U.S. Home Broadband Actually is Neither Slow Nor Expensive

Critics of U.S. home broadband often claim that service is slow and expensive. Both opinions can be challenged. In fact, U.S. median home broadband speeds were among the fastest in the world in 2021 and climbed in 2022. 

source: Ookla 

“Price” sometimes is a bit more subtle. Though prices have declined in every speed category, some might still argue “prices are too high.”

For example, ana analysis shows that U.S. home broadband prices have fallen since 2016, according to a study by Broadband Now. 

Broadband Now says that the average price for internet in each speed bucket starting in the first quarter of 2016 compared to the fourth quarter of 2021 has fallen:

• The average price decreased by $8.80 or 14% for 25 – 99 Mbps.

• The average price decreased by $32.35 or 33% for 100 – 199 Mbps.

• The average price decreased by $34.39 or 35% for 200 – 499 Mbps.

• The average price decreased by $59.22 or 42% for 500+ Mbps.

The analysis is subtle because if there is a movement by customers from lower speeds to higher speeds, which clearly is happening, then “prices” might climb, though not for the same products. Customers are choosing to buy higher-priced, higher-performance products, instead of the lower-priced, lower-performance products they used to buy. 

Other studies show the same trend.  

Also, because of inflation, price levels rise over time. So virtually any product can be accused of “costing more” in 2022 than it cost in 1996. 

Some may intuitively feel this cannot be the full story where it comes to digital products, which keep getting better, while prices either stay the same or decline. Such hedonic change applies to  home broadband. 

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 

 

Quality improvements also are seen globally. 

Adjusting for currency and living cost differentials, however, broadband access prices globally are remarkably uniform. 

The 2019 average price of a broadband internet access connection--globally--was $72..92, down $0.12 from 2017 levels, according to comparison site Cable. Other comparisons say the average global price for a fixed connection is $67 a month. 

Looking at 95 countries globally with internet access speeds of at least 60 Mbps, U.S. prices were $62.74 a month, with the highest price being $100.42 in the United Arab Emirates and the lowest price being $4.88 in the Ukraine. 

According to comparethemarket.com, the United States is not the most affordable of 50 countries analyzed. On the other hand, the United States ranks fifth among 50 for downstream speeds. 

Another study by Deutsche Bank, looking at cities in a number of countries, with a modest 8 Mbps rate, found  prices ranging between $50 to $52 a month. That still places prices for major U.S. cities such as New York, San Francisco and Boston at the top of the price range for cities studied, but do not seem to be adjusted for purchasing power parity, which attempts to adjust prices based on how much a particular unit of currency buys in each country. 

The other normalization technique used by the International Telecommunications Union is to attempt to normalize by comparing prices to gross national income per person. There are methodological issues when doing so, one can argue. Gross national income is not household income, and per-capita measures might not always be the best way to compare prices, income or other metrics. But at a high level, measuring prices as a percentage of income provides some relative measure of affordability. 

Looking at internet access prices using the PPP method, developed nation prices are around $35 to $40 a month. In absolute terms, developed nation prices are less than $30 a month. 

According to an analysis by NetCredit, which shows U.S. consumers spending about 0.16 percent of income on internet access, “making it the most affordable broadband in North America,” says NetCredit.

Looking at internet access prices using the purchasing power parity method, developed nation prices are around $35 to $40 a month. In absolute terms, developed nation prices are less than $30 a month.  

Methodology always matters. The average U.S. home broadband service  costs about $64 a month. In fact, U.S. home broadband inflation-adjusted costs have declined since the mid-1990s, according to an analysis  of U.S. Consumer Price Index data. 

U.S. home broadband is neither “slow” nor “expensive.”