Harvard Study Shows Community-Owned ISPs Offer Lower, More Transparent Prices

from the when-in-doubt,-ban-it dept

We've routinely noted how countless communities have been forced to explore building their own broadband networks thanks to limited competition in the market. As most of you have experienced first hand, this lack of competition routinely results in higher prices, slower speeds, worse customer service, and massive broadband deployment gaps. And thanks to telecom industry regulatory capture (taken to an entirely new level during the Trump administration), countless well-heeled lawmakers make it a personal mission to keep things that way.

Needless to say, the threat posed by angry users building or supporting their own networks is a major reason ISPs have lobbied (read: literally bought and written) laws in twenty-one states banning towns and cities from pursuing this option. In some states, towns and cities are even banned from striking public/private partnerships, often the only creative solution available to the traditional broadband duopoly logjam.

Not too surprisingly, a new study out of Harvard details just what AT&T, Verizon, Comcast and Charter (Spectrum) are afraid of.

The study found that averaged over a four year period, service offered by community ISPs tends to be significantly cheaper that broadband service made available from privately-owned alternatives. In some areas, the researchers couldn't directly compare community-owned broadband with private service, either because the private ISP in question couldn't even offer the FCC definition of broadband (25 Mbps downstream, 3 Mbps upstream), or because ISPs went to great lengths to prevent users from seeing their actual prices. But in 23 out of 27 cases, the community option provided lower prices:

"When considering entry-level broadband service—the least-expensive plan that provides at least 25/3 Mbps service—23 out of 27 community-owned FTTH providers we studied charged the lowest prices in their community when considering the annual average cost of service over a four-year period, taking into account installation and equipment costs and averaging any initial teaser rates with later, higher, rates."

What's more, the study found that the community options tended to offer prices that were more upfront with the end user, and less reliant on misleading promos or hidden fees:

"While community-owned FTTH providers’ pricing is generally clear and unchanging, private providers almost always offer initial "teaser" prices and then raise the monthly price sharply. This price hike in the communities we studied ranged between $10 (20 percent) and $30 (42.8 percent) after 12 months, both imposed by Comcast, but in different communities. Only one community-owned FTTH provider employed this marketing practice for a data-only plan."

It's worth noting the study was only able to directly compare stand alone broadband prices, since ISPs often obfuscate broadband pricing via the use of bundles and promotions. Often these bundles "promise savings" to users to combine broadband with TV and phone service, though in reality users are routinely and severely financially penalized for ordering just standalone broadband service. Even then, the study is quick to point out how ISPs go to great lengths to make direct price comparisons "extraordinarily difficult":

"In general we found that making comprehensive pricing comparisons among U.S. Internet service plans is extraordinarily difficult. The U.S. Federal Communications Commission (FCC) does not disseminate pricing data or track broadband availability by address. Additionally, service offerings follow no standard speed tiers or definitions (such as the specifics of video or phone service bundles)."

ISPs also routinely lobby the government to ensure the FCC doesn't collect and share pricing data, lest somebody figure out the connection between limited competition and high prices. That lobbying influence is one of the major reasons this country spent $300 million on a broadband availability map that not only over-states broadband availability and speeds, but fails completely to even mention pricing. ISPs and lawmakers paid to love them will often focus on empty promises to "expand broadband availability," intentionally ignoring the role competition and pricing plays in that equation.

Again, these towns and cities wouldn't be getting into the broadband business if they were happy with the services being provided by the likes of Comcast. And again, Comcast could quickly nip these efforts in the bud by offering better, cheaper service. But time after time it's clear that Comcast, AT&T, and other incumbent ISPs would prefer to instead file lawsuits, spread disinformation, and buy laws banning communities from making their own decisions on local infrastructure. Whatever it takes to avoid having to directly compete.

Filed Under: broadband, community owned broadband, competition, fcc, municipal broadband, transparency