Study shows Community-Owned Broadband Networks provide best value – and access to pricing info is difficult to get

Harvard University recently published a report that compared public-owned FTTH networks with private options in the same market. They learned a few things – perhaps most important to note i- they learned it’s difficult to get info on pricing and packages available from some providers in some markets, which makes it very difficult to have a real conversation about broadband affordability. In this study or any other.

Here’s the abstract from the report…

We collected advertised prices for residential data plans offered by 40 community-owned (typically municipally owned) Internet service providers (ISPs) that offer fiber-to-the-home (FTTH) service. We then identified the least-expensive service that meets the federal definition of broadband—at least 25 Mbps download and 3 Mbps upload—and compared advertised prices to those of private competitors in the same markets. We found that most community-owned FTTH networks charged less and offered prices that were clear and unchanging, whereas private ISPs typically charged initial low promotional or “teaser” rates that later sharply rose, usually after 12 months. We were able to make comparisons in 27 communities. We found that in 23 cases, the community-owned FTTH providers’ pricing was lower when averaged over four years. (Using a three year-average changed this fraction to 22 out of 27.) In the other 13 communities, comparisons were not possible, either because the private providers’ website terms of service deterred or prohibited data collection or because no competitor offered service that qualified as broadband. We also made the incidental finding that Comcast offered different prices and terms for the same service in different regions.

Here are their highlights…

  • When considering entry-level broadband service—the least-expensive plan that provides at least 25/3 Mbps service—23 out of 27 community-owned FTTH providers we studied charged the lowest prices in their community when considering the annual average cost of service over a four-year period, taking into account installation and equipment costs and averaging any initial teaser rates with later, higher, rates. This is based on data collected in late 2015 and 2016.
  • In these 23 communities, prices for the lowest-cost program that met the current definition of broadband were between 2.9 percent and 50 percent less than the lowest-cost such service offered by a private provider (or providers) in that market. In the other four cases, a private provider’s service cost between 6.9 percent and 30.5 percent less.
  • While community-owned FTTH providers’ pricing is generally clear and unchanging, private providers almost always offer initial “teaser” prices and then raise the monthly price sharply. This price hike in the communities we studied ranged between $10 (20 percent) and $30 (42.8 percent) after 12 months, both imposed by Comcast, but in different communities. Only one community-owned FTTH provider employed this marketing practice for a data-only plan. This exception was a student discount offered by the MINET network in Oregon.
  • Language in the website “terms of service” (TOS) of some private ISPs strongly inhibits research on pricing. The TOS for AT&T, Verizon, and Time Warner Cable (now owned by Charter), were particularly strong in deterring such efforts; as a result, we did not record data from these three companies.
  • While the United States has 40 community networks offering broadband FTTH service (many of them serving more than one municipality), we did not make comparisons with private competitors in 13 cases, either because the TOS prohibited data collection or because no competing broadband service existed in the community network’s home community.
  • We noted that Comcast varied its teaser rates and other pricing details from region to region. Our sample size was small; just seven of the communities we studied were served by Comcast. Understanding Comcast’s pricing practices and their consumer impacts across the United States would require much deeper study.
  • In general we found that making comprehensive pricing comparisons among U.S. Internet service plans is extraordinarily difficult. The U.S. Federal Communications Commission (FCC) does not disseminate pricing data or track broadband availability by address. Additionally, service offerings follow no standard speed tiers or definitions (such as the specifics of video or phone service bundles). We focused on comparing entry-level broadband plans in part because of these complexities.

They looked at two communities in Minnesota and this is what they found in terms of average cost per year over four years; it takes into account all fees and recurring cost:

In Monticello:

  • Monticello Fiber Network a 50/50 connection is $640.29
  • TDS Telecom a 25/10 connection is $763.03
  • Charter Spectrum a 60/4 connection is $678.63

In Crosslake:

  • Crosslake Communications a 30/20 connection is $1,030.40
  • Emily Cooperative Telephone Company a 30/30 connection is $1,067.65

It’s interesting to see the differences in those two areas. And to see that we really aren’t talking about apples to apples comparisons – especially when you account for upload and download speeds. Again to me half of the story here is the difficulty in getting the information. The National Broadband Plan paid lip service to gathering more standardized info on services and prices…

Recommendation 4.2: The FCC and the U.S. Bureau of Labor Statistics (BLS) should collect more detailed and accurate data on actual availability, penetration, prices, churn and bundles offered by broadband service providers to consumers and businesses, and should publish analyses of these data.

But that doesn’t seem to have happened. Think about the impact of the cost (or calorie) per serving info at the grocery store. Now image how nice that would be for broadband and how that would help us pinpoint real issues based on areas and technologies. Is the problem access or affordability (or something else)? And are there some providers who have been able to overcome challenges to provide affordable access in rural areas – how can we reward and/or emulate them in other areas. Because I know there are providers (public, private and cooperative) who are serving happy customers in hard to reach places.

This entry was posted in Community Networks, Funding, MN, Research, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

2 thoughts on “Study shows Community-Owned Broadband Networks provide best value – and access to pricing info is difficult to get

  1. This article doesn’t represent the truth at all.
    In Minnesota there have been roughly 5 well known municipal broadband systems

    Monticello 50mbps for $35.95
    Windom 12mbps for $52.95
    RS Fiber 50mbps for $49.95
    Lake County 30 mbps for $59.95
    Crosslake 30 mbps for $59.95- was city owned up until 2 years ago.

    The article mentions Crosslake. Crosslake was a municipal up until 2 years ago when the city decided to sell the system. Emily Telephone Cooperative, which is one of the owners of Crosslake is also the company which manages it. Emily Telephone Cooperative, West Central Telephone Association, and BEVCOMM the three owners of Crosslake didn’t change the pricing for broadband service from what the city had set it to. Although they have raised the broadband speeds for that price.

    Monticello defaulted on their revenue bonds within the first three years of operation. They ended up getting Arvig, a non-municipal communications provider to run the system for them.

    Lake County is in the process of defaulting on their USDA loans. They have brought in CTC, again a non-municipal communications provider to run their system for them.

    Windomnet has ran in the red every year except 2 in the last 10 years. But at least their city is standing behind the system and paying for it.

    So of the 5 municipal systems in Minnesota, 2 are managed by private companies, 1 is owned by a private company. 2 of the 5 have defaulted on their debt.

    • Thanks for the update. There’s always a gap between research and one the ground expertise – and I always think there’s room for both. There’s especially room for both when someone kind as yourself compiles the current info.

      I found that gap frustrating when looking at impact of broadband on a community – census data is a step behind where I want the date to be!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s