Is Your Broadband Getting Cheaper?

Since the national dialog has suddenly fixated on inflation, the big ISPs decided to jump into the discussion by claiming that broadband prices are falling. You need to watch this short video from USTelecom to see the ridiculousness of their claim.

The big ISP industry has been trotting out this untruth for the last several years. This is the latest permutation of the claim that broadband prices are falling. What underlies this claim is that the cost per megabit of speed has been falling as ISPs increase speeds. By definition, when an ISP upgrades a customer from 100 Mbps to 200 Mbps, the cost per megabit drops. While the cable companies have been unilaterally increasing speeds, consumers have not seen the check they write each month drop. There is no consumer who wouldn’t think that “broadband prices are falling” to mean that monthly bills are dropping.

Just the opposite is true for most ISPs. The cable companies have been raising rates steadily for the past five years. Charter has raised broadband prices by $5 per month in each of the past three years. Those rate increases were far higher than the rate of inflation in each of the three years. Comcast seems to have slowed a bit on rate increases, but this is after many years of rate increases that have pushed the cost of basic broadband to around $90.

This assertion doesn’t even consider the quiet rate increases. Consider ISPs like Comcast that bill for overages on data caps. As recently as the beginning of 2018, OpenVault said that about 4% of all households used more than 1 terabyte of data per month. In the most recent report for the end of 2021, OpenVault says that 15.1% of households routinely use a terabyte of data per month and 2.5% now use more than two terabytes. That means a lot more customers than in the past are getting dinged for exceeding data caps.

However, this USTelecom claim is not aimed at consumers who would laugh at the idea that their bill for broadband has gone down. Recall that USTelecom is the lobbying arm of the big ISPs, and this claim is aimed at politicians and policymakers. Rolling out the cost-reduction canard coincided with a change of Chairman at the FCC. The big ISP quake at the idea of regulators ever considering any form of rate regulation. This misinformation campaign is mostly a strategy to plant the idea that broadband rates don’t need to be examined.

What might be the most ironic about this campaign is that prices really might start dropping. The big cable companies have been able to maintain high stock prices for a decade due to the incredible annual growth fueled by luring customers away from telephone company DSL. But we’re seeing broadband customer growth slow and stagnate for cable companies that are smaller than Comcast and Charter. Charter has adopted a strategy of passing millions of new homes with fiber as a way to try to keep growth going. Comcast just announced last week that it intends to edge out to at least 800,000 new passing this year – something it could have done any time over the last decade.

We are starting to see the beginning of real competition for urban broadband. T-Mobile says it expects to gain millions of customers this year for its FWA wireless broadband that uses cellular frequencies. Verizon is also starting to aggressively market its FWA product. Later this year, Dish will be hitting the market hard. AT&T says it will finally roll out its FWA product next year. While the low prices of FWA are aimed at luring remaining DSL customers, the speeds are good enough to be attractive to cable customers. Verizon is peddling FWA for as low as $25 per month for Verizon cellular customers. The regular price for all of the carriers selling the product is in the $50 to $60 range – far less than the cost of standalone cable company broadband.

If the big telcos stick to their business plans, millions of urban and suburban homes will be overbuilt with fiber in the next few years. So far, fiber prices have been lower than cable company broadband prices.

I’m really curious to see if the big ISPs stick with this story of falling broadband prices if their rates actually start dropping. That doesn’t seem like a story they will want to emphasize for Wall Street analysts.

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