Computing the Cost of Intelligence: The Consumer Price Index and Information Products

Every month the U.S. Bureau of Labor Statistics (BLS) announces its latest estimate of the cost of all consumer goods and services. These initial estimates are then revised as additional data come in. One of the key drivers of the American economy over the last few years has been the declining cost of information in relation not only to other goods and services but occasionally also in nominal prices. This blog reviews the current procedures for measuring information costs, hopefully giving readers more context about the long-term trends.

We examine seven discrete categories of goods and services that have the primary purpose of collecting and processing information. Four of these goods are members of the broader category of Information technology, hardware and services. Two lie within the category of Telephone services. The final one lies within the category of Video and audio.

Approximately half of the index for telephone hardware, calculators, and other consumer information items consists of cellphones (about 95 percent of which are smartphones) with home-based phones, phone accessories and smartwatches making up the rest. The Consumer Price Index (CPI) records the actual price of a smartphone, with promotions deducted from the advertised price. The BLS also separates out the price of hardware from accompanying services such as Internet access and television subscriptions. These services are collected in a separate category of spending.

One of the most important information products is smart phones. These goods are the only item in their broader category that are quality adjusted due to the rapid rate of technological advancements and improved quality for consumers. For the vast majority of products, BLS simply records the price without any adjustment for quality. However, for smartphones BLS economists have developed a hedonic regression model that allows them to identify how much of a price rise is due to specific improvements in quality. Assuming some of a price increase was due to product improvements such as better screen resolution, BLS would add the value of those improvements to the previous price of the smartphone and compare it to the new price. If both prices were the same, consumers would be paying more but also getting more, as opposed to paying more for the same benefit due to general inflation. Wireless telephone services and television services undergo similar adjustments.

CPI also uses the concept of directed substitution for both smartphones and computers because of the rapid quality improvements in each good. Basically, twice a year BLS assumes that consumers are purchasing the newer version of a product even if the older one is still available. The resulting data recognizes that manufacturers are improving the cost and/or quality of the product even if consumers are not purchasing it yet.

Another key fact is that information services make up a growing share of consumers’ total spending. This multiplies the impact of cost restraint. A 50 percent price reduction in housing, which currently accounts for more than 44 percent of spending, has a much larger effect on living standards than a 50 percent cut in furniture and bedding, which makes up less than 1 percent. Table 1 shows the relative weights for selected categories of information spending for 2017-18 compared to 2024. Some items have increased their share of the consumer’s budget while others have contracted.

Table 1: Relative Importance of Components in the CPI, 2017-18 and 2024

Spending Category	2017-18	2024
Computers, peripherals, and smart home assistants	0.285	0.293
Computer software and accessories	0.016	0.027
Internet services and electronic information providers	0.856	0.923
Telephone hardware, calculators, and other consumer information services	0.066	0.461
Wireless telephone services	1.824	1.340
Residential telephone services	0.405	0.126
Cable, satellite and live streaming television service*	1.145	0.606

*Was Cable and satellite television service in 2017-18

It is important to note that the CPI only collects data on consumer items. Price and quality improvements on products purchased by businesses are not recorded. This excludes a major source of innovation and productivity in the economy. However, many of these changes are eventually captured as competition eventually forces companies to pass most of the benefit on to consumers. Also excluded from this table are subscriptions to on-line magazines, games, and music and video downloads, which are treated just as if the consumer purchased them offline. Non-business subscriber fees for residential television are included, but pre-recorded video-on-demand subscription streaming services are not.

BLS faces a constant problem separating out changes in general inflation from changes in the quality and capacity of specific goods and services. Products that seldom change from one period to another present little problem. However, the true prices of products that change rapidly are more difficult to measure. A current example is the rise in pay-per-view streaming which charges viewers fees for a greater choice of programming content. If a replacement product is better than its predecessors and BLS can measure the value of the difference in quality, it will raise the price from the previous month to reflect that there has been no change in the real price. In cases like this, nominal price increases may simply reflect the fact that consumers are getting more for their money. In this case the market is doing exactly what it should.

