Inflation has returned to the historical average of around 2.5% per year, but we’ve experienced several years in a row of much higher-than-average inflation. In times of inflation and rising prices, consumers and businesses normally cut back on expenditures.
For years, I’ve believed that broadband and cellphones usage is somewhat immune to inflation, meaning that people don’t ditch these services unless they have no other choice. In a very ad hoc and non-scientific poll, I’ve been asking ISPs about the impact of inflation on customer subscription rates. Many small ISPs don’t do an exit interview with customers who are disconnecting, so they don’t always know why they lose customers. But no ISP I talked to said that they were aware of losing any significant numbers of customers who could no longer afford their broadband plan.
For a more detailed look at the question, I found a survey done by Recon Analytics in April 2023 at the height of inflation. The survey asked consumers the kinds of expenditures they expected to cut back in a time of increasing prices.
The responses were what you might expect. About 20% of households said they didn’t plan to cut spending. But most respondents said they would trim expenses. The biggest category of planned savings was to reduce dining out, and 50% of respondents said they planned to dine in-home more. Next on the list was clothing, with 39% of respondents saying they would buy fewer clothes. 19% of respondents said they would cut back on streaming video and audio services. 16% of consumers were considering cutting the cord on linear cable TV. 14% of consumers planned to cut back on driving and gas costs. 14% of consumers were going to cut back or cancel gym memberships.
Only 8% of consumers planned to cut back on home internet or cellphone expenses. A deeper dive into these customers showed that customers planned to save money without discontinuing service. Some households planned to switch to less expensive broadband or cell plans, which probably explains a lot of the success of FWA cellular broadband. Some consumers planned to downgrade broadband to a slower speed tier. I saw a different survey that showed that people were hanging onto cellphones longer before upgrading.
The survey found almost nobody willing to discontinue broadband or cellphone usage completely. This is a testament to how embedded broadband and cellphones are in our lives. The average American adult spends an average of over 7 hours per day online – which is evenly split between computer and cellphone usage.
Most of us have good reasons for not wanting to lose broadband. At the end of 2023, over 12% of U.S. employees worked remotely. A huge percentage of homes use broadband for entertainment to stream video and music. 70% of American adults use social media. Three out of four Americans plan games online. Most households now bank online. An increasing number of people use telemedicine. And who doesn’t shop online?
Since I’m in the broadband business I often talk to folks about these issues, and it’s become clear to me that people value broadband as much as they do having electricity and water in their homes.
The Economics term for this is “inelastic demand”.
Broadband access is becoming an essential commodity, like electricity, water, public roads, navigable waterways. As such its provisioning, infrastructure, maintenance and delivery must not be left in the hands of mostly-unregulated private for-profit monopolies and oligopolies.
every single one of those essential commodities has a per-use cost. electricity and water have base rates and then per gallon/watt fees on top. Use more, pay more. Roads have it in fual taxes. Use more, pay more.
Do you want to switch to a model where you pay for the connection and then pay per MB transfered like all these commodity items?
The light touch regulation has made for a product that you pay less for that any other bill and get unlimited use of. It’s the only success story of the items you listed.
Advanced telecom service should be regarded as a utility per the FCC’s Open Internet rulemaking reclassifying it under Title II. However, since for most users data does not incur additional cost to deliver, it should not be treated or regulated as a consumption based utility like electricity or water reflecting production costs and incentives for conservation.
” since for most users data does not incur additional cost to deliver”
This is blatantly false. The cell/mobility model absolutely proves it.
By restricting the total GB of data, they influence users to use it less for things like streaming. That reduces the constant flow of data massively and reduces the cost for backhaul between pop sites.
Unlimited use services get streaming as background noise for people. There’s no ‘self control’ required because the meter isn’t running.
There is an additional cost to move the higher volume of packets during busy periods when it matters.
Mobile wireless has limited carrying capacity due to RF propagation limits so yes, delivering more data associated with higher costs for delivery. My comment in reference to landline FTTP.
it still applies. average consumption during business hours is what drives up requirements. it drives up pps requirements on hardware, it drives up the peering costs because it drives down oversell. it drives up support costs because higher usage puts higher straight on RF/WiFi environments in homes. Every step of the way has a cost for use. It might not be measured in tons of coal or watts to pump or filter but it’s all there.
The electrical grid is built not for average use but to sustain 100% use at peak time. Or it should be anyway. Same with internet. We have to purchase hardware to satisfy peak demands and there is no way to recoup the cost of that hardware for 90% of the day when 1/4 of the resources would suffice. If we only had to satisfy the 24 hour average network load I would be able to reduce my yearly expenses by a massive amount. I could easily live on the difference it would make a small ISP to only have to satisfy average demand, not peak.
Uh no, 100% no. I’m sitting here in a small office that we use to operate our ISP out of and the power bill in the summertime almost touches $3,000 / month. If the utility here were also the ISP I would expect internet monthly charges around 10x what we are charging. I have a friend in town that runs a small convenience store with a couple of coolers. His power bill this summer was $6,000. They have a store twice as big in a different part of the country where there is competing, less regulated, utilities and they have never seen even $3,000. I will die on this hill. It is impossible to convince me that internet should be treated the same as power, water, and roadways.
Spot-on. Broadband access is such a part of our lives for all the reasons you list, plus the continued increase in work-from-home which requires internet access.
“At the end of 2023, over 12% of U.S. employees worked remotely.”
Advanced telecom infrastructure is an important component of reducing commute transportation demand. As this article notes, we can’t solve highway congestion by building more lanes. As the saying goes, move bytes not bodies.
https://www.route-fifty.com/infrastructure/2024/10/we-know-widening-highways-leads-more-traffic-why-do-we-do-it-anyway/400440/
Broadband pricing is DEFLATING. The price per Mbps delivered continues to fall through the floor.
Saying there is inflation is like saying gas prices are inflating when you move from the city to the country and tripple your miles driven.
Broadband pricing has dropped so low that most people are actually paying a base rate for infrastructure delivery and very little for the actual data.
It’s much more like paying $65 as a meter fee for electricity and then the power you use is free and unlimited.