High-speed internet service, commonly referred to as broadband, has become a requirement of 21st-century American life—a virtual necessity for many people attending school, getting and performing many jobs, receiving medical care and government services, or trying to purchase goods and services that are unavailable locally.
Yet broadband service is too expensive for many Americans to afford.
Consumer Reports (CR) launched the Fight for Fair Internet campaign to encourage policymakers and service providers to make broadband more accessible and affordable. This study was designed to shine a light on an important component of that goal: determining what consumers pay for internet service, and exactly what they get for their money.
To do so, we collected and analyzed more than 22,000 consumer broadband bills. Many of the consumers who shared their bills also took internet speed tests and completed a survey on their satisfaction with and the reliability of their internet service. While this is not a nationally representative study and is not predictive of the broadband market, it is one of the most ambitious efforts of its kind to understand how much consumers are paying at a moment in time.
We believe our findings have important public policy implications.
Median cost of service
Among the 18,359 consumer bills on which an internet price could be identified, the median cost of high-speed internet service was $74.99 per month. Approximately half of the households were paying between $60 and $90 per month.
Bills that are hard to understand make it difficult for consumers to budget and compare prices with alternative service options. The following factors contribute to this billing confusion:
Bundles. Numerous internet service providers (ISPs), including Comcast (Xfinity), the nation’s largest provider, do not always itemize the internet price within their “bundled” TV, phone, and internet packages. This was true of 2,827 of the 22,088 bills we analyzed, and 1,810 were issued by Comcast. This practice makes it impossible for both consumers and CR’s researchers to determine the cost of the service and compare it with other providers.
Discounts. Many ISPs offer discounts on broadband service, including introductory promotional discounts and conditional discounts such as auto-pay discounts. The discounts identified typically ranged from $10 to $50. Discounts generally benefit consumers, but also make it challenging for consumers and researchers to determine the true cost of service and to compare it with other providers’ prices. For example, it is not always clear from bills when discounts will expire and what the price will be afterward. Notably, more than half of the AT&T and Verizon bills we analyzed contained discounts, while none of the Google Fiber bills in our sample included discounts.
Fees. ISPs charge a wide range of fees that, together, can add up to a significant portion of the overall cost of service and contribute to the confusion around internet pricing. Individual fees tied directly to internet service in our sample typically ranged from $2.49 to $9.95 per month. It is often difficult to determine whether these fees are associated with broadband or other elements of a service bundle. Some of these fees, such as the cost of renting a modem or wireless router from the provider, are avoidable, but most are not.
The unavoidable fees are especially problematic because consumers may believe they are government-imposed when, in fact, many are company-imposed and distinguished from the core service price at the provider’s discretion. More than a dozen ISPs were found to charge company-imposed fees—also known as junk fees—under names such as “network enhancement fee,” “internet infrastructure fee,” “deregulated administration fee,” and “technology service fee.” They can surprise consumers when they appear on monthly bills, and can enable providers to raise prices without seeming to violate marketing or contractual price commitments.
Data cap charges. Several providers, including fixed broadband providers Comcast (Xfinity), Cox, Suddenlink, AT&T, and Wave Broadband, impose data caps in at least some areas and charge overage fees for exceeding those caps, or fees for unlimited data. Unlimited data can add as much as $49.99 per month to the base cost of service.
The results of online speed tests can depend on time of day, the quality and speed of a home WiFi network, and other factors unrelated to ISP performance.
That said, some study participants clearly experience severe broadband speed limitations. Download speeds routinely fail to match the advertised “up to” speeds of several ISPs. This was especially true of consumers paying for “premium” plans purporting to offer download speeds of between 940 and 1,200 Mbps, who in fact experienced median speeds of between 360 and 373 Mbps.
In addition, we found that a large number of consumers who participated in our study pay as much or more for a sub-broadband plan (which is generally defined as a download speed of less than 25 Mbps) as other consumers pay for advertised speeds of 300 Mbps or higher.
Lack of competition
CR counted how many ISPs were reflected in bills for each ZIP code where we had participants. We did not independently determine how many ISPs operate in each community, but our findings do point to a lack of choice for many consumers.
CR collected 9,116 bills from ZIP codes where we detected just one ISP. In ZIP codes where bills from two ISPs were present in our sample, that number dipped to 7,273. Three or more competitors were spotted in ZIP codes accounting for only 1,802 bills.
Though not conclusive evidence of a lack of competition, we found it telling that the overwhelming majority of bills came from ZIP codes where all study participants subscribed to the same ISP, or one of just two ISPs.
The data from bills analyzed by CR suggests that competition results in lower broadband prices. Americans in markets where we received bills from at least three broadband competitors reported paying, on average, about $5 per month less for service than those in areas where we received bills from one or two providers, and reported prices were lower still as the number of local competitors increased. This mirrors the findings of previous studies.
Make broadband label easier to find
The Federal Communications Commission’s proposed broadband “nutrition” label, designed to bring greater price transparency and uniformity to the broadband market, should be a) required to appear on all monthly broadband bills and b) machine-readable.
Encourage broadband competition
Two policy changes could spur competition in the broadband industry: permission and support for the creation of municipal broadband networks, and greater regulatory scrutiny of the legal challenges and other efforts by incumbent ISPs to thwart new competition in underserved areas.
Strengthen FCC oversight
The FCC should reassert its regulatory authority over the broadband internet service industry, which would allow the Commission to ensure consumers have non-discriminatory access to broadband, monitor price-gouging, bar anti-consumer business practices, and better address price and fee transparency.