Mobile and Internet Access Prices Have Declined in U.S. Since 1997

Many complaints about “high prices” are justified. Most complaints about the cost of mobile or some  fixed network services most often are not justified--costs for linear video subscriptions being the obvious exception to the rule. 

“At a time when seemingly every other industry in America is raising prices, the wireless industry continues to be mired in an interminable ARPU slump,” says Craig Moffett, co-founder of MoffettNathanson.

Here in the U.S. Bureau of Labor Statistics trend on mobile service pricing since 2011. Note that all these prices are below the basis level of 100 in 1997. In other words, since 1997, the cost of mobile service has dropped more than 50 percent . 

source: BLS

Prices for other consumer services such as internet access also have apparently fallen, even if some reports suggest otherwise. 

Looking at internet access, the U.S. Bureau of Economic Analysis shows a clear decline in costs for internet access between 1988 and 2018, for example. 

source: Bureau of Economic Analysis 

The latest (January 2022) data from the Bureau of Labor Statistics for internet access services shows more than a 60-percent decline in prices since 2004. 

source: Bureau of Labor Statistics 

Data from the U.S. Federal Reserve likewise finds falling prices since 1988. Using a hedonic approach that incorporates improvements in quality, a study prepared for the U.S. Federal Reserve shows a big fall in real prices when “quality of product” changes (including speed) are included in the analysis. 

In other words, even if posted prices seem to be about the same, value is quite a bit higher. In other words, since 1987, value has increased about 20 percent a year while real prices have declined about 20 percent a year. 

source: Federal Reserve 

source: Federal Reserve 

Other analyses also published by the BLS seem to indicate that internet access prices have climbed since 2018. That requires interpretation. 

Here is 2022 BLS data on internet access services and electronic information providers (internet access and other digital services). Prices have climbed since 2018, but are down from the 1997 base level of 100. In other words, prices are about 83 percent of 1997 levels. Some of the increase, we might suggest, is a shift of spending by consumers from lower-priced to higher-priced services.

However, this overstates price changes for consumer internet access, as many other services are included in the analysis that are not “internet access.”

 

source: BLS

This  BLS analysis includes--in addition to residential internet access--web hosting, domain names, and file hosting for non-business use. 

This category also includes residential, including landline, telephone and TV services bundled with residential internet service, including mobile internet access. Other monthly subscriber fees are included as well, including  internet rental equipment, internet service fees, installation and activation fees, and other associated taxes and fees.

This category does not include any other bundled services such as home monitoring services and wireless telephone service. Fees for online activities such as music or video downloads, streaming media (both music and video), fees for online gaming, and subscriptions to online newspapers or magazines are all excluded.

 Fees to access additional information or services provided by particular websites, such as those offered by popular sporting websites are also excluded. Pre-recorded video on demand subscription streaming services are excluded.

Still, even using this definition, inflation-adjusted prices are 20 percent lower than in 1997. 

The other caveat is that this data does not clearly separate internet access from price trends for the other information services. Some of us would bet that higher prices for information services are principally driving the price increases since 2018. 

Landline voice services and linear video services, on the other hand, have risen in price since 1997. Cable TV services are about 550 percent higher than 1997 prices. Voice services are close to 140 percent higher than in 1997.   

The bottom line is that prices for mobile service and internet access in the U.S. market have declined since about 1997. They have declined much more if hedonic quality changes are considered.