According to the 2021 Broadband Pricing Index Report from US Telecom, prices are trending downward for American broadband services when compared with 2020 rates. This includes popular tiers, which have decreased by 7.5% this year. Downward price pressure has been a fixture of the industry since 2015. Therefore, in 2021, despite surging demand, the price of broadband fell more than 9% when adjusted for inflation. This means more value at a cheaper price for viewers.
As the industry focuses on the federal target of closing the digital divide, prices will likely remain low. Let's take a look at what this might mean for underserved users and the industry as a whole.
Substantial Price Reductions Make High-Speed Services Affordable
The BPI report collates FCC data and other public records to determine average pricing for different broadband services. The report looks at trends in residential broadband pricing, indicating substantial declines for cable and broadband internet services. During the pandemic, demand for these services soared without significant increases in cost, despite potential overhead increases in serving new customers.
Both the federal government and private individuals and entities have been pushing for more affordable internet access for students, Americans below the poverty line, and others who cannot afford to pay hundreds of dollars to stay connected.
Prices Low Despite Rising Cost of Goods Sold
The report also showed that the cost of goods sold went up for service providers. The widespread installation of 5G infrastructure, additional training for sales staff, operators, and other costs related to introducing or developing new products typically shows up in increased subscription costs or fees. So far, that hasn't happened in internet access for several years.
Other Findings of the Broadband Pricing Index (BPI) Report
Two other findings shed light on the reasons behind the cost of internet service. The most popular speed tiers have remained at the same price or gone down and so have the highest speed tiers. Purchases within these sectors showed year-over-year price drops in 2020 and 2021, despite more people staying at home due to the pandemic.
As noted above, the most popular tiers of broadband declined 7.5% or 9.3% in real cost.
The highest speed broadband service also decreased in price, falling 2.3% year over year, or 4.2% in real costs.
At the same time, goods and services in the United States increased by nearly 2% overall.
Why Are Broadband Prices Falling?
The adoption of declining entry barriers has become the norm rather than the exception in the industry. This creates a competitive environment where service providers must keep their costs low in order to compete in this space. Additionally, the surge in usage shows how dependent the country is on this essential service.
Broadband connections have become integral to modern life. Although some Americans still lag behind, many neighborhoods now offer affordable access from reliable carriers. Federal assistance for low-income Americans has also helped bridge the digital divide.
Next, we may see a push for universal connectivity, which is fast becoming an achievable goal. The federal government aims to make the United States the envy of the world when it comes to Internet access, targeting 90% connectivity rates as a result of current and future initiatives.
The United States has deeply invested in building out the infrastructure required for 5G and other technology that can make high-speed internet access the norm.
Contact Valicom for Efficient Telecom Expense Management Systems
With rising costs and few price increases, internet providers must search for other ways to develop efficiencies and cut costs. Telecom expense management systems provide the tools needed to streamline billing, track expenses and automate repetitive tasks.
Contact Valicom to schedule a free demo today!
ABOUT THE AUTHOR: NANCY PECKHAM
Nancy Peckham is the Founder and President of Valicom Corporation, a leading telecom expense management and consulting firm in Madison, Wisconsin. Nancy launched the organization as one of the very few women in technology, seeing the gap in services and the opportunity to fulfill the client’s unique needs while leveling the telecom playing field. She has spearheaded Valicom’s evolving services, including a web-based TEM platform that tracks all IT assets and processes multi-level invoice approval for bill payment. To learn more, visit www.valicomcorp.com.