The relationship between prices and growth is complex. Some experts argue that much of the U.S. productivity boom in the 1990s and 2000s was due to statistical agencies using hedonic measures to overestimate productivity gains. However, others point to the large unincluded value of free services such as ChatGPT, Facebook, Gmail, Google Maps, and YouTube. Although these services deliver tremendous value to consumers, they are not counted in GDP. This debate will not end soon. In the meantime, the important point is that technology does increase our living standards even if the inherent level of data uncertainty makes this hard to see. 

FSF at 20: Looking Backward, Looking Forward

 Randolph May

As most of you reading this (hopefully) already know, the Free State Foundation will be celebrating its Twentieth Anniversary with a luncheon event on June 4 at the National Press Club.

Do you recall the opening lyrics to one of my favorite Jimmy Buffet tunes, "Changes in Latitudes"?

"I took off a weekend last month just to try and recall the whole year

All of the faces and all of the places wonderin' where they all disappeared

I didn't ponder the question too long, I was hungry and went out for a bite

Ran into a chum with a bottle of rum and we wound up drinkin' all night!"

Forget about the "chum with a bottle of rum" part – at least for now. But I will admit that I spent a weekend last month – well, many weekends and weekdays over the last couple of months – just trying to recall all that the Free State Foundation has done in the two decades since its founding in 2006!

At the time, in 2006, a friend told me, "Randy, if you do this, you're just going to be one man and a fax machine. He was half right. I didn't have a fax machine!"

Don't worry! I'm not going to indulge myself here – or risk boring you – by reciting a litany of my favorite events or publications, policy victories or defeats, and so forth. But in the recesses of my own mind, I've done a lot of, as Jimmy Buffet would say, "recalling" recently.

And I'll just say, looking back, I'm truly proud of what we've accomplished.

Obviously, there would have been no accomplishments without the hard work over the years of my many FSF colleagues. Here, with the obvious disclaimer of limitations of space and time, and the understanding that necessarily I am drawing a line, I want to call out longtime FSF staff members Seth Cooper, Kathee Baker, and Andrew Long for special appreciation for their contributions and commitments to the organization. And my wife, Laurie, who has served as FSF Secretary/Treasurer since the inception (or is it conception?), has contributed so much and has been a source of support in so many ways that go beyond her "official" duties. And thanks to all those staff members and Free State Foundation academic advisors, unnamed here, for their many and varied contributions to our success.

And, of course, special thanks to those who have sustained our work with their financial contributions. It goes without saying that we could not have kept the lights on – and accomplished all we have – without your steadfast confidence in the persuasiveness and integrity of our work.  

What I am most proud of, though, can't be measured by the number of Perspectives from FSF Scholars published (849 from 2006 on) or the number of blogs posts (2,444 from 2006 on). Or the number of star-studded events held.

No, what I am most proud of is that, since its founding, the Free State Foundation has remained true to its proclaimed mission. Right at the start, I posted on our website that FSF's mission was "to promote, through research and educational activities, understanding of free market, free speech, limited government, and rule of law principles … and to advocate laws and policies true to these principles." Regardless of who held the White House, which party controlled Congress, or who was in charge at the FCC or elsewhere in government, we've tried to stay true to those foundational principles as we've gone about our daily work.

Others, of course, are free to make their own judgments about what we've done. But I'm satisfied that we have succeeded, over two decades, in remaining true to promoting policies consistent with our principles. It's my fervent wish that so long as FSF exists, it will continue to do so.

I leave on this note. As America celebrates its 250th anniversary, there is no doubt we are living in challenging times – not for the first time, of course. And for those toiling in the realm of public policy advocacy – like Free State Foundation scholars – today's frenetic, frantic, hyper-ventilated, "influencer"-saturated environment certainly presents challenges. Too often, public policies appear to be divorced from foundational principles – for example, free markets, free speech, property rights – that not long ago were proclaimed sacrosanct.

It is the season of click-bait, with crude memes, name-calling, and even profanity-laced tirades much in fashion in places where they would have been verboten only yesterday. This makes constructive civil discourse in the public policy space ever more challenging. But this is not the place where I wish to cast aspersions on any person, party, group, or special interest. And, truth be told, there's enough aspersions to cast all around!

This is what I want to say now. However difficult America's challenges may be today, and however difficult the challenges may be today in the policymaking arena in which the Free State Foundation labors, I am certain that the best way forward for America to realize the promise of the Declaration of Independence which we celebrate, and for FSF to be true to its founding vision, is adherence to a fixed set of foundational principles. Indeed, that's the only way forward.

