U.S. Fixed Network Broadband is "Among Most Affordable" in the World, says ITU

From time to time, observers complain about the high price of fixed network Internet access, especially when prices climb. A typical line of argument is the retail price, expressed in dollars, compared to prices in other countries, also expressed in dollars.

Analysts who work across regions and nations globally know there are issues with such comparisons. To normalize “prices,” analysts often use purchasing power parity or measures that index communications spending to household income, for example.

Those methods often provide a more-realistic way of comparing prices, since they are expressed in terms that are normalized for purchasing power differences.

In that regard, an International Telecommunications Union report shows that U.S. fixed network broadband prices are exceedingly low, expressed as a percentage of gross national income per person. That is not the only way to compare prices across countries, but is instructive.

Using the per-capita GNI method, fixed network high speed access costs less than one percent of per-person GNI, making U.S. fixed network broadband services among the “most affordable” in the world.

source: ITU

In developed countries, the fixed-broadband basket has been relatively affordable for a number of years, but prices are no longer falling.

Between 2008 and 2013, the price of the fixed-broadband basket as a percentage of GNI per person fell from 2.3 percent to 1.4 percent. That figure remained unchanged in 2014.

While prices for fixed-broadband services are comparable in absolute U.S. dollar  terms across developed and developing countries, they remain much higher in terms of purchasing power parity values.

In 2014, fixed-broadband services in developed countries cost PPP$27, compared to PPP$65 in developing countries. This is not the case for fixed telephone and mobile prices, as prices expressed in purchasing power parity are almost the same in developed and developing regions.

source: ITU

U.S. Internet Access Prices are Not as High as Some Believe

Though it remains common to hear complaints about “how slow” internet access is in the U.S. market, or how “far behind” U.S. internet access is, compared to other nations, what always seems missed is how inexpensive internet access is, on a “cost per gigabyte consumed” basis.

But some new studies also suggest that absolute retail cost in the United States is not as high as originally was said to be the case.

Also, on a “purchasing power parity” basis, U.S. internet access cost is among the lowest in the world.

Prices not adjusted for purchasing power parity suggest one set of cost rankings, globally.  On that score, U.S. prices per megabit of speed are high, compared to many other nations.

Source: Boston Consulting Group

Adjusting for purchasing power parity or general levels of income are key. For example, measured as a percent of gross national income per person, the monthly cost of owning a mobile phone in the U.S. market is less than one percent. In developing countries the cost can represent double digits percent of GNI per person. 


source: Statista

Are U.S. Broadband Prices Too High?

From time to time, the cost of broadband internet access becomes a public policy issue. Some claim prices are too high, the typical argument being that U.S. a la carte prices (the retail tariff for internet access, not purchased in a bundle) are higher than prices in other countries.  

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 a new 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.  

In Europe, a majority of consumers pay less than one percent of their average wages to get broadband access, NetCredit says. In Singapore, Hong Kong, New Zealand and Japan,  10 Mbps service costs between 0.15 percent and 0.28 percent of income. 

A normalization technique used by the International Telecommunications Union is to attempt to compare prices to gross national income per person, or to adjust posted retail prices using a purchasing power parity method. 

source: ITU 

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 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.

Internet Access Got Dramatically Better--60% for Mobile, 32% for Fixed--Over the Last Year

Despite perennial complaints that internet access simply is not available enough, cheap enough or good enough, global internet access keeps getting faster, more available and arguably even more affordable. 

According to Ookla, mobile download speed improved 60 percent  over the last year globally, while fixed broadband speeds got 32 percent faster. 

The global mean of download speeds improved over the last 12 months on both mobile and fixed broadband to 55.07 Mbps (mobile) and 107.50 Mbps (fixed network) in July 2021, Ookla says.  

Mean (average) download speed over mobile was 99 percent faster in July 2021 than in July 2019, 141 percent faster when comparing July 2021 to July 2018, and 194 percent faster when comparing July 2021 to June 2017.

source: Ookla 

On fixed networks, mean download speed was 68 percent faster in July 2021 than in July 2019, 131 percent faster in July 2021 than in July 2018 and 196 percent faster in July 2021 than in June 2017.

On the price front, observers sometimes cite posted retail prices and argue that “ prices are too high.” That remains true in many developing countries, but in developed countries the story is not correct. Internet access is not very expensive. 

When some claim prices are too high, the typical argument is that U.S. a la carte prices (the retail tariff for internet access, not purchased in a bundle) are higher than prices in other countries.  

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 a new 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.  

In Europe, a majority of consumers pay less than one percent of their average wages to get broadband access, NetCredit says. In Singapore, Hong Kong, New Zealand and Japan,  10 Mbps service costs between 0.15 percent and 0.28 percent of income. 

A normalization technique used by the International Telecommunications Union is to attempt to compare prices to gross national income per person, or to adjust posted retail prices using a purchasing power parity method. 

source: ITU 

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 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.  

