If Home Broadband is a Computing Product, Price Trends Make Sense

Total worldwide telecom revenues from mobile and fixed broadband services will grow 14 percent  between 2022 and 2027 to reach €1.2 trillion according to  Omdia. But monthly Average Revenue Per User will fall by 4.2 percent from €7.48 in 2022 to €7.16 in 2027, India researchers say. 

You might think new 5G services and faster home broadband would lead to a different result. But that is not the historical record. According to the U.S. Bureau of Labor Statistics, prices. for internet services and electronic information providers are 19.49 percent lower in 2022 versus 1997. 

Between 1997 and 2022, internet services experienced an average inflation rate of -0.86 percent  per year, even as access speeds continued to climb steadily. 

source: Omdia 

Competition explains some of the results. Indirectly, lower costs per bit explain some of the pricing trends, as access networks work more efficiently over time. While lower costs per bit do not directly explain lower recurring costs, they help internet service providers maintain profit margins even when delivering more capacity. 

Pricing trends for other digital products, such as computing devices, also seem to dictate pricing policies. Personal computers and other devices tend to improve performance over time while retail sales prices retain roughly flat. 

source: Free by 50 

But it also seems to be the case that retail prices for internet access are shaped by wide area network costs; lower costs of computing generally and by ISP pricing practices, which are not strictly usage-based. 

Though mobile operators do sell packages of usage that vary by “amount consumed,” the relationship between units consumed and price-per-unit drops with higher volume. 

Fixed network operators tend to price on advertised headline speed, not consumption. Historically, higher speeds have always led to higher data consumption, so higher speeds almost automatically come with lower unit prices. 

Ultimately, it seems Moore’s Law seems to be at work--not as a principle related to transistor density--but as a description of retail pricing. Since customer spending is never unlimited, we see doubling of capability every 18 months or so, while prices drop or remain the same. 

Internet access essentially is valued as a computing product. Retail prices, at least, suggest that form of valuation by customers. And that means higher capability at constant or lower prices will be expected. 

Competition matters, of course. But global prices for internet access seem to exist, as though the product were oil, where prices are inherently globally set. Local levels of competition matter, but overall, prices seem to act as though global norms prevaill.