Robert Frost, the quintessential American poet, declared: "Most of the change we think we see in life is due to truths being in and out of favor."

Going forward, as it has been since June 2006, the Free State Foundation's mission will remain helping to ensure that free markets, free speech, limited government, and the rule of law endure as truths in favor.

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I would be very pleased to have you attend FSF's Twentieth Anniversary Celebration on June 4 at the National Press Club. The event agenda is here. Space is limited. To attend, you must register here if you haven't already

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What Others Are Saying About FSF's Twentieth Anniversary

 

Congressman Richard Hudson

 

FCC Commissioner Olivia Trusty

 

Bill Kennard, Former FCC Chairman

 

 Michael Powell, Former FCC Chairman

USTelecom's 2026 Broadband Pricing Report Sings a Familiar Refrain: Backtracking Prices and Surging Speeds

The latest broadband pricing report released by USTelecom | The Broadband Association (USTelecom) tells a familiar – and welcome – tale of falling prices and rising speeds.

Released on Tuesday and, as in previous years, prepared by Business Planning, Inc.'s Arthur Menko, "2026 Broadband Pricing Index: Faster Speeds, Lower Prices" (2026 BPI) analyzes data from 2025. It concludes that real (that is, adjusted for inflation) prices fell as speeds continued to climb. Specifically:

• PRICE: For the most-popular offerings (those delivering download speeds between 100 Megabits per second (Mbps) and 940 Mbps), the 2026 BPI reports that real prices dropped by 6 percent. The price of so-called "entry-level" plans – which provide download speeds between 100 and 249 Mbps and which USTelecom characterizes as "the most accessible tier for price-sensitive households" – reportedly decreased by an even greater margin: over 17 percent. According to the 2026 BPI, the price of gigabit (1,000 Mbps or greater download speeds) services fell nearly 5 percent.

• SPEED: The 2026 BPI concludes that subscribers to the most-popular offerings in 2025 saw speeds increase by nearly 22 percent – and since 2014, those speeds have increased by 145 percent.

Americans appear to recognize that the broadband value proposition hasn't merely improved but stands as a welcome outlier in comparison to other household expenses. According to a March 2026 survey of 1,500 likely voters conducted by Impact Research and cited in the 2026 BPI, only 2 percent of respondents identified the price of home Internet service as a top two cost concern, rendering it the least pressing of all surveyed categories, which included groceries, health insurance, housing, gasoline, and prescription drugs, among others.

It is important to note, of course, that none of this happens by accident. Thanks to the expenditure of tens of billions of dollars in private capital each year – according to an October 2025 USTelecom investment report, nearly $90 billion in 2024 and over $2.2 trillion total since 1996 – fierce competition among a diverse set of facilities-based providers increasingly delivers better service at lower cost.

In a companion blog post, USTelecom CEO Jonathan Spalter summarized the report in plain terms – "broadband internet service continues to deliver more value for less money" – and urged policymakers to ensure that those trends continue. Specifically, he identified copper retirement and permitting reform as two areas ripe for further deregulatory action.

As it happens, in comments filed yesterday regarding the Commission's next report on the state of competition in the communications marketplace, FSF President Randolph May and I made the same two points. We also identified the pole attachment "accelerated docket" and the spectrum pipeline as areas where the FCC can take steps to accelerate broadband investment and deployment.

Free State Foundation scholars have summarized every BPI report released by USTelecom. Posts to the FSF Blog addressing previous versions are available here: 2024 | 2023 | 2022 | 2021 | 2020.

Maryland Has a Long Way to Go on Taxes

With Maryland's new budget going into effect in July for FY 2027, Governor Wes Moore has touted the plan as fiscally disciplined, citing no new taxes or fees. But one year without new increases doesn't reverse Maryland's problematic budgetary trajectory.

Maryland residents and businesses are still living with the tax increases enacted in the current FY 2026 budget, which included a 3% sales tax on IT services; an increase in the vehicle excise tax rate from 6% to 6.5%; an increase in the vehicle emissions inspection fee from $14 to $30; a 3.5% rental vehicle tax; and a new $5-per-tire fee, among others.