First of all, the product people buy is different over time. Customers are buying faster packages than they used to. To the extent that faster tiers of service cost more, “average” prices will climb. On a cost-per-Mbps basis, costs are dropping. 

But there are limits to price levels. Consumers will only spend so much on internet access. That figure tends to a small percent of household income, with all forms of communication service spending amounting to perhaps 

Prices for fixed network service have dropped about 92 percent over the last decade, for example, on a cost-per-megabit-per-second basis. Customers also use much more data than they used to, as well. Competition accounts for some of the improvement, even if observers sometimes argue “there is no competition” for consumer broadband services.  

The point is that internet access keeps getting better, and more affordable as well.

Real Internet Access Prices are about $50 a Month, Globally

Some argue U.S. consumers suffer from high prices for internet access. It is a highly-nuanced matter, though. Some issues are methodological. To make a valid price comparison, any researcher has to choose a method--picking plans that are widespread enough to be comparable across many or most nations.

source: cable.co.uk

Then one has to adjust prices using some measure of currency conversion that accounts for relative price differences for all manner of goods and services in any particular country. The reason is that general price levels for the same products are higher or lower in different countries, across the board. 

Add to that cases where half of all purchases occur in bundles that obscure the “price” of service. 

Then there is the matter of value. Price is one thing, while typical speeds and service quality or(outage performance) are different. There is no convenient way to adjust prices to incorporate quality differences (cost per Mbps, for example).

Also, customers in different countries buy different plans. As always, the method of determining “average” matters. Median (half higher, half lower) prices can be quite different from “mean” prices (average of all plans) when plans cover a high range (high to low). 

It matters greatly which plans are most-often purchased, in other words. In the U.S. market, 60 percent to 75 percent of internet access plans are bought in a bundle, so there is no way to directly state the internet access price. Price has to be inferred. 

To my knowledge, nobody actually uses bundle prices to compare internet access prices across nations. So comparisons are made on the basis of published retail prices for stand-alone internet access. By definition, up to 75 percent of U.S. consumers do not buy internet access that way. 

So the price comparisons are made on the basis of retail tariffs alone, without considering the frequency of plan purchase. Under such conditions, all one can say is that published retail tariffs are at certain levels. That tells us nothing about which products customers actually buy, at what volume, and therefore the effective or actual purchase price.

The further nuance is that posted retail prices often are not “final prices” paid by consumers, since taxes, fees, equipment charges and so forth are included. No comparison of retail prices captures the final price. 

In the U.S. market, where 60 percent to 75 percent of all purchases are on bundle plans where price cannot be determined, prices are inferred based on allocations. The easy method is to take the total price of the bundle and then divide by the number of services in the bundle to derive an “average” price. 

There are obvious methodological issues. Video service tends to be twice as expensive as internet access. And internet access tends to be twice as expensive as voice service. So some method of weighting is required. So the cost pattern is 4:2:1. 

Consider a bundle costing $175 a month. The simple “divide total cost by number of services” method gives you a mean cost of $58 a month for each service.

That ignores the retail price differential for each service, however. Retail prices might have a pattern something like $90 for video, $50 for internet access and $30 for voice (after including taxes, fees, customer equipment rentals). So the $175-per-month bundle has video at 53 percent of total cost, internet access at about 29 percent of total cost, and voice at about 18 percent of total cost. 

So in a $175 a month package, internet access might cost about $50 a month (including taxes, fees, CPE). That is just an allocation, though. One could argue for a higher or lower price, making different assumptions about the cost of the other components. Video often represents a higher cost, voice arguably a lower cost, in many packages. 

And then one has to adjust for internet access price tiers, since faster service costs more than slower service. This deconstruction of bundle prices actually agrees with the cable.co.uk estimates. 

Those prices are not adjusted for price levels in each country, however. So comparisons often adjust for purchasing power parity, normalizing for general price level differences across countries. This look at country cost of living indexes, for example, shows areas in red that have higher living costs generally. So all prices would normally be expected to be higher in those areas. Note that these comparisons are not adjusted for purchasing power parity, though. 

source: Numbeo 

One analysis of the costs of fixed network internet access, using the purchasing power parity method, shows that by 2016, internet access prices--adjusted for differences in local prices--actually were quite consistent across nations.

In all countries, prices hovered around a $50 a month level, after PPP adjustments. 

source: ITU

The point is that, even if nominal retail posted prices in the U.S. market seem higher than in Western Europe, Japan, South Korea or China, PPP prices in all countries are about the same.

Despite Assertions, U.S. Broadband is Neither Slow Nor Expensive

One often hears it argued that U.S. broadband is expensive or slow. That might not actually be the case, as data published by the European Telecommunications Network Operators’ Association suggests. 

Simply put, the ETNO analysis suggests U.S. downstream speeds actually are higher than in South Korea, Japan, Europe or the global average. 

