U.S. Telecom Prices Among the World’s Highest, Study Shows

A study released Wednesday, indicates that while Americans pay an average rate for standalone broadband, the price they pay for so-called "triple-play" services ranks among the world's highest.

In the study of Western countries that are members of the Organization of Economic Cooperation and Development, the Technology Policy Institute also found that the price U.S. consumers pay for triple-play services has increased steadily for speeds ranging from 2.5 Mbits/s to 10 Mbits/s, the median bandwidth category that the TPI assigned for the U.S.

While the TPI considered its study unique -- it measured more than 25,000 discrete wired broadband plans across the OECD countries, from Australia to Japan and Korea, through Mexico and the European countries -- the study's authors noted that it should be seen as indicative of trends, rather than absolute data. It excluded South America, the Caribbean, Southeast Asia, the Middle East, and Russia, and didn't weigh the number of subscribers per each plan -- a key factor.

The study was cautious in its conclusions; it did not, for example, tie broadband pricing to the development of broadband within a particular country. It also did not examine the effect of prices on broadband use and investment.

"In the short run, consumers are better off when prices are low and falling," the study concluded. "Some industries have been able to maintain consistent quality-adjusted price decreases for long periods of time.

"Ultimately, though, it is difficult to determine if prices are 'too high' or 'too low,' and both have implications for future investments and innovation," the study added. "Prices that are 'too high' allow firms to earn monopoly rents. Firms with market power are likely to invest and innovate less -- or, at least, in different ways -- than firms operating in competitive environments. Prices that are 'too low' are unsustainable over time and will slow investment and innovation."

The study also measured the period between 2007 and 2009. The prices paid were normalized to U.S. dollars as a measure of purchasing power parity, set by the OECD.

With that said, the TPI study was able to place the U.S. roughly in the middle -- or 13th out of 30 -- of the OECD's countries for residential, standalone broadband services. For the period the TPI studied, the median U.S. consumer plan charged just above $500 per year as a median price, factoring in promotions, standard pricing, installation and activation fees, plus other fees and rebates. France paid the lowest median price, or about $250, while Spain, Poland and Turkey paid roughly three times that amount.

For triple-play services that combined voice, data, and television, however, the U.S. position dramatically changed, the TPI found. There, the median U.S. triple-play subscriber plan charges about $1,250 annually, second only to Slovakia. French consumers again paid almost the least, finishing in a virtual dead heat with Germany for an annual median plan of about $500.

Although the United Kingdom's median price for triple-play services was third cheapest, it also represented among the broadest disparity of prices between the 25th and 75th percentiles or the interquartile range, a range of between $500 to $1,500 per year.

The study also found that Americans ranked 15th in terms of the average they paid for business broadband, with a median cost of less than $1,000.

Although TPI was unable to measure the number of subscribers per broadband tier, it found that, in general, prices have generally dropped or remained flat for most standalone broadband customers, but increased sharply for the tiny fraction of subscribers who chose 25 Mbits/s to 100-Mbit/s services. Prices remained roughly flat for those that chose the 2.5-Mbits/s to 10-Mbits/s tier.

But within the triple-play market, prices for the 10-Mbit/s to 25-Mbit/s tier decreased the most between 2007 and 2009, about 15 percent. Prices for the 2.5-Mbit/s to 10-Mbit/s tier, meanwhile, climbed more, about 20 percent.

TPI found that the majority of wired connections fell into the latter tier, meaning that the typical triple-play price for U.S. consumers has increased.

TPI also reached some general conclusions regarding the prices other countries pay for their broadband services, factoring in data caps, speeds, contract length, and other factors. The study found that the U.S. residential plan is the tenth cheapest out of the 30 OECD countries, and the fourth most expensive for triple-play consumer services.

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