Have Internet Access Prices Really Grown 25% Since 2010?

“Average fees for standalone broadband have increased nearly 25 percent since 2010,” says a study by Parks Associates on subscription TV and internet access. Other studies have noted higher prices for internet access over the past several years.

That is not the same thing as saying “people are paying more for broadband access.” Sticker or suggested prices are one thing; what customers actually pay can be quite another matter.

That is a major reality of the U.S. internet access market, where most consumer mobile or fixed services accounts are purchased as a bundle, offering discounts over separate purchases of each service. That is why actual internet access prices have dropped over the past couple of decades, despite faster speeds and posted rate hikes.

And make no mistake: bundling as a marketing strategy is designed to increase value and cut prices. In other words, effective prices are cut when consumers buy bundles (dual play, triple play, in some cases quadruple play).  

Also, bundling reduces churn. Some note that average spending by consumers on telco or cable services has risen. That is easy to explain. When consumers buy three or four services, or three or four products, even when getting a discount, average account value grows.

That also is an important point. Higher account spending is not necessarily caused by higher component prices, but because consumers are buying more units.

Mobility shows another trend. The other issue is that account spending can climb because more consumers have moved to “bundled” or “multi-user” or “family” plans, which reduces the total number of accounts, while raising average account spending.

In the U.K. market, 68 percent of fixed network consumers report buy bundles, for example. In the U.S. mobile market, most consumers are on multi-user plans, while in the fixed services market, a similar trend prevails.

In fact, when a consumer buys a bundle, it actually is impossible to determine the precise cost of any single component, except to note that the imputed price of each component comes with a discount.

So it might be much more accurate to say that posted retail prices for internet access have grown. The actual prices consumers pay has almost certainly declined.