Home Broadband Prices have Dropped in Real Terms, Over the Last 2.5 Decades

U.S. home broadband inflation-adjusted costs have declined since the mid-1990s, according toan analysis of U.S. Consumer Price Index data. That will often not be obvious when observers consider only “current” prices for home broadband, and compare them to past “retail” prices. 

Comparing prices internationally over time is even harder, since there additionally are currency issues and general cost of living differences between nations.

Two primary forces are at work: price inflation over time and changes in quality or performance and features of the “same” products over time. Still, despite the oft-heard complaint that home broadband prices are "too high," they actually have dropped over two decades.

Consider U.S. prices.

According to the U.S. Bureau of Labor Statistics, prices for internet services and electronic information providers are 21 percent lower in 2021 versus 1997, for example. 

Other communication and computing related prices also have fallen, often in both stated and “real” terms after adjusting for inflation. 

According to the U.S. Bureau of Labor Statistics, prices for communication are 22  percent lower in 2021 versus 1993.

Between 1993 and 2021: Communication experienced an average inflation rate of -0.88 percent per year. 

Compared to the overall inflation rate of 2.26 percent during this same period, inflation for communication was significantly lower.

Also, according to the U.S. Bureau of Labor Statistics, prices for computer software and accessories were 74 percent lower in 2021, compared to 1997. Information technology, hardware and services are 92.64% lower in 2021 versus 1988. 

Prices for information and information processing are 27 percent  lower in 2021 versus 1993. 

Hedonic adjustments also are exceedingly common in computing and information products over time. The obvious examples are the price and performance of dial-up internet access in 1995 and broadband in 2021; the cost of computing operations; data storage or bandwidth. 

Hedonic qualIty adjustment is a method used by economists to adjust prices whenever the characteristics of the products included in the consumer price index change because of innovation. Hedonic quality adjustment also is used when older products are improved and become new products. 

That often has been the case for computing products, televisions, consumer electronics and--dare we note--broadband internet access services. 

Hedonically adjusted price indices for broadband internet access in the U.S. market then looks like this:

source: Bureau of Labor Statistics 

In other words, dial-up internet access and gigabit broadband are not the same product. 10 Mbps broadband is not the same product as 100 Mbps or 500 Mbps service. 

The same trend holds for mobile phone service, phones and other consumer electronics gear. The value and “quality” of a mobile phone subscription in 2000 is not the same as the 2020 value. Nor are the capabilities of a mobile phone the same in 2020 as was true in 2000.