Wallsten, Riso release Part 2 of Study on Broadband Pricing
Contact: Amy Smorodin
December 15, 2010 – Residential broadband prices in the U.S. remained fairly stable over the past few years, while the price of business plans in the U.S. has decreased, show Scott Wallsten and James Riso in “Residential and Business Broadband Prices, Part 2: International Comparisons,” released today by the Technology Policy Institute. The authors’ analysis also shows that the price for standalone broadband in the U.S. is in the middle range of prices in OECD countries. The paper is the second part of a comprehensive study on broadband pricing.
Wallsten and Riso, TPI Vice President for Research and Research Associate, respectively, constructed a unique data set of 25,000 broadband plans offered by almost 170 firms in 30 OECD countries. The authors separated price determinants in order to more accurately compare plans both in the U.S. and internationally. Analysis of the data shows:
- U.S. residential broadband prices remained stable over the past three years but have fallen in most other countries. Prices for residential standalone and triple play plans remained stable overall, although prices across speed tiers differ. Prices for standalone plans with speeds above 25 Mbps have increased by 25 percent but account for only 1 percent of total subscribers. Residential broadband prices have fallen in most other OECD countries, some by as much as 40 percent.
- U.S. business prices have decreased by 15-25 percent. As with residential broadband, price changes differ by speed tier. Faster broadband plans have shown the largest decrease in price, at over 30 percent, but the data show almost no change in plans with slower speeds.
- Prices for standalone broadband plans in the U.S. are in the middle range compared to other OECD countries. While standalone broadband plans are in middle range relative to other OECD countries, they rank closer to the “leaders than to the laggards.” Business standalone broadband plans ranked squarely in the middle of the price ranges across countries.
- Prices for triple play plans in the U.S are among the most expensive for OECD countries. The analysis of triple play plans also showed a wide variance in prices across countries. Such dramatic differences in price could be explained by the inability to control for the type of programming in the video packages in the analysis.
The authors conclude that while their research attempts to compare price levels and changes, it does not evaluate the policies and other influences that impact those prices, nor does it attempt to evaluate what is the ideal price for broadband. “In the short run, consumers are better off when prices are low and falling,” the authors state. “Ultimately, though, it is difficult to determine if prices are ‘too high’ or ‘too low’ and both have implications for future investment and innovation.”
“Residential and Business Broadband Prices, Part 2: International Comparisons,” is available on the TPI website. An appendix, which includes discussion on methodology and data for individual countries, is available here. Part 1 of the study, “Residential and Business Broadband Prices, Part 1: An Empirical Analysis of Metering and Other Price Determinants,” explored the effects of plan components, such as contracts and data caps, on broadband pricing.
Technology Policy Institute
The Technology Policy Institute is a research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.