Technology

Ajit Pai promised cheaper internet – instead real prices rose 19 percent

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The average US bill for the Internet at home rose 19 percent in the first three years of the Trump administration, refuting former Federal Communications Commission chair Ajit Pai’s claim that deregulation was affecting, according to a new report by advocacy group Free Press Have lowered prices. For tens of millions of families who are not rich, “these gains are profoundly felt, forcing difficult decisions about which services to forego in order to maintain vital Internet access,” Free Press wrote.

The Trump-era 19 percent increase is adjusted for inflation to match the 2020 dollar value. The monthly cost increased from USD 39.35 in 2016 to USD 47.01 in 2019. Without the inflation adjustment, the average household internet price increased from USD 36.48 in 2016 to USD 46.38 in 2019, an increase of 27 percent.

The nominal increase in each of the three years ranged from 7.27 percent to 9.94 percent, while inflation ranged from 1.81 percent to 2.44 percent each year.

“That means the nominal increase in broadband bills over those three years has been more than four times the rate of inflation,” Free Press said. The report is based on data from the Bureau of Labor Statistics (BLS) Consumer Spending Survey, which does not yet include 2020.

Prices go up when the cost of ISPs goes down

On an annual basis, the average household internet spending increased from USD 437.71 in 2016 to USD 556.50 in 2019. Adjusted for inflation for the value of USD 2020, the costs increased from USD 472.25 in 2016 to USD 564.07 in Year 2019.

“”[B]Street prices are consistently rising faster than the rate of inflation, while the suppliers’ own costs do not. This makes this increasingly critical infrastructure service more real for both the users and the ISPs, “the report said.

Average US home internet prices over the years.

Average US home internet prices over the years.

Free press

Internet providers’ capital investments have declined. “Big companies like AT&T (where investments in 2020 were 52 percent below 2016 total, adjusted for inflation) and Comcast (where investments in the cable segment were 22 percent below investments in 2020) are seeing significant declines . ” 2016 level adjusted for inflation, “says the report.

In a press release, Free Press said that ISPs “increased their profits to record levels before and during the COVID-19 pandemic by increasing their prices during an unprecedented economic downturn” and that “cheap entry-level options for high-speed” Internet service is disappearing and increases the adoption barrier for low-income families. “

“US broadband giants continue to raise prices and make higher profits when their own investments decline,” said Derek Turner, research director at Free Press Research. “This is exactly the result that we would expect in a highly concentrated market that is completely free from any oversight.”
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Long-term trend of rising prices

Prices have risen by a similar amount over the past three years of the Obama administration. Pai claimed that his deregulation of the broadband industry and the removal of net neutrality rules would reverse the trend of rising prices and “bring cheaper internet access to all Americans.” Instead, prices continued to rise.

President Biden said he wanted to reverse the long-term trend by “working with Congress to find a solution to lower internet prices for all Americans”. Biden didn’t say exactly how he would cut prices, but the cable lobby is already slamming Biden for his suggestion that the government should help Americans get cheaper access to the Internet.

Over the past three Obama years, the inflation-adjusted average monthly internet spend rose from $ 32.25 in 2013 to $ 39.35 in 2016, an increase of 22 percent. Nominal prices rose in these three years from USD 28.86 to USD 36.48, an increase of 26 percent.

The Free Press report highlighted the surge during the Trump years to suggest that Trump and Pai’s policies did not lower prices as the FCC Republicans and broadband industry claimed, Turner told Ars. The Obama -Government has also done little to lower broadband prices.

“Neither the Obama administration nor the Trump administration had guidelines to curb broadband price increases,” Turner said. “At best, the FCC’s 2015 Open Internet Order sent a signal to ISPs that abusive data restrictions could be a cause for concern.”

There are several ways to measure internet prices. Broadband lobby groups claim that prices are getting lower by pointing out a falling price per megabit or by tracking the advertised price of the “most popular” [speed] Tier “over time. But” the real price customers pay each month, “which is often increased by hidden fees, equipment rental fees, and data cap fees,” is the most important metric for economic analysis and policy making. “Free Press report said.

Pai claimed in October 2020 that “real broadband prices fell by about a third between 2015 and 2020.” The Free Press report states, “Pai quoted an ISP-paid employee who uses quality-matched URS [FCC Urban Rate Survey] Data for comparing the average quality-adjusted prices in 2015 and 2020 without noting the data does not reflect the price actually paid and without facing the impact that the drop in Cadillac fiber prices had on the averages, however not the median. The same data shows that average prices rose over the same period that Pai cites. “

Many factors influence the price, but it always rises

Most of the 2013-2016 increase occurred in a year between 2014 and 2015. The 2015 increase was mainly due to “an acceleration into higher priced / faster tiers at a time when the price spread between them and lower tiers was wide.” “Said Turner.

In particular, 2015 was “a big year for subscriptions to grow above 100 Mbps [the] DOCSIS 3 [cable Internet standard] was pushed harder, particularly by Comcast after the failed TWC deal, “noted Turner. The online video also picked up, aided by improvements in streaming quality following the Obama-era FCC regulation affecting residential ISPs and others Network operators had to resolve their problems differences and upgrade network connections.

Streaming video helped people buy “the more expensive 100Mbps + tiers,” especially after the network connectivity battles between Netflix and network operators were resolved, Turner noted. Various factors drove prices up during the Trump era. For example, former Time Warner Cable customers who had older, slower promotional pricing plans were “pushed into faster but more expensive Charter Spectrum tiers” after Charter bought the company in 2016, he said.

As we wrote in 2017, “many [Charter] Customers saw their bills soar as their previous discounts expired and they were switched to non-promotional prices. “People who upgraded from DSL to fiber in the areas where vendors upgraded their networks also increased the average amount paid, Turner said.

“In short, what is sold affects the price paid,” he said.

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Biden targets hidden fees

In addition to promising an as-yet-announced method of lowering prices, Biden also proposed funding municipal broadband networks and removed “barriers that prevent” public networks “from competing on an equal footing with private providers”. This could ultimately lead to the creation of more public networks, offering cheaper options, and forcing established ISPs to compete on price and quality.

Biden also suggested “requiring ISPs to clearly disclose the prices they charge”. This would make it more difficult for ISPs to advertise low prices and then meet customers with a number of hidden fees.

“In most markets, the prices for buyers are transparent. In the wired broadband market, however, not”, it says in the report of the Free Press. “Vendors market promotional pricing to new customers, but sometimes refuse to post the monthly fee after the introductory rate is up or bury it in the fine print. In addition, many wired ISPs charge additional fees such as data overrun fees and equipment rental fees, as well as hidden fees such as non- Autopay penalties. “

Disclosure: The Advance / Newhouse partnership, which owns 13 percent of the charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.

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Steven Gregory