Maryland has traditionally been among the least tax-competitive states in the country, and it’s only gotten worse under the Moore administration. According to a Tax Foundation analysis of its State Tax Competitiveness Index, Maryland ranked 42nd on the index in FY 2020 and has since fallen to 46th in FY 2026, where 1st is most competitive and 50th is least.

Neighboring states have also seen their tax-competitiveness rankings slip over that period, but they all remain substantially more competitive than Maryland, according to the Tax Foundation report. In FY 2026, Delaware ranks 24th, Pennsylvania 36th, and Virginia 30th.

The income tax is a big part of why. Maryland’s low tax competitiveness is driven in large part by high income taxes, as the Tax Foundation's full report details, a topic I covered last month. As part of the FY 2026 budget, Maryland created a new top marginal rate for personal income tax at 6.5%, compared to 3.07% in Pennsylvania, 5.75% in Virginia, and 4.82% in West Virginia. Maryland’s corporate income tax rate is also high at 8.25%, compared to 7.99% in Pennsylvania, 6% in Virginia, and 6.5% in West Virginia.

This matters especially because Maryland is an expensive, high-cost-of-living state competing for businesses and workers who have options regarding where they choose to live. Maryland is making itself a harder and harder sell.

Governor Wes Moore needs to get serious about improving Maryland's budgetary situation. As part of that effort, the "Free State" definitely needs to treat improving its tax competitiveness ranking as an economic priority.

PRESS RELEASE: FSF Comments Show the FCC That the Communications Marketplace Is Competitive

Today Free State Foundation President Randolph May and Senior Fellow Andrew Long submitted comments in the FCC’s proceeding to examine the state of competition in the communications marketplace. Below is the Introduction and Summary of the comments.

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"In 2026, the hallmarks of the communications marketplace are competition and convergence. Wherever legacy regulations do not interfere, countless providers efficiently deliver communications – in whatever form (text, voice, video) – over a range of ubiquitously available IP-based distribution platforms. With respect to both content and connectivity, competition abounds.

 

As such, to achieve its goals, this next competition report need only identify additional opportunities to tear down rusty silos, repeal expired rules, and employ the various tools in the Commission's toolbox to achieve further deregulation – the DELETE, DELETE, DELETE proceeding; rulemakings; forbearance; waivers; sunset provisions; and so on. This will encourage further private investment (which has surpassed $2.2 trillion since 1996), accelerate deployment timelines, and, more broadly, eliminate unnecessary red tape.

Specifically, the Commission should acknowledge the true scope of the consumer-driven broadband marketplace (not some artificially contrived and constrained "broadband" marketplace) and, in response, take action to advance the transition to all-IP networks; eliminate unreasonable permitting hurdles at every level of government; continue to take swift action to resolve pole-attachment disputes; and take measures necessary to keep the spectrum pipeline flowing.

To unlock the full potential of unfettered competition to benefit consumers in the video programming marketplace, the Commission should: (1) reject calls to extend antiquated regulations applicable to facilities-based distributors to over-the-top providers – and instead eliminate those regulations altogether; (2) direct a fresh set of eyes to the regulated relationship between local broadcast television stations and facilities-based distributors, including asking whether in 2026 (a) there remains a factual predicate for the retransmission consent regime, and (b) there might be a more direct and efficient way to promote localism than taking steps to prop up legacy revenue streams (e.g., sports-driven advertising sales); and (3) going beyond the proposal to eliminate set-top box reporting requirements and sunsetting all of its rules implementing the navigation device provisions of the 1996 Telecommunications Act."

Do Pole Attachment Issues Threaten BEAD Projects?

On May 12 researchers Alex Karras and Michael Santorelli of the Advanced Communications Law & Policy Institute at New York Law School published a report and analysis of the cost of getting access to utility-owned poles as part of the deployment costs under the historic Broadband Equity, Access, and Deployment (BEAD) Program. The bottom line is that projects funded by BEAD are expected to lay 188,287 miles of aerial fiber on 3.9 million poles within 2,053 separate electric utility service territories. Using rough estimates, the estimated pole costs that BEAD contractors will have to pay in order to attach to poles range from $534 million to $4.63 billion nationwide.

