terrible; it was hard to understand what was being said (to the point that some radio stations would refuse to put cell phone callers on the air) and the signal frequently dropped out, especially if the caller was in a moving vehicle. But the service took off when they moved away from per-minute or per-call pricing and went to either a huge bucket of monthly minutes, or “unlimited” service for a monthly price (and perhaps most important, no “long distance” charges on calls outside the caller’s local calling area). Those things helped drive acceptance by the masses.

Now, once again they are trying to market a service that would have little appeal if priced the same as cable, but will get traction precisely because it’s more affordable. People will put up with pauses in their videos during peak congestion periods in order to save $30 to $50 a month. And like the traditional wireline phone companies who probably initially thought that only people in business and well-heeled consumers would ever subscribe to cellular service, the cable companies simply aren’t getting the hint that their ever-increasing prices coupled with poor customer service have their customers eyeing the exits, just waiting for any viable alternative that will reduce the outrageous bills they’ve been receiving. And the thing is, the more people that sign up for wireless service, the better it may get over time, because the wireless industry can always add capacity to existing towers or build new ones, or even add micro-cells in congested areas. In my opinion this would probably happen a lot faster if there were more competition in the wireless industry, but that’s a whole other topic of debate.

85.00 is affordable and priced at value as long the service provided is as advertised, high QoS, has the capacity to provide all the potential services a typical consumer needs, and consumption of bandwidth is based on real world needs. “Best effort” is no longer acceptable. I find that a consumer, educated as to what a “high speed” ( high QoS) connection can provide ( wifi calling, streaming TV, supports many devices, etc) the value emerges. Compare 85.00 to water/sewer, gas, electric? The big cable companies are vulnerable because of QoS, competition solves this. 85 is the minimum if you want high QoS. For the low income consumers, subsidy is the answer, much like other utilities.

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