Opinion

Internet and the Cost of a Cup of Coffee

The infrastructure proposal unveiled by the Biden Administration in March contains provisions for hefty broadband expenditures supported by claims that internet services in America are just not affordable. The proposal, the American Jobs Plan,, commits to reducing internet prices and allocating $100 billion in government funding for building broadband infrastructure to reach all American consumers.

Internet services have become essential for nearly every American to work, shop and learn – all of which makes achieving 100 percent U.S. coverage such a vital goal. Taking this one step further, the AJP says that “Americans can’t use broadband internet even if the infrastructure exists” because the United States has some of the highest broadband prices among the Organization for Economic Co-operation and Development nations.

But, contrary to the claims made in the AJP, the reality is that broadband service prices in the United States are at least as affordable as those overseas, and they are much less expensive for American consumers today than they were just a couple of decades ago. Because average wages in the United States are nearly $20,000 higher than in many European countries, the ability for Americans to afford broadband services is even greater. For these reasons, broadband prices as a percent of gross national income put the United States in a tie for sixth place as most affordable, according to the International Telecommunications Union. Comparing 120 counties, another report ranks the United States fifth in affordability, when adjusting for purchasing power.

What these international statistics do not show is that the population density in Germany, Italy, France and the United Kingdom is several times higher than in the United States, making it more expensive to build domestic infrastructure here. Yet, these higher costs are not reflected in higher prices for American consumers.

While the benefits from internet services have expanded over the years, speeds have increased several hundredfold and, after adjusting for inflation, prices are much lower. In fact, compared to a daily purchase of a cup of coffee or a can of dog food, the daily price of broadband services is affordable.

While a coffee a day can keep you energized for a few hours, internet access can offer you a much wider range of benefits, including access to telehealth, shopping, distance learning and streaming services. Yet, internet service prices continue to decrease.

When adjusting for speed, the decline in broadband prices is even more pronounced. For example, the cost of internet on a megabit-per-second basis fell from $9.01 in 2008 to $0.76 in 2018, a 92 percent decrease in cost. This decline in prices has allowed many more consumers to gain access to the internet. In 2000, only 52 percent of U.S. adults reported using the internet. Today, that number has jumped to 93 percent.

The presumption that broadband is unaffordable for many Americans leads lawmakers to introduce proposals that are potentially harmful to consumers. For example, the infrastructure plan also aims to create publicly owned internet companies. While dozens of these publicly owned providers have gone bankrupt in the past, many will take more than 100 years to financially break even. One municipal internet provider was so in debt that it sold for a mere dollar, and many others are so costly to operate that they require substantial financial support from taxpayers well beyond a monthly subscription. This means higher prices for consumers.

These public entities crowd out investments as they compete directly with private enterprises, including small wireless internet service providers. One thing is for certain: No private investor will ever risk a dollar to compete against a government venture. Again, consumers lose, as will innovation.

There are currently multiple programs already financed that can help rural communities and low-income Americans get online, including the Connect America Fund, Lifeline program, the Department of Agriculture’s e-Connectivity, various state universal service funds and Emergency Broadband Benefit Program, which was recently funded by Congress with $3.2 billion that has yet to be spent. Maybe we should use these existing resources to close the gap, while incentivizing the private sector to reach rural areas through wireless technologies – like the thousands of low-orbiting satellites being launched in the next few years, TV white spaces and fixed 5G services – thereby bypassing expensive fiber infrastructure in sparsely settled areas, as the AJP proposes.

The claim that broadband prices are unaffordable is simply unfounded.

The next time you buy a cup of coffee or open a can of dog food for your pet, ponder how really bad policies can have significant and negative consumer consequences when spawned by the knee-jerk conclusion that the internet is not affordable.

 

Steve Pociask is president and CEO of the American Consumer Institute, a nonprofit educational and research organization. While he chairs the FCC’s consumer Advisory Committee, the comments here are solely his own.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.

Do NOT follow this link or you will be banned from the site!