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.