Executive Summary

In this year’s Cost of Connectivity report, we find further evidence that people can expect to pay more for internet service in the United States than in Asia or Europe. Our previous studies—published in 2012, 2013, and 2014—consistently showed that U.S. consumers paid higher costs for slower speeds than consumers abroad. Some of these trends continue in the 2020 report. Our research has additional urgency this year, as many people rely on the internet to navigate new realities presented by the COVID-19 pandemic. This year’s report is also our most extensive to date, examining 760 plans in 28 cities across Asia, Europe, and North America, with an emphasis on the United States. In our dataset, 296 plans are located in the United States and 462 plans abroad.

Across North America, Europe, and Asia, we find the highest average monthly prices in the United States. This trend is consistent across different network technologies: cable, DSL, and fiber. Fiber plans are the most expensive option in all three markets, with the United States being the most expensive. Cable and DSL plans are less expensive, but still higher in the United States than in Europe. We find the fastest advertised speeds in Asia. Asia also leads on value, as measured by standardizing the relationship between cost and advertised download speed. Europe leads on affordability, as measured by monthly prices at minimum broadband tiers.

We find substantial evidence of an affordability crisis in the United States. Based on our dataset, the most affordable average monthly prices are in Asian and European cities. Just three U.S. cities rank in the top half of cities when sorted by average monthly costs. The most affordable U.S. city—Ammon, Idaho—ranks seventh. The overwhelming majority of the U.S. cities in our dataset rank in the bottom half for average monthly costs. Internet policy scholar Jonathan Sallet recommends that $10 per month is an affordable benchmark for low-income households. Only six plans in our U.S. dataset meet this $10 benchmark at any speed tier (only four meet Sallet’s 50/50 Mbps recommendation), and all six are offered in Ammon. Out of 290 plans in our U.S. dataset, 118 have advertised initial promotional prices of $50 and under—and only 64 of these plans advertise speeds that meet the current FCC minimum definition for broadband. In addition, some ISPs have abandoned low-income neighborhoods in a form of “digital redlining.” Moreover, COVID-19 has exacerbated a longstanding digital divide that disproportionately affects low-income households and Black, Indigenous, and people of color (BIPOC) communities. As jobs and incomes are lost, this affordability crisis is poised to worsen. Congress and the FCC must take immediate action to stop digital redlining and help more people get online.

Consumers must navigate a maze of additional fees and hidden costs to determine the total price of internet service. These additional costs include equipment rental fees, installation and activation fees, data overage penalties, and contract termination fees—and they are often substantial. For instance, modem rental fees in the United States can add an additional 75 percent to the cost of monthly internet service, while abroad they may add an additional 30 percent. These ancillary fees create complicated pricing structures that make it difficult for consumers to compare plans and understand the total price they can expect to pay.

Municipal networks appear to offer some of the best value in the United States. In the U.S. market, prices vary widely across the country—but municipal networks tend to offer the fastest, most affordable options. Of the 14 U.S. cities in our study, the lowest average price is in Ammon, Idaho, a city with a municipally-owned open access network. A growing body of evidence indicates that these locally-owned networks yield significant cost savings for consumers, yet at least 20 states restrict or outright prohibit these networks from existing. These laws must be repealed so every community can invest in its own infrastructure.

The U.S. market suffers from a lack of competition. The U.S. market for internet service is dominated by just four companies: AT&T, Charter, Comcast, and Verizon. This lack of choice directly affects the cost and quality of internet service. The extent of ISPs’ market power is documented throughout this year’s report, from high monthly prices to the pervasiveness of early termination fees and lock-in contracts that inhibit competition. ISPs also broker exclusive deals with landlords to gain a monopoly on apartment buildings, leaving residents with no other choice of provider. The government should ban these exclusivity deals and strengthen antitrust enforcement in this market.

ISPs are not transparent with consumers, the government, or researchers. Many U.S. consumers struggle to determine the total cost of internet service due to poor transparency, highly complex pricing structures, and confusing itemized billing. Moreover, no government agency collects pricing data from ISPs, so it is difficult for policymakers to help consumers navigate this complex market. It is also extremely burdensome for independent researchers to study internet pricing. ISPs do not disclose accurate data about their networks, so it is difficult for researchers to determine where service is even available. Comparative analysis is challenging, too, due to a lack of standardization across providers and the complex plan structure. Therefore, it is critical that the government collect better data on internet deployment, availability, and pricing. ISPs should also disclose pricing terms in a “broadband nutrition label,” a standardized format that would help consumers comparison-shop and know what they are paying for.