Broadband affordability: customer prices increase faster than inflation while provider costs do not

Derek Turner has a new report, Price Too High and Rising: The Facts About America’s Broadband Affordability Gap

This report lays out the facts on pricing and profits for the U.S. broadband industry. We discuss the varying ways to measure prices, the important differences between these methods, and how certain methods can be used to obfuscate the reality of what is happening in the market and at the kitchen table. We present government and industry data, noting the strength and weaknesses in each form, and highlight how the ISP industry and its apologists use this kind of data to mislead. Some of our findings include:

  • Monthly Broadband Bills Continue to Rise Far Faster than the Rate of Inflation
    (sample stat: That means the nominal increase in broadband bills was more than four times the rate of inflation during those three years)
  • Low-Priced Offerings Are Disappearing, Threatening to Cement the Digital Divide and Disrupt the Post-COVID Economic Recovery
    (sample fact: ISPs are eliminating their budget tiers. Entry level prices in some markets have increased by 50 percent or more in the past four years)
  • U.S. Government Data Contradict ISPs’ Claims About U.S. Price Superiority
  • ISPs Are Enjoying Record Profits as They Increase Prices and Reduce Investments
  • (sample fact: Capital investment by broadband providers large and small declined during the previous four Years)

The paper goes into great details, well researched and cited details. It was the framing of the issue that caught me, especially as broadband’s importance accelerated during the pandemic…

While plenty of goods and services get more expensive over time, broadband stands out for several critical reasons.

First, broadband prices consistently increase faster than the rate of inflation while the providers’ own costs do not.2 This makes this increasingly-critical infrastructure service both more expensive in real terms to users and more profitable for the ISPs.

Second, in almost all consumer product markets, particularly those involving technology, producers offer a wide array of service offerings that attract buyers of all means. But as the broadband market matures, the nation’s top ISPs are increasingly moving away from low-priced entry level tiers in favor of higher-priced, higher-speed packages, which they market as having increased value.

Can today’s broadband infrastructure handle social distancing?

Today the Governor of Minnesota closed schools (Mar 18-27). Last week he encourages “social distancing” for work, school and fun. SO what are people going to do? People who can will be going online – for work, school and play. Are we ready?

Chris Mitchell with Muninetworks makes some predictions on the preparedness of the networks. Best poised…

Those on fiber optic networks probably won’t notice major changes in demand. This is the easy one — it is why we have long believed that fiber optics should be the goal for the vast majority of Americans.

Most modern cable networks should be also able to handle the demand — especially on the download end. This is good because 2 out of 3 Americans with broadband gets it from a cable network. …

In the upstream direction, the cable networks will have some challenges.

Least prepared…

Fixed Wireless networks will be all over the board. Urban and advanced fixed wireless networks like Monkeybrains in San FranciscoOpen Broadband in North Carolina, and NetBlazr in Boston will probably scale just fine. But in rural areas, many fixed wireless networks were constructed without the headroom for the expected increase in demand. Some will be able to accommodate it, but many will not. …

DSL will be an unmitigated disaster in many places, especially where Frontier and Windstream are the monopoly. These networks may become unusable — though many may think of them as unusable now, congestion could so overwhelm the systems that they become entirely unusable. …

Whether on failed DSL or struggling fixed wireless networks, I think there will be insufficient capacity to productively work from home at best and in many cases, and inability to even stream content.

Satellite? Again, something many thought could not get worse will, especially with daily data caps, etc. Unlike with wired networks, the caps are probably actually necessary because the system is not designed to handle a large concurrent demand from users. It will not scale at all.

How would you use a computer if it were new to you?

Insight News ran an article this weekend that highlights some of the folks who have been taking advantage of public computer centers and training offering through the Broadband Access Project, which finances 12 new or enhanced community based public computer centers in four federally designated poverty zones in Minneapolis and St. Paul.

Here are some of the stories they told:

  • Robin Lewis, a user at the Sabathani Community Center lab, is impressed by the quality of the computers to help her with her current job search. “It’s been very helpful as far as being functional enough for me to find and look for work effectively,” she says.
  • Charlie Stembreche, another user at Sabathani explains the importance of the Internet to him, “It helps me be aware of information that would otherwise be hard for me to get. In a practical sense, I’m trying to think, like if my bike broke down, where’s the local close by bike shop?”
  • Also, Shauna Miller, the BAP apprentice at Sabathani, talked about how she once helped a woman at the center to find affordable housing, “So she and her kids didn’t need to live in a shelter anymore!” Because of email and social networking sites such as Facebook, computer users are more able to stay in contact with loved ones and associates as well.