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The mere presence of gigabit Internet speeds in a metro area drives down the price of plans with slower speeds, according to new industry-funded research. Thus, the data suggests that even customers who don't purchase gigabit Internet benefit from its availability.
This research also found—to no one’s surprise—that having more ISPs in a particular region drives prices down and that the presence of fast speeds encourages other ISPs to offer higher-speed plans to match their competitors.
The study, titled “Broadband competition helps to drive lower prices and faster download speeds for US residential consumers,” analyzed DSL, cable, and fiber broadband plans from the 100 largest DMAs (designated market areas) in the US. It was written by Analysis Group, an economics consulting firm, with research funding from the Fiber to the Home Council, an industry consortium founded by fiber network equipment manufacturers.
Here is a summary of the key findings:
This research also found—to no one’s surprise—that having more ISPs in a particular region drives prices down and that the presence of fast speeds encourages other ISPs to offer higher-speed plans to match their competitors.
The study, titled “Broadband competition helps to drive lower prices and faster download speeds for US residential consumers,” analyzed DSL, cable, and fiber broadband plans from the 100 largest DMAs (designated market areas) in the US. It was written by Analysis Group, an economics consulting firm, with research funding from the Fiber to the Home Council, an industry consortium founded by fiber network equipment manufacturers.
Here is a summary of the key findings:
- The presence of gigabit service in a market is associated with a $27 decrease in the average monthly price of broadband plans with speeds of 100Mbps or greater but less than 1Gbps. That’s a 25 percent price reduction.
- Markets with gigabit Internet also see smaller price decreases for plans as slow as 25Mbps. The presence of gigabit Internet has no significant effect on prices of plans with speeds below 25Mbps. This isn’t that surprising since the slowest plans are already the cheapest and aren’t suitable substitutes for gigabit speeds.
- Gigabit prices decline when at least two providers offer gigabit service. “If a DMA moves from having one to two providers of gigabit Internet, we estimate that the standard monthly price for gigabit Internet will decline by approximately $57 to $62, which is equal to a reduction in price of between 34 and 37 percent,” the study said. Going from one to three gigabit competitors would reduce prices by an estimated $98.11 to $106.50 per month.
- Competition at any speed reduces prices. “An increase of one competitor is associated with approximately a $1.50 decline in the monthly standard broadband price for Internet plans with speeds ranging from 50Mbps to less than 1Gbps,” the study said. For plans with download speeds of less than 25Mbps, the decrease in average monthly price is $0.42 for each competitor.
- Availability of fast speeds increases the likelihood that other ISPs will introduce their own higher-speed plans to match competitors. “In particular, we find that each additional competitor offering broadband in a higher speed category will increase the probability that other broadband providers in the market will offer broadband at those higher speeds by 4 to 17 percent on an annual basis,” the study said.
- Average monthly prices for each speed category are as follows: $52.60 for speeds less than 25Mbps; $74.05 for plans from 25Mbps to 99Mbps; $108.52 for plans of least 100Mbps but less than 1Gbps; and $165.63 for speeds of at least 1Gbps.
