Monday, July 24, 2017
How Costly is Internet Access, Across Countries, Really?
Thursday, December 17, 2020
Internet Access Too Expensive; Too Slow?
One often hears complaints that U.S. broadband is “too expensive” or “too slow,” as one hears that municipal internet access services are needed to do the job internet service providers will not do. It always is worth evaluating such claims.
Is U.S. broadband “too slow.” Maybe not. About 80 percent of U.S. households can buy gigabit per second service if they choose, looking only at coverage by cable TV networks. Yes, households in rural areas often cannot buy service at such speeds, but speeds improve all the time, for a greater number of locations.
According to comparethemarket.com, the United States ranks fifth among 50 for downspeeds.
Is U.S. internet access too expensive? Maybe not. 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.
Back in 2017, actual U.S. broadband speed was more than 100 Mbps, on average, according to Akamai. Upstream speeds varied by location, but are at or above plan goals in most cities, with performance varying by provider.
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.
This chart from McKinsey compares cost trends for various products purchased by consumers in the 22 Organization for Economic Cooperation and Development countries. It shows price changes, indexed to inflation, between 2002 and 2018, covering nearly two most-recent decades.
Here is a Bureau of Labor Statistics analysis of U.S. prices for about the same time period. It shows that U.S. mobile communications prices have dropped almost identically with the OECD data for communications services.
That matters since mobile phones are the clear consumer choice for using voice services .
One can see the same general downward price trend for U.S. internet access, normalizing for higher consumption over time.
Some will argue that is the wrong way to look at consumer internet access prices. Some will point to non-inflation-adjusted retail prices, or note that posted U.S. retail prices are high by global standards. Without adjusting for different costs of living in different countries, one can conclude U.S. Internet prices are too high.
Adjusting for local prices, as when comparing the cost of an Internet access subscription to national income statistics, yields a different answer, namely that prices are quite low in developed countries.
Granted, there always are challenges. Rural areas are harder to serve than urban areas. Poorer countries have a harder time supplying access at low prices than richer countries.
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.
There are methodological issues. 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.
That is worth keeping in mind.
According to BroadbandNow, less than half of U.S. households have access to fixed network internet access at prices of $60 or less per month. The implication is that this is a problem.
Maybe it is not generally a problem. The average global price of a fixed network internet access connection is $73 a month. So average U.S. prices are significantly lower than the global average.
Monday, March 7, 2022
Home Broadband Prices Dropped 10% in 2021, Speeds Increased 32%
If there are any iron rules about the home broadband business, it is that prices tend to fall while the amount of supplied bandwidth tends to increase.
In 2021, the average monthly cost of fiber-based residential broadband decreased nearly 10 percent, according to Point Topic.
In the same period, the price of cable broadband increased by 1.2 percent, while the average subscription to copper-based broadband services increased by 0.5 percent.
The average monthly charge for residential broadband services fell by 10.4 percent in 2021 and cost $82 per month, adjusted using the purchasing power parity method.
At the same time, the average downstream bandwidth provided to residential subscribers has gone up by 32 percent.
Global Bandwidth and Retail Price (adjusted for purchasing power parity) | ||||
Region (Residential Broadband) | Average Downstream Speed, Mbps (Q4 2020) | Average Downstream Speed, Mbps (Q4 2021) | Average Monthly Charge, $PPP (Q4 2020) | Average Monthly Charge, $PPP (Q4 2021) |
Asia-Pacific | 856 | 1,355 | $ 63.45 | $ 61.53 |
Eastern Europe | 232 | 278 | $ 66.68 | $ 66.46 |
Latin America | 158 | 254 | $ 166.38 | $ 115.62 |
Middle East/ Africa | 91 | 155 | $ 160.93 | $ 155.28 |
North America | 358 | 396 | $ 83.93 | $ 88.31 |
South, East Asia | 371 | 393 | $ 83.16 | $ 66.43 |
Western Europe | 325 | 403 | $ 68.00 | $ 68.20 |
source: Point Topic
Friday, July 8, 2022
Home Broadband Costs--for the Plans People Actually Buy--Have Dropped Since 2015
According to US Telecom, U.S. home broadband prices continue to fall, when looking at the most popular service plans consumers actually buy. The BPI-Consumer Choice compares providers’ most popular speed tier of broadband service in a given year to its most comparable 2022 service.
The BPI-Speed compares providers’ fastest speed tier option in a given year to the comparable plan in 2022.
Using what is called the “Real Broadband Price IndexI-Consumer Choice method (looking at prices for the service plans most people actually buy),broadband prices dropped by 14.7 percent from 2021 to 2022, UST says.
Over a longer time span, Real BPI-Consumer Choice tier prices dropped by 44.6 percent from 2015 to 2022, UST adds, while Real BPI-Speed tier prices dropped by 52.7 percent from 2015 to 2022.
Real BPI-Speed broadband prices dropped by 11.6 percent from 2021 to 2022, the group says. In contrast, the cost of overall goods and services rose by eight percent from 2021 to 2022, UST says.
Other analyses support similar conclusions. 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.
That will often not be obvious when observers consider only “current” prices for home broadband, and compare them to past “retail” prices.
Despite the oft-repeated claims that U.S. home broadband is “too expensive,” careful analysis suggests the answer is far from clear. In fact, using measures to normalize prices for different costs across countries; accounting for inflation; taking into account the actual plans people actually buy; including cost per gigabit per second of speed and also accounting for hedonic product change, the opposite conclusion might be reached.
Wednesday, January 4, 2023
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.
“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.”
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