Wednesday, February 12, 2014

Hard to Say Whether Typical Internet Access Prices Have Climbed or Dropped

Relatively minor changes in broadband access pricing are not uncommon. A price hike for Clear service provides an example.

But assessing changes in Internet access pricing is difficult, since the typical pattern is for the actual product to change over time.

Consumers might once have paid $20 to $22 a month for a dial-up connection operating at 56 kbps to 128 kbps. Consumers now pay about $40 a month for a 15 Mbps connection. So absolute prices have increased, but prices per megabit have declined.

Also, the types of products have changed over time. Where once consumers had only one choice--dial-up access or no access--they now can buy service at varying speeds, with the faster services costing more each month.

That obviously skews spending patterns. If more people choose to buy faster access, “average” spending also rises. Something like that likely happened in 2009, as more people chose to upgrade to faster levels of service.

The increase in what people pay for broadband is evident in prices for basic and premium services, according to the Pew Research Center's Internet & American Life Project.

For subscribers to basic services, the average monthly bill was $32.80 in 2008, a figure which rose to $37.10 in 2009.

For premium subscribers, those thirsty for faster home broadband speeds paid about $38.10 per month in 2008 and roughly $44.60 in 2009.

Across different service types, broadband subscribers reported higher prices for cable modem service than DSL by a $43.20 to $33.70 margin. This compares with 2008 figures of $37.50 for cable modem subscribers and $31.50 for DSL users.

That shift in demand--from DSL to cable modem, for example--also affects average pricing, as cable offers tend to be faster, on balance.

The point is that the actual product consumers are buying has differentiated over time, and appears to be in the process of segmenting further, as top end services start to stretch an order of magnitude.

The other important change is the rise of mobile Internet access as a material factor in the market. By about 2020, about 10 percent of all broadband connections will be supplied by fixed lines, the overwhelming majority of connections being supplied by mobile networks.

On a percentage of household income basis, Internet access prices have been dropping globally, with the biggest changes in developing markets. Though prices have dipped in developed nations, the changes are relatively slight.

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