Are Home Broadband Prices Going Up or Down?

Are home broadband prices going up or down? It might seem an easy question to answer. "Up," of course, many will say. But ask a different question: what are the price trends compared to other essential products. One might get a different answer. 

Home broadband pricing comparisons are more tricky than you might suppose. One has to choose which sorts of plans to compare. Is the comparison to be made of the most-affordable plans, those in the middle or the highest-priced plans? 

And what if half or more of all customers buy service bundles, not stand-alone internet access plans? Does one exclude buying behavior from half or more of the audience? And what if a significant percentage of customers are on promotional plans? Does one compare those, or only the “standard” plan pricing when promotional periods end?

In other words, it does not make sense to compare price plans most consumers do not buy. Though judgment and choices must be made, what are the plans “most” consumers actually buy? As a rule, that will mean comparing not the value plans or the highest-cost plans, but plans someplace “in the middle of the range,” as that is what most consumers actually buy. 

All that and we have to include the impact of inflation, which distorts longer-term “real” price trends. Finally, there are changes in product quality over time. Does one compare 10 Mbps plans to 100 Mbps or 1,000 Mbps over time? And if so, how does one adjust for quality improvements? Such hedonic adjustment applies whenever legacy products have changed in some key way that makes them new products.

The classic example has been personal computer technology. But internet access also has changed in similar ways over time. 

source" USTelecom

It is hard to answer the question “have home broadband prices risen since 2009?” without using hedonic adjustment and also adjusting for inflation. The Bureau of Labor Statistics uses hedonic adjustment to track producer prices for home broadband, for example, since speed and other attributes change over time. 

The rationale is that a dial-up internet connection is not a  comparable service to home broadband at various speeds (10 Mbps, 100 Mbps, 1 Gbps, for example). Since prices tend to stay about the same over time while speeds have increased for the “most bought” tiers of service, BLS adjusts prices to account for quality improvements. 

source: Bureau of Labor Statistics 

In other words, home broadband prices might not be “too high.” Where many other essential products have seen price increases--even before the recent bout of high inflation--home broadband prices arguably have decreased. 

Ignoring hedonic changes, Compared to 2008, fixed network broadband costs have fallen, globally, though there is a slight rise in developed nations, driven by consumer preferences for higher-priced and higher-speed services, according to International Telecommunications Union data. 

source: ITU 

Consumers do not like price increases, it goes without saying. But nominal price increases, when inflation is at any rate above zero, are going to happen. Real price increases must adjust for currency differences, inflation rates and hedonic quality changes, not to mention actual consumer behavior.