As inflation spirals, U.S. among leaders in mobile broadband affordability

Just six years ago, a third of the global population was using mobile broadband. By the end of 2020, over half did. With the COVID-19 pandemic speeding up the digital transformation of the economy and spurring interest in the affordability of mobile broadband, independent economic firm Oxford Economics published a timely and groundbreaking study on wireless affordability titled “Unpacking the cost of mobile broadband across countries.” 

Not only does the U.S. consistently lead in broadband affordability and at a growing rate, but it does so by virtue of its regulatory framework, which is conducive to competition and capital investment relative to other countries. Studies and policymakers that paint a dim picture of increasing prices and lament the digital divide fail to see the reality of increasing affordability because they don’t account for the metrics that this report does. 

The report, which was first published in November, examines mobile broadband prices between 20 different countries. Unlike previous studies that have mostly relied upon pricing data alone, the Oxford Economics study considers how local economic factors like plan prices and disposable income impact affordability. The result is a more accurate comparison between nations that accounts for each household’s actual purchasing power. 

For example, when only observing plan pricing, Colombia’s entry level and mid-tier pricing seems relatively cheap. However, when the average household disposable income is considered, the cost of the plans as a percentage of GDP per capita is significantly greater than other countries. Ultimately, their wireless broadband plans are less affordable than their counterparts’. 

When it comes to the distribution of countries and their cost of wireless broadband plans as a percentage of the average income, Australia ranks #1 for lowest cost for entry level and mid-tier plans. The U.S. ranks third and fourth, respectively. Moreover, the U.S. consistently ranks in the most affordable half of the distribution when accounting for average household income.

Their study also highlights how affordability has changed among countries. In the U.S., affordability has increased, while it has declined in other countries such as France, Korea, Switzerland, Austria and more. Germany, Canada, Czech Republic and the U.S. saw the biggest affordability gains between 2018 and 2021. For example, entry level plans fell by 44 percent as a proportion of disposable income in the U.S. 

While wireless broadband services are comparatively cheaper in the U.S., wireline broadband trends have plummeted and speeds have increased sharply during the COVID-19 pandemic, as the American Consumer Institute (ACI) has pointed out. In comparing U.S. wireline broadband services, a report by The Broadband Association has shown the U.S. to consistently lead the European Union (EU) in adoption and deployment, investment and competition. EU countries have a more intensive regulatory framework for wireline broadband than the U.S., which may explain why the U.S. leads them in investment and competition.

In terms of wireless broadband, the new Oxford Economics report further explains the key factors that can drive variation in broadband affordability. These include the population with internet access and capital investment. A higher percentage of the population with internet access enables carriers to create economies of scale, whereby they can connect more subscribers to the available infrastructure. This results in a lower cost per subscriber, a diffusion of the cost of network and a lower price for users.

Therefore, higher broadband demand does not necessarily mean a higher price, but rather lower fees. The higher the share of a population that uses the internet, the more affordable a plan will be. Currentlyaround 93 percent of Americans use the internet, which is above average relative to other countries.

Capital investments for broadband infrastructure also explain the variation in affordability because of the higher deployment costs. For example, the cost of broadband deployment is higher in countries with diverse terrain and expansive rural areas. Dense urban economies do not impose these added cost as broadband networks are already built.

For practical purposes, Congress should look toward advancing the Broadband Grant Tax Treatment Act and extending the Affordable Connectivity Program – two promising programs that will increase internet access and produce a considerable return on broadband investment in America’s rapidly changing digital landscape.

With new light shed on the affordability of mobile broadband connection from this report, in conjunction with the wireline study from the Broadband Association, it’s clear that there are lessons to learn from the U.S. — not only for other countries but the FCC as well. Increased regulation discourages capital investment and leads to less affordable and slower broadband – both wireless and wireline broadband. Policymakers must go beyond simplistic price comparisons and consider the varying broadband plans and household dispensable income, aim to increase internet access and ease regulations that hinder capital investment to narrow the digital divide.

For the sake of consumers, it would be wise for policymakers to take heed to protect competition and investment, whether in the U.S. or abroad.