The Grouse finally comes out and says it: When did the Internet get so damn pricey?
Posted 09.18.2008 at 11:13 am
12 Comments
Boom Times in Web Land
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Despite the economic flogging we’re trying our best not to think about, most of us don’t bat an eye when shelling out that monthly 50-plus bucks for Internet access. I guess that’s a testament to how deeply integrated into our lives the Web has become in just the last few years. Between my home Internet service from Time Warner and my data plan from Verizon Wireless, I’m paying about $80 per month to get online. If I travel, I pay T-Mobile et al. another toll to browse in the airport terminal and then I usually end up paying someone else for Internet access once I’m in my hotel room. When all is said and done, I cough up $100 or more per month to get online.
I don’t know about you, but that seems like a lot of bread these days.
Back in the heyday of late-‘90s dial-up, forking over $100 per month for the Internet would have been laughable. I paid $20 for AOL, which at 56K was as good as it got at home (more or less). A decade later, it costs five times that amount. Why?
The answer is a combination of things, one being the proliferation of access points. I no longer have to be at home in front of my PC to get online—I can get there anywhere I’ve got bars or a Wi-Fi signal. On one hand, this is a privilege I’m willing to pay extra for. On the other hand, ten years ago I wasn’t expected to be checking email every waking second of the day.
The other reason is that broadband providers are keeping prices artificially high because they can. The only reason I ever agreed to pay $50 per month for broadband was because it was a luxury item at the time. I switched over to cable in 2000, which was a big year for broadband. By the end of that summer, the number of U.S. households with broadband Internet access had rocketed from less then five percent to about 30 percent. I was flying first class on the Web, and more than happy to pay the premium for it.
But now, half of all U.S. households are broadband-equipped. Broadband is no longer a luxury; it’s the standard. If you think I’m overstating things, try visiting any one of today’s most popular websites on a dial-up connection and you’ll arrive at the inevitable conclusion that the Web is no longer built for 56K modems.
So, if broadband is now the standard, why are we all still paying luxury prices for it?
Well, I’m no economist, so I called one. According to economics professor Shane Greenstein of Northwestern’s Kellogg School of Management, $40-$50 was the monthly price cable and DSL providers came up with in those build-out years in order to subsidize the sprawl of their infrastructures. They figured the rollout would cost them about $1,000 per household, but that only a third of households in a given neighborhood would adopt. By charging $40-$50 per month for service, the investment would pay for itself in a few years.
“Well, they’re not building out anymore,” Greenstein says. “Adoption has slowed because the market is saturated. It no longer costs the cable company $40 per month to support and maintain a line. I can’t imagine it costs more than a couple of bucks, which is a pretty good margin.”
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Big corporations will ripe off it's consumers as long as they can because they can. When a smaller upstart company shows up with something new that compete with them, the company is either squashed by political maneuvering and/or bought out. Greed runs this country now and it will be greed that destroys it.
The cost of things go up, jobs are sent over seas to increase profit. Soon, there won't be enough individuals who can afford the service because they don't have good jobs anymore and the company's will again have to raise their costs to make up for it. A vicious cycle we are putting ourselves into all for the sake of MONEY.
"I paid $20 for AOL, which at 56K was as good as it got at home"
"Where's my $20 Internet?"
Quick search on Verizon’s site:
DSL starting at $19.99/mo for up to 768Kbps.
13.7 times the speed at the same price over 10 years....Not bad!
I would settle for just 10 times the MPG in ten years given that my car
cost the same! Or how about just 5 times the rice for the same price in
10 yrs.
As for mobile internet....price and speed has drastically improved over ten years. Same goes for wireless voice in price and covera
Check a little further. AT&T provides the DSL here in my part of Sacramento. 1.5Mbps for $14.95/month. Internet doesnt have to be expensive. I got tired of paying $50 for comcast internet, so I dropped it. With the proper tweaks of the OS, I can get just as much speed from DSL
You are missing an important fact. (One that I can't believe a professor of economics can't figure out.) High speed Internet is just like everything else in electronics / computers. You are getting a lot more for your money. When "broadband" started out, you typically got .5 to 1Mbit per second speeds. 2 years ago, Cox cable was offering 6Mbit for their most expensive home broadband...now they offer 20Mbit for about the same price.
Internet access isn't likely to get more expensive anytime soon. We will just keep getting bigger and bigger pipes. (Especially once IPTV takes off.)
Too bad google TISP isnt real.
Dustin H
Another important fact left off by the author…..with that 56k service of $20 you also needed a phone line. So, you never had $20 internet….more like $50 for 56k!
I now have DSL without a phone line 1.5M at $25….no need for a phone line because wireless service is so cheap and coverage is much better.
BTW- Complaining to the ISP because YOU need more bandwidth and connectivity is like complaining to your apartment complex because you bought too much stuff an now need a bigger apartment…a complex who has already given you more space and decrease their per square foot price in the last decade!
What do you mean by "Worldwide"?
Here in the UK internet access rates have fallen to around $12.8 per month (up tp 8Mb), including free evening and weekend phone calls worldwide.
D Mc
I just moved into a new home, called to have cable internet installed and was told that the install would be ninety bucks! When asked why it would cost so much I was given the run around and never really got a real answer. Then I was informed that between the hours of noon to midnight I was limited to a little over 1 Gig of download, after that my bandwidth was cut in half. Being that I took networking and Comptia A+ and N+ courses I knew it was a scam. If they can't provide the bandwidth advertised then don't offer it. When the "technicians" came they were armed to the teeth with tools and ready to wire the pentagon, except it was just a house and one cable that had to be run from the street to the house and a wireless router plugged in.....15 minutes and they were out of there. That equates to 360 dollars an hour!! Guess I picked the wrong trade.
true desmc. I currently live in South Korea. I have a package deal where I get digital Cable TV with about 300 channels plus extras AND a 100Mb connection for the low low price of about $34 USD.
I get 14Mbps burst with 5MB bit bucket (768 sustained) for 30 a month via Motorola canopy WISP these things are every ware and the connection is rock soled. So yah if you dl a torrent you only get 768 but if your clicking around the web its always 14Mbps I'll never go back to cable.
I had no idea there was such a thing as DSL without a phone line. I'll have to look into that.
DSL is a downgrade from Cable? That is untrue. On a cable connection you share bandwith with everyone on the node that serves your neighborhood and home. As traffic increases (in the node), your connection gets slower if there are a lot of people on it. If you don't see a decrease in speed at peak times, it's because your service node doesn't have a lot of people on it. DSL however is a dedicated circuit that isn't shared by anyone else but the devices in your home. So if you pay for a 3MB circuit, you always get 3MB.
As far as the monthly costs of internet access, one thing that people don't realize is that when a site, or RT as it's known is the biz, is installed, it isn't left that way forever. As more people request new service or upgrade their service, bigger fiber feeds are needed to increase the overall bandwith for that site. On that same line, the fiber has to be upgraded to offer new services (like at&t's U-Verse service) to new and existing customers. Don't get me wrong, I would love to see my monthly bill go down, But there are some legit reasons for the price staying up and some not-so legit.