Is the price of Internet service rising or falling? Benton Senior Fellow John Horrigan recently tried to answer this question in a recent analysis for the Benton Institute using the FCC’s Urban Rate Survey (URS). His analysis builds on a prior piece by USTelecom. The answer is important because significant real increases in the cost of broadband may delay its benefits and serve as an argument for greater federal involvement. In brief, the price of most connections has fallen significantly since 2020. However, subscribers are choosing to spend more on faster plans.
Horrigan concluded that “[b]roadband service offerings at the highest speeds are expensive, growing in prevalence, and driving up average broadband prices.” Average price across all broadband plan offerings grew 4.8 percent in real terms. However, he also found that the rise is mainly due to increased demand for high-speed connections (2 Gbps or higher), not general inflation. The portion of high-speed plans in the URS sample rose from 9% to 16%. As the number of high-speed plans increases, they form a larger percentage of the URS survey. This in turn raises the average price for all plans, even if the price of every specific plan remains the same.
The chart below gives the average change in the price of different plans between 2020 and 2025 for different equipment and speeds. Higher than 2 Gbps is measured from 2021.
Change in Real Broadband Prices from 2020 to 2025
Speed or Technology |
% Change |
|
|
|
|
Technology |
|
|
Cable |
-13.8 |
|
Fiber |
+40.1 |
|
DSL |
-9.3 |
|
Fixed Wireless |
-50.7 |
|
|
|
|
Speed |
|
|
Below 100 Mbps |
-15.0 |
|
100-1000 Mbps |
-28.9 |
|
1000-2000 Mbps |
-15.3 |
|
Greater than 2000 Mbps |
-25.3 |
Consumer demand has likely driven most of the increase in fiber. Horrigan also found that the quality of Internet plans is increasing. The most obvious improvement has been in data speeds. However, increases in the variety of content and reliability also matter. As the quality of broadband increases, consumers are willing to pay more.
The survey does point to a possible price ceiling in which low-income users are unable to pay higher prices even when better quality is considered. The decline in offerings of the lowest-cost plans may hurt low-income households. However, many Internet providers have special offerings for qualified low-income households that offer discounted prices. For example, Xfinity Essentials provides affordable home Internet for qualifying households ($14.95 per month for up to 75 Mbps, or $29.95 per month for up to 100 Mbps) — as well as low-cost computers, free WiFi hotspots, and free Internet training. CTIA points out that the industry has participated in programs like Lifeline, the Emergency Broadband Benefit and Emergency Connectivity Fund, and the Affordable Connectivity Program.
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