Facts Do Not Support Charge that Internet Access Prices Climb "Without Net Neutrality"

One often hears, in discussions of network neutrality, assertions that without such rules, internet access costs will skyrocket. Oddly enough, internet access has--for nearly all its history--been an unregulated service where internet service providers have been able to charge whatever the market will bear.

Since, for all of the time U.S. consumers have purchased internet access, the same fundamental rules (internet access is a data service, and therefore unregulated as are other data applications) have been in place, with the exception of the the few years when internet access was deemed to be a regulated “telecom” service, we can look at the whole history of prices to evaluate whether prices actually have shown evidence of “price gouging.”

History suggests prices have done nothing but drop--and drop by orders of magnitude--over the whole history of consumer internet access services.

Some might argue that this might be true on a “cost per bit” basis. Others will argue it is true on an absolute price basis. Those of you who were buying internet access early in the broadband era (around the turn of the century) can remember spending $200 to $300 a month for 756 kbps service. We routinely now pay $50 to $70 a month for service of 100 Mbps.

Value is higher and price is lower, on an absolute basis, without adjusting for inflation. And prices continue to fall, even faster, on a “value compared to price” basis. Schools buying internet access between 2013 and 2017, for example, saw prices decline 78 percent, on a cost per Mbps basis.

That same price trend can be seen globally, in developing countries. The same trend was seen in mobile voice, internet transit (where prices often decline 33 percent per year).

Consumer internet access also can be characterized as having Moore’s Law rates of change. In other words, connection speed increases 50 percent per year, every year, while prices drop, remain stable or increase only modestly.

It is obvious that consumer internet access prices, despite improvements, do not increase 50 percent per year. In fact, without adjusting for inflation or changes in end user demand for products, it is hard to argue that U.S. consumer internet access prices actually have increased much at all.

Real prices are often hidden because most consumers do not buy the “stand alone” prices for access, but instead buy bundles of services where the actual discounts are not visible.

Some might argue internet access prices rise two percent or perhaps three percent a year. That is not surprising, as this represents the underlying rate of inflation.  

The point is that actual access prices are not--as many claim--increasing in the U.S. market because there is no competition or because there is no “network neutrality.”

Some studies suggest prices are higher than they actually are, because the quotes are for “standalone” prices, at retail, even when most consumers do not buy those products, but rather bundles or other promotional plans.

Of course, one also has to adjust nominal (actual) retail prices across countries, as overall price levels vary across countries. Adjusting using the purchasing power parity approach, to normalize retail prices for actual price levels in each country, global internet access prices average between $50 to $80 a month, according to Point Topic studies.


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