Recent reports have described falling prices in broadband coverage. These declines are kind of surprising given the high initial costs of deploying broadband and the general increase in most other costs of living basics, including food and gas. Two recent articles look at some of the actual plans offered by Internet service providers. They confirm the general price declines but look more closely at how prices play out in the actual market
The
conclusion of both articles is that both users and companies have been
experimenting with pricing policy to get the best deal. The key finding is that
broadband is already affordable to the vast majority of Americans, largely as
the result of market competition.
One
of the articles (subscription required) states that: “It would not be an exaggeration to say
that many U.S. ISPs – responding to free-market forces rather than regulatory
gimmicks – have on their own established a competitively driven replacement for
the defunct Affordable Connectivity Program.”
The second article describes plans from a number of technologies and companies, including Charter, Optimum, and Comcast. Providers for the most part have done away with extra costs including equipment rental, junk fees, and automatic price increases. Instead, companies are offering price freezes, in some cases for life. There is no reason that these guarantees could not be standard practice in the next few years.
Companies compete using a number of technologies including cable, fixed wireless, fiber overbuilders, and satellite. On average Americans pay $78 a month for broadband. Surprisingly, 63% of adults are paying $195 more for Internet this year than they were last year. This may be because users are relatively price insensitive once they find an acceptable plan, the expiration of promotional prices, or they are purchasing higher speeds. Still, the article lists several ways for users to lower their cost, such as buying the modem and router, negotiating with their current supplier, choosing a slower plan, and switching providers.
All this goes to show that, like any competitive market, buyers and sellers continually negotiate for a better deal. The difference is that, with the help of a lot of innovation and private investment, the broadband market promises further benefits to consumers. Once quality is held constant, broadband prices are clearly falling, so much so that users are buying more of it.
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