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Summary:

As a general rule, prices of technology-driven products and services tend to fall over time. But what’s happened with broadband prices is a clear exception.

planetbroadband

At GigaOM, we closely track the world of broadband, and were curious what has happened to the prices of it relative to some other technology-dependent products and services. So using the most recent data from the Bureau of Labor Statistics, we compared the prices of wireline broadband to that of computers, computer software, and wireless cell phones. We also tracked those against the entire Consumer Price Index.

Here’s what we found: While the price of these other technology-driven products and services has continued to fall over the last few years—personal computer prices have dropped over 44 percent in five years—the prices for wireline broadband have mostly been flat.

So why haven’t wireline broadband prices budged in recent years? The high, fixed costs of broadband means that there hasn’t been a big rise in competition among providers, according to Scott Wallsten, Vice President for Research and Senior Fellow at Technology Policy Institute. Indeed, most Americans don’t have more than two options when it comes to wireline broadband providers. (See how many your area has here. )

In the meantime, people who don’t have broadband want it badly and the for those who do have it, it’s become increasingly indispensable. The result is that there hasn’t been much downward pressure on prices.

The last few months did see a very slight drop  in the price of broadband. It’s unclear whether that’s just a temporary blip or beginning to use the high-speed wireless network LTE as a substitute for wireline broadband. (Of course, if it’s the latter and that trend continues, that could drive down the prices for broadband.) “A big, and open, question is whether LTE will begin to compete on the margins with wireline broadband,” says Wallsten.

  1. Normalize for download speeds, and it’s definitely dropped.. Yes the providers are investing a lot, and prices are staying flat.. but I have a 75/35 connection now.. I had a 5/.5 connection 5 years ago.. similar price

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    1. Alamgir Tamboli Friday, December 7, 2012

      Agreed. In addition to speeds, total download amounts (bandwidth consumed) has increased a lot with OTT services.

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    2. Peter and Alamgir, the BLS normalizes its price index to account for speed, so the index should reflect the increase in speeds we’ve seen. However, the BLS doesn’t give its exact methodology, so it’s hard to tell how accurate the normalization is.

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      1. Alamgir Tamboli Friday, December 7, 2012

        Did not realize that, thanks for the info!

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    3. Compared to memory or storage prices, it hasn’t dropped as much. The providers are investing a lot in absolute terms, but relatively speaking, it’s not much. ATT & VZ have halted the expansion of their fiber, and don’t plan on offering it to those who don’t have it, so here I am, 3500 feet from the CO, and all I can get is 7 mbps. For $149/mo.

      It’s called lack of competition. I wish they would sell their land-line business, instead of milking their customers.

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      1. Verizon has sold at least some of their copper-wire assets. They don’t want the maintenance costs of ancient copper land-lines.

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  2. Mark Holoubek Friday, December 7, 2012

    Canadians have it much worse. We have draconially low cap limits. Many subscribers actually make do with 60 GB or less a month and wonder why services like Netflix, iTunes and online app purchasing drives them over their limit!

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  3. Michael W. Perry Friday, December 7, 2012

    In Seattle, the problem is crony capitalism. In my neighborhood, Comcast has no effective competition for broadband, so prices are high and almost every week I get multiple, wasteful flyers from Comcast trying to get me to sign up for a more expensive plan.

    Meanwhile, just a few miles north of me and just outside Seattle city limits, Verizon is offering fiber broadband that could give Comcast some healthy competition. But, as one Verizon employee told me, that isn’t going to happen. Comcast and Seattle’s politicians have a cozy little relationship that nothing is going to disturb.

    What passes for a city council in Seattle would rather spend its time banning plastic shopping bags than addressing anything serious. And worst of all, it seems impossible to get Seattle voters to notice this sort of thing. They’d rather hang around Starbucks, sipping their lattes and chatting about trivia.

    I fight the Comcast monopoly by having the cheapest, slowest connection they have and still cramming the same amount of data through it.

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    1. Christopher Mitchell Friday, December 7, 2012

      Note that Seattle’s Mayor ran on a platform of building a next-generation network to give people a real choice but the City Council shot him down.

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      1. Seattle’s new network is happening: http://gigabitseattle.com

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    2. I’m pretty sure that most areas of Seattle allow competition now, it’s just that unless you’re talking about adding a multi-family building (or other multi-customer situation), one company isn’t going to move into another company’s area. It’s too expensive.

      That changed over 15 years ago if my memory is correct.

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  4. Mark Holoubek Friday, December 7, 2012

    A sequel to my earlier comment. Rogers, the main cable modem internet provider in Canada, recently bragged how they were speeding up most subscribers access dramatically at no cost to consumers. When people went on Rogers official forums to say “thanks for solving a problem few people complained about, but what about our cap limits?”, Rogers was tellingly silent. They DID increase cap limits quite modestly early this year, but even then by only 20%.

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  5. My 15/5 FiOS went from $50 to $65, so I dropped them. Luckily we have two other cable companies to choose from and I went with the one selling Docsis 2.0 technology at 25/2 for $30/mo. I guess that’s how it’s supposed to work, but Verizon was just crazy that they raised the lowest tier. I even asked them to talk numbers but they wouldn’t.

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  6. When you see what Sonic.net provides and charges, and you consider that they’re buying wholesale from AT&T to do it (at what must yield a profit to both firms), you realize that this is about restrained competition, not high fixed costs.

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  7. Matthew Butch Friday, December 7, 2012

    “The high, fixed costs of broadband means that there hasn’t been a big rise in competition among providers”

    Which is because of local government approved monopolies on cable service. Maybe if we got rid of that we could have some actual competition.

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  8. Christopher Mitchell Friday, December 7, 2012

    Many of the community broadband networks have not increased their prices for broadband. Why should they when the price of delivering a bit keeps dropping every year? It is a lack of choices that keeps prices high, pure and simple.

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  9. this lack of fiber in american’s diets is doing them no good.

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  10. Lack of competition is why prices haven’t dropped… its not like their providing commodities.. their providing a virtual product basically, with fixed cost for years, and least with equipment and lines, while their whole sale price drops… Another words, if they were upgrading all the time, equipment, I can understand the fixed cost, but I’ve had to contend with pretty much the same lousy internet speeds for freaking years and years where I live. Literally, no joke, no exaggeration. I live in the middle of the US, close to the eastern states…

    Kinda in the south kinda not. Anyways, I’ve heard about fiber for years and the cost associated with it. If I could have fiber service.. like for 50 dollars a month, and I got like 50/50MBPS and I had to pay 2500 dollars or sign a 5 year contract with the companie, I’d do either to get better internet service/speeds/latency resolved. I’d do it tomorrow. And 2500 hundred dollars is a lot of money, but hell for the 25 years+ I’ll live where I do, it would be worth it.. These companies must not even be thinking 10 years long term investment. Its garbage.

    Also I have TimeWarnerCable, they bought out newwave who was my provider, a decent company honestly, compared to charter who owned the cable lines before them….

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