Comparing prices, some point to costs that are not indexed for currency values. Looking at spending as a percentage of gross domestic product or household spending over the last decade or so, U.S. prices have dropped since 2010, as have prices in South Korea, Japan and Europe. 

source: ETNO 

The universal trend in those regions--and throughout the world--is lower prices. 

source: ETNO 

There are lots of nuances. For example, “fiber to the home” does not equate to “gigabit speeds.” In South Korea, acknowledged to be a world leader in broadband access, “next generation access” is close to 100 percent. But “fiber to home” or “premises” is at about 40 percent. 

So the issue might not be “access media” but rather “capabilities.”

source: ETNO 

That is clear in the analysis of gigabit capable or “upgradeable” networks. In the U.S. market, cable operators lead the gigabit market. 

Also, not all FTTH networks actually are upgradeable to gigabit service levels without substantial rework. In South Korea and Japan, most FTTH networks are gigabit capable or upgradeable. In Europe, about a quarter of FTTH networks are gigabit capable or upgradeable. 

source: ETNO 

Also, average downstream speeds in the United States are faster than in South Korea, Japan, Europe, or the global average. 

source: ETNO 

The point is that the repeated assertion that U.S. broadband speeds are low, or that internet access is expensive, does not hold up, either internally over time, or in comparison to trends in other developed nations. Globally, internet access is getting better, fast.  

Adjusting for purchasing power, U.S. internet access was deemed “among the most affordable in the world” by the International Telecommunications Union. 

Also adjusting for purchasing power, using the purchasing power parity method, internet access prices are around $35 to $40 a month. IIn developed nations  prices are less than $30 a month.  

Internet access in the developed world--including the United States--simply is not that expensive.

Mobile Broadband is Cheaper than Fixed Broadband in 111 Countries

The global average price of a basic fixed broadband plan (1 Gbyte) is 1.7 times higher than the average price of a comparable 1 Gbyte mobile broadband plan.

Fixed high speed access costs $52 on a purchasing power parity basis (a way of normalizing prices across countries). Mobile high speed access costs $30 on a purchasing power parity basis

That is why mobile broadband has become the typical way people get access to the Internet.

In at least 111 countries the price of a basic (fixed or mobile) broadband plan corresponds to less than five percent of average gross national income per person, the threshold of affordability used by the International Telecommunications Union.

In developing countries, average monthly fixed broadband prices (in PPP$) are three times higher than in developed countries. Mobile broadband prices are twice as expensive as in

developed countries, the ITU notes.

Spectrum Futures

Will FTTH Payback Always be Led by Internet Access Revenues?

Retail mobile and fixed network connectivity providers who sell directly to consumers arguably face some issues related to average revenue per account and cost per account. Whether in the mobile or fixed realms, mobile revenue per account seems to range from a few dollars a month up to $41 per month. 

source: S&P Global Market Intelligence 

Against that must be balanced the cost of infrastructure, operating and marketing costs plus all other overhead, ranging from personnel benefits to debt service and taxes. While not minor, network infrastructure costs are only part of the cost model. 

Some have claimed 5G can reach break even in a five years or less. But that likely rests on excluding all other business costs except the network infrastructure. 5G capex per subscriber might range between $100 and $450 per year, during the network build period. 

Even assuming a 20-percent profit margin, that still means 80 percent of revenue is consumed by operating costs, marketing, amortization of debt and other overhead, including personnel costs, retirement fund payments, dividend payments, taxes and so forth. 

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. 

That PPP normalization technique compares 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. 

Generally speaking, broadband prices are dropping in developing countries, where the product is most expensive, and primarily because mobile internet access prices are dropping. 

source: ITU 

Looking at mobile voice and data prices, as a percentage of gross national income per person, one easily can see that very-high prices in lesser-developed countries skew global indices. In some developed markets, prices are less than one percent of GNI (without adjusting for purchasing power parity). 

source: ITU 

The unadjusted 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. 

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. 

The point is that network infrastructure investment now seems to hinge on revenue--depending on how we count it--that could range from a few dollars a month up to perhaps $72 a month. 

Most of the market--with prices adjusted for currency and living standards--seems to be $40 a month or less. 

That is challenging for fixed network operators deploying fiber to the home, if less a challenge for mobile operators, whose networks cost less, per customer or passing. 

Among countries that are members of the Organization for Economic Cooperation and development, prices prices in 2016 seemed to cluster around $40 per month. 

A more recent study confirmed those figures. 

The take away is that FTTH payback--in many markets--cannot rest solely on home broadband revenues. Other revenue drivers likely must also contribute. Right now, that includes backhaul for 5G and future mobile networks, internet of things, edge computing, internet of things and applications that are owned by the connectivity providers. 

Over time, those other sources might be even more important. Payback models of several decades ago assumed significant contributions from sources such as voice and video entertainment that have declined steadily. 

The net change is a revenue-per-account ranging from $130 per month to $200 a month to the present $40 to $50 a month level. FTTH costs per passing have gotten better, but probably not enough to support revenue as low as $40 a month or even $50 a month. 

Other value must be involved, or the payback model is not there.