Every BEAD deployment contractor had to estimate actual pole attachment costs as part of the application process. The study’s authors were not trying to duplicate these estimates. However, the range of estimates could be a sign that actual costs will vary widely. In a situation where contractors are facing tight deadlines and where actual costs are uncertain, pole attachment issues could become the focus of a lot of deployment problems. Coming on top of a renewed legal battle between Comcast and Appalachian Power Company, the large range of attachment prices shows that there is tremendous room for disagreement between broadband contractors and pole owners.

 

According to the report, pole ownership and regulation follow a “scattershot” approach. Electric cooperatives play a disproportionate role. Although they only serve 13% of electric customers, about 40% of BEAD aerial fiber will be deployed across their territories. The FCC has jurisdiction over poles owned by investor-owned electric utilities (IOUs) in 27 states. In the other 23 states, IOU poles are regulated by state public utility commissions. Regulation of poles owned by cooperatives and municipal electric utilities differs among states. The authors speculate that: “[i]n states where cooperatives and municipal electric utilities are unregulated, there are few guardrails in place to provide predictability and consistency in how pole-related costs are set, increasing the chances that BEAD subgrantees could encounter higher-than-expected pole fees from these entities.”

Electric utility pole issues have a significant effect on broadband deployment. The National Telecommunications and Information Administration (NTIA) has tried to address regulatory problems by extending the reach of the FCC’s rules. The FCC recently showed its willingness to act quickly in resolving pole disputes by expediting its decision in a dispute between Comcast and Appalachian Power Company. Comcast alleged that Appalachian Power was charging it for pole damage that was caused by third parties. The Commission ruled that Appalachian Power could only charge Comcast for the incremental cost of its project.

However, Comcast recently approached the Commission complaining that Appalachian Power was refusing to abide by its ruling. Thus, it remains to be seen whether tougher action by the FCC or NTIA will translate into a quicker, less contentious process that lowers cost or whether it leads to a rise in litigation that slows everything down.

Using a variety of independent studies, the researchers chose low, medium, and high estimates of pole costs depending on whether a pole just needs equipment added or whether it needs replacement. Their estimates are limited to electric utility-owned poles, which constitute about 70% of the total. Including all poles would raise the price significantly. The estimates for the cost per touched pole were $75 (low), $175 (base), and $450 (high). The estimates for the percentage of poles that will have to be replaced were 3% (low), 4% (base), and 8% (high). Finally, the estimates for the cost of replacing a pole were $2,000 (low), $3,500 (base), and $9,000 (high). Using the base assumptions produced an estimate of $1.25 billion or roughly 6 percent of BEAD deployment funds. The boundary estimates were $534 million (low) and $463 billion (high). This leaves a lot of room for disagreement between BEAD contractors and pole owners.

What can be done? The NTIA requires cooperatives and municipal utilities that participate in the BEAD program as subgrantees to comply with FCC pole attachment rules as a condition of accepting BEAD funding. The rules cap rates and charges that pole owners can impose on contractors. They also create timelines for processing applications and require regular progress reports. The authors also advocate letting states use some of the remaining $21 billion in nondeployment BEAD money to offset unexpected pole attachment costs. They point to successful models in Texas and North Carolina as good examples. State regulators could also rationalize pole issues as well as the accompanying permitting, rights of way, and easement issues that accompany them.

With proper policies in place, broadband providers around the country will soon be engaged in a major deployment effort to significantly expand coverage to unserved and underserved areas. In a project of this scope, problems are inevitable. But many of these problems, including pole attachments, can be managed better if regulators and broadband providers perform proper due diligence, build strong relationships, and create transparent, predicable processes.

Revised BEAD Program Connects its First Location

On November 15, 2021, the Infrastructure Investment and Jobs Act – that is, the legislation that created the $42.45 billion Broadband Equity, Access, and Deployment (BEAD Program – was signed into law. On May 14, 2026, 1,641 days later, BEAD Program funding at long last enabled the connection of its very location.

Of course, millions more locations are expected to come online in the coming weeks, months, and years.

In remarks offered on location in Ogallala, Nebraska, NTIA Administrator Arielle Roth highlighted the expediting impact of the "Benefit of the Bargain" revisions adopted last year. She also discussed changes designed to reinstate Congress' technologically neutral intent. In that regard, she noted that "[i]t's not an accident that this connection here in Ogallala is from an unlicensed fixed wireless provider."

