The Industry

Broadband Prices and Digital Discrimination

I recently wrote a blog that talked about digital discrimination. The article identified two primary types of discrimination. The first is infrastructure discrimination, where lower-income neighborhoods tend not to have the same quality of technology as more affluent neighborhoods. The second was price discrimination, where cable companies have started to price broadband differently by neighborhood based on demographics.

But there is a more basic element of price discrimination that also needs to be recognized. The big cable companies have raised the price of broadband at a much faster rate than inflation, which is putting the cost of a broadband subscription out of reach of a lot of households.

It’s not easy on the web to find the pricing history of broadband because the primary source of pricing has always been on ISP web pages which are constantly updated. If you do a web search on older broadband prices, the first couple pages of Google search are full of fraudulent articles from USTelecom and big ISP lapdogs like BroadbandNow that tell you that the cost of broadband has dropped over time. The many articles making this claim fail to mention that the statistic that has dropped over time is the price per megabit of broadband speed. That just means that cable companies have increased broadband speeds at a faster pace than prices. But the out-of-pocket cost of broadband has increased at a significantly faster pace than general inflation as measured by the Consumer Price Index. These articles must be confusing to the average consumer who knows they are paying more for broadband every year.

I’m going to use Comcast for the following discussion, but you could change this discussion to any of the other big cable companies – a few which have raised rates even faster than Comcast. I found a copy of a portion of Comcast’s annual statement for 2005 in the SEC archives. 2005 was an interesting year for broadband because it marked the beginning of the time when broadband speeds on cable companies broke away and greatly surpassed the DSL competition. In the 2005 annual report, Comcast said that its average customer was getting broadband speeds between 6 and 8 Mbps. The company reported that the average broadband charge to customers that year was $42. My recollection of 2005 is that the cable companies (and the telcos) only offered a single broadband product and didn’t have price tiers – a customer paid $42 and got the fastest speed available.

If you trend the Consumer Price Index from December 2005 until December 2022, something that cost $42 in 2005 would be expected to cost $63.34 today to keep up with inflation. Interestingly, the telcos that are still selling DSL in cities today have prices that are at or below the price predicted by inflation.

With the price increase at the end of 2022, the two basic Comcast broadband products were labeled as Fast and Superfast (the product name vary by market). These are the products that Comcast offers to new customers. The fast product at the end of 2022 was $83, with an additional charge of $15 for the modem, which most customers buy. That’s a total price of $98. The Superfast product base price was raised to $93, and with the modem now costs $108. In 2005 there was no separate charge for the modem.

The Consumer Price Index would predict that something that cost $42 in 2005 would now cost $63.34, an increase over 17 years of 51%. The cost of the Comcast Fast product is 133% higher than what Comcast customers paid in 2005. The price of the Superfast product increased by 157% since 2005.

These super-high rate increases are perhaps the ultimate price discrimination – the big cable companies are pricing millions of homes out of the market. The cable companies will tell you that they have low-income products, but only certain homes qualify for them and folks need to know to ask for them. The low-income products also don’t offer the same speeds as the normal consumer broadband products.

Comcast and the other big cable companies have raised rates between 2.5 and 3 times faster than inflation since the end of 2005. Comcast just implemented a $3 increase in December 2022 even as it was seeing customer growth stagnate, while seeing increased pressure from FWA competition. Raising prices at a time that the company’s sales are stagnating might be the ultimate proof that in most neighborhoods that Comcast is a monopoly that can raise prices with impunity.

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