Broadband Prices are Soaring. Competition is the Answer
Friday, April 30, 2021
Broadband Prices are Soaring. Competition is the Answer
Despite clear evidence to the contrary, lobbyists have long claimed that U.S. broadband is extremely competitive and incredibly affordable. As the Biden administration pushes a bold new broadband plan to drive competition in the broadband marketplace, lobbyists are once again trying to pretend there’s no real problem that needs fixing.
To be clear, Americans pay some of the highest prices for broadband in the developed world, thanks to limited competition and regional monopolization. After decades of industry consolidation, heavy lobbying, and the steady erosion of both competition and government oversight, the results are obvious: high prices, spotty coverage, comparatively slower speeds, and statistically terrible customer service.
President Joe Biden’s broadband plan hopes to fix this problem by driving additional competition to market, whether that competition comes from new private sector upstarts, innovative new technologies, or the hard work of local communities. An additional $100 billion in broadband funding also aims to help those stuck on the wrong side of the digital divide.
Wary of anything that could disrupt a comfortable and very profitable status quo that has persisted for decades, lobbyists for the nation’s biggest broadband providers have been making the rounds on Capitol Hill and at the White House, insisting that U.S. broadband is in a perfect state of health, providing a bevy of increasingly affordable options to U.S. consumers.
Reality paints a dramatically different picture.
Despite decades of industry subsidies, dubious tax breaks, and rampant deregulation, as many as 42 million Americans still lack access to broadband. Another 83 million U.S. consumers live in markets that are broadband monopolies.
The impact is clearly measurable.
A recent report from the New America Foundation’s Open Technology Institute (OTI) tracks broadband costs across 28 cities in Asia, Europe, and North America. It found that U.S. consumers pay significantly more for broadband than their overseas counterparts, a problem hitting disadvantaged and marginalized U.S. communities the hardest.
When it comes to average monthly broadband costs, just three U.S. cities ranked in the top half of all cities tracked worldwide in the OTI study. And the most affordable U.S. city—Ammon, Idaho—obtained that honor thanks to an open-access, community-broadband network that embraces competition by multiple providers over the same network.
To avoid discussing the U.S. broadband affordability crisis or the obvious impact of regional monopolization, industry lobbyists often attempt to twist, distort, and massage U.S. broadband data and statistics, often focusing on how U.S. broadband prices are dropping if you look exclusively at “quality adjusted price per megabyte.”
But a study from consumer group Free Press found that, adjusted for inflation, the average U.S. consumer broadband bill increased 19 percent from 2017 through 2019. The study also found that providers have consistently either eliminated or hiked the price of slower, entry-level tiers to drive subscribers to more expensive service offerings, pushing affordable broadband even further out of reach for those already struggling to afford even basic tiers of service.
The cause of this behavior, again, is not mysterious: it’s a direct result of limited competition, heavy consolidation in the sector, regional monopolization, and government policies that for years have failed to fully acknowledge these realities.
The industry uses a classic trick to get consumers: sneaky hidden fees. There’s a universe of fees that let ISPs advertise one rate, then sock US consumers with another. There’s “internet cost recovery” surcharges and “regulatory recovery” fees (designed to try to get consumers to blame higher costs on the government), installation fees, activation fees, hardware fees, early termination fees, fees to pay your bill over the phone, fees to pay your bill in person, and a bevy of other surcharges. And don’t forget modem rental fees, which, according to OTI, can also dramatically increase monthly consumer costs.
U.S. providers are also increasingly embracing monthly usage caps and overage fees, arbitrary constructs that serve no technical purpose and don’t help manage network congestion. Data indicates that roughly 175 companies impose such unnecessary and confusing surcharges, driving already expensive US broadband bills even higher.
A 2019 Consumer Reports study found that fees imposed by cable and broadband providers can increase monthly bills by as much as 24 percent. That’s hundreds of additional dollars per year for consumers, and upwards of $28 billion in additional revenue for the telecom industry. All made possible by sagging oversight and limited competition.
Complex billing structures, hidden fees, shifting promotional offers, and a lack of transparency by broadband providers often make determining what you’ll actually pay a hassle by design. Worse, OTI notes that many studies examining U.S. broadband prices are based exclusively on advertised, promotional prices, and don’t include the stealthy surcharges or the cost increases after the first few months of service.
Additional data helps clarify the picture. A 2020 FCC Urban Rate Survey on consumer broadband prices found that non-promotional rates for lower-priced, standalone broadband tiers rose 20 percent between 2015 and 2020, more than double the rate of inflation.
Data can be spun and twisted, but reality can’t be negotiated with. And the reality is that U.S. consumers pay some of the highest prices in the developed world for broadband thanks to limited competition and “light-touch” government oversight.
While the affluent may think soaring broadband prices are something to sneeze at, a lack of affordable broadband is a significant obstacle to education, employment, healthcare, and opportunity during—and after—the pandemic.
Broadband is the infrastructure of opportunity. But we have allowed broadband providers to set monthly costs too high for too many to participate.
Let’s stop pretending. The lack of broadband competition is a major problem. President Biden’s broadband plan is a first step toward fixing it.
Kevin Taglang is the Executive Editor at the Benton Institute for Broadband & Society
The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.
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