Home Broadband Prices and Inflation: Negative Correlation in Some Cases

Consumer prices in the United States are up more than eight percent over the last 12 months, according to the Bureau of Labor Statistics. But not all products experienced that same inflation rate. Home broadband prices, for example, arguably have fallen, according to an NCTA analysis. 

In fact, according to this heat map, where higher inflation is in darker red, high inflation in light red, moderate inflation in beige and low inflation in blue (light or dark), communications is an area of low inflation. 

source: Knoema 

For some products--including home broadband--BLS also adjusts current prices for quality improvements. In other words, such hedonic adjustments attempt to quantify the qualitative changes in products over time. 

“If the replacement is different from its predecessor and the value of the difference in quality can be accurately estimated, a quality adjustment can be made to the previous item’s price to include the estimated value of the difference in quality, BLS says. Internet access is hedonically adjusted, as are mobile services, computing and communications devices and fixed network voice services. 

The key implication is that retail prices are adjusted to account for quality improvements. So even if some prices appear to be higher, value is greater, so comparative prices might be considered to have dropped. So prices for telephone equipment, calculators and other consumer hardware are deemed to have fallen. 

source: BLS

 

Hedonically adjusted internet access prices (home broadband) also are deemed to have fallen. 

source: BLS 

Still, prices for some connectivity products, such as fixed network voice or cable TV content, have grown for decades, even as home broadband prices have fallen (again, hedonically adjusted). 

Parenthetically, take rates for home broadband vary directly with income and other indices such as educational attainment. “An analysis of broadband adoption rates by income groups, both nationally and for individual states, suggests that broadband is now affordable for middle-class households,” says George Ford, Phoenix Center for Advanced Legal & Economic Public Policy Studies chief economist. 

source: Phoenix Center for Advanced Legal & Economic Public Policy Studies 

source: Phoenix Center for Advanced Legal & Economic Public Policy Studies