Finally, a reminder: Ms. Roth will be a keynote speaker at the Free State Foundation's Twentieth Anniversary Celebration on Thursday, June 4, from 11:45am to 3pm, at the National Press Club. If you haven't already, register here to catch her fireside chat with FSF President Randolph May as well as an impressive lineup of other speakers.

Finding a Consensus on Accomplishing Permitting Reform

With the House of Representatives’ failure to schedule a vote on the American Broadband Deployment Act of 2025, we may have reached an impasse, at least for the moment, on achieving additional permitting reform at the state and local levels. Congress has taken several steps forward on reform at the federal level. But these mostly involved changes to the National Environmental Policy Act or the National Historic Preservation Act, the statutes that govern the majority of federal permitting decisions. However, one past attempt at negotiation may offer some lessons.

The success at the federal level led many to conclude that circumstances might be right for a more comprehensive reform to remove obstacles at the state and local levels. On March 24, Representative Buddy Carter (R-GA) introduced H.R. 2289, the American Broadband Deployment Act, which combined provisions from roughly 20 previous bills, including shot clocks and limits on fees, to accomplish broad reform. The bill passed the House Committee on Energy and Commerce and was scheduled to go before the House Rules Committee on April 20^th. However, a vote was indefinitely postponed once it became obvious that the bill lacked the votes to pass. This change in outlook was widely attributed to opposition from a number of associations representing state and local government, including the National Association of Counties and the U.S. Conference of Mayors.

Although Congressman Carter expressed confidence that the bill would pass later this Congress, the debate currently seems to be at an impasse. While the FCC is pursuing permitting reform under its own authority, the timing of any decision is not known and any significant change will be immediately challenged in court, delaying its effect. Meanwhile the significant increase in buildout activity due to the Broadband Equity, Access, and Deployment Program (BEAD) is approaching.

This is a shame because sensible permitting reforms would benefit both broadband providers and local governments. To start, unnecessary time and costs delay the build-out and use of broadband coverage to local households. Coverage in turn is firmly linked to greater economic activity and higher living standards. In the short-run permitting also increases local demand for skilled labor. So far much of the debate has been confined to anecdotes regarding specific experiences and limitations on the FCC’s powers, especially in light of recent Supreme Court decisions. While a list of unreasonable fees, unrelated construction requirements, poor construction planning, and damage to state and local property catches one’s attention, it is probably not the best grounds for determining public policy.

Almost two years ago the Benton Institute for Broadband & Society teamed up with the Georgetown Law Institute for Technology Law & Policy and groups of both Internet supporters and state and local governments to explore the possibility of improving the permitting process in ways that benefit all stakeholders. The effort involved a survey of stakeholders, a one-day conference, and a written report.

The report contained several sensible suggestions for reform. It listed three findings, each of which produced more specific suggestions. First, the parties should foster a partnership between the permit seeker and the permitting authority. They should try to create trust and accountability by meeting early and often and understanding the role of both local government and the proposed development. According to the report, one key issue is determining when any shot clock would start.

Second, the parties should maximize the resources available to the permitting authority. There was a consensus that many permitting agencies lack the resources needed to handle the normal permitting volume, let alone the significant increase expected from BEAD disbursements. Given BEAD’s history and the current delay in announcing how the government will spend approximately $21 billion in non-deployment funds, one should not be surprised if a large number of projects experience significant delays from a variety of causes, placing greater strains on agencies. Given that much of the under capacity may be due to the increase in BEAD-funded construction projects, perhaps using some of the excess to increase local capacity, at least through the surge, makes sense. Providers should also help agencies build public support by articulating the benefits of broadband delivery.

Third, the process should be transparent and consistent. Efforts to modernize the process by allowing builders to download forms, submit applications online, and look up the current status of projects can lower total costs and reduce unnecessary duplication. Modern online dashboards are already being used successfully in some jurisdictions.

In general, and certainly in the abstract, the Benton Institute report recommendations are sensible and merit action. However, they do not address some of the worst abuses regarding permitting at the local government level. These abuses increase the costs of broadband deployment projects and delay the provision of new or improved service to consumers.

Taking the position that state and local governments should face no deadlines, should be able to charge whatever fees they suggest are reasonable, and should be allowed to require substantial unrelated improvements seems like something we should avoid.