Price Forecast: Internet Services

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Recent Price Trend - Internet Services


Internet service prices have been increasing at an annualized rate of about 0.6% in the three years to 2017, but prices largely depend on the location of the customer. In areas where competition has been increasing, such as large urban areas, prices have actually been increasing or remaining steady. Namely, to attract and retain customers in these areas, ISPs have offered lower prices, higher speeds and discounts when bundling phone and TV services. However, in less competitive rural areas and smaller cities, prices have increased.

Higher costs for suppliers to provide services have been contributing to price growth in the three years to 2017. The prices of essential operating equipment, such as servers, routers and data storage devices, have been increasing during the period, promoting growth in internet service prices. Despite rising equipment costs, suppliers have been focusing on making subscribers’ needs fit on existing infrastructure through data caps and lower bandwidth. Consumers, which generate the most revenue and account for most bandwidth usage, have increasingly received less bandwidth with data caps on their internet plans. As a result, ISP costs per subscription have decreased, while prices per Mbps have increased.

Low price volatility indicates that prices have not fluctuated significantly from year to year. Although prices have risen slightly, business buyers have not been subjected to asynchronous (faster downstream speed than upstream) speeds, data caps and other limitations on internet usage. Some ISPs, though, are increasingly passing off asynchronous internet services as business class. Buyers should lock in prices for long-term contracts to avoid both price increases and service limitations. Furthermore, buyers should avoid, if possible, moving to or staying in an area where ISPs are consolidating because that usually results in higher prices.

 



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