Introduction

New America’s Open Technology Institute’s (OTI) latest Cost of Connectivity report comes at a difficult time for the world. The ongoing COVID-19 pandemic has changed daily life for billions of people, and many households are relying heavily on the internet for work, school, commerce, and social connection. In 2020, internet access is clearly an essential service, yet it remains unaffordable for many people. In this year’s report, we find that people can still 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 our 2020 report. When measured by costs for each Mbps of advertised download speed, U.S. plans lag behind Asia but may be on par with Europe.

This year’s report contributes to a growing body of literature on internet affordability. In a recent study, price comparison service Cable.co.uk found that the United States ranked 119th out of 206 countries in internet affordability at $50 per month on average, and that due to a “lack of competition in the marketplace… Americans pay far more than they should compared to much of the rest of the world.”¹ New York University economist Thomas Philippon points to internet service markets in the United States as an example of how increased corporate concentration leads to significantly higher prices.² He estimates that the collective prevalence of monopolies and oligopolies across sectors typically costs American households over $5,000 annually each.³ In markets where ISPs (internet service providers) face little to no competition, consumers are the ones who suffer—they’re forced to pay higher prices, penalties for exceeding data caps, and, if they’re lucky enough to have more than one option for internet service, high switching costs.

What is Broadband?

A quick note on terminology: we differentiate between “internet” and “broadband” in our report. Broadband refers to high-speed internet access that delivers faster speeds via digital subscriber line (DSL), cable, fiber, wireless, or satellite.

We use broadband when referring to plans that advertise speeds at or above minimum broadband speeds, and internet everywhere else. To determine whether a plan is capable of broadband speeds, we rely on a plan’s advertised speeds and the FCC’s minimum broadband definition.⁴ The FCC’s definition of broadband has changed over the years to reflect consumers’ needs. In 2015, the FCC updated its definition for broadband to a minimum of 25 Mbps download and 3 Mbps upload speeds, which is often delineated as 25/3 Mbps.⁵ This change increased the minimum speeds for broadband adopted in 2010, 4 Mbps download and 1 Mbps upload, which we had used in our previous Cost of Connectivity reports as a baseline benchmark for data collection.⁶

Current FCC Commissioner Jessica Rosenworcel has called for increasing the national broadband standard from 25 Mbps to 100 Mbps.⁷ OTI has also advocated for a new, higher threshold for broadband at 100 Mbps download speed, while also expressing support for an even higher standard of 1 Gbps download speed, the equivalent of 1,000 Mbps.⁸

These standards are an important reflection of users’ needs. While high-speed internet may not be required for some activities, most households need over 25 Mbps. According to a Pew Research Center survey conducted in 2016, the typical U.S. household uses five devices, and nearly one-in-five households use at least 10 devices.⁹ While speeds below 25/3 Mbps may be sufficient for a single device, these households with five or more users or devices require over 25 Mbps for even moderate internet use, which the FCC defines as “basic functions plus one high-demand application: streaming HD video, multiparty video conferencing, online gaming, telecommuting.”¹⁰ These considerations are especially pertinent as the world grapples with the COVID-19 pandemic, which has shifted workplaces, classrooms, and many other aspects of daily life online for millions of people. As internet usage increases to reflect this shift, we need to consider how people are making trade-offs between speed, affordability, and shared devices in a household.

Given the importance of broadband as a national standard, we chose to look at all available standalone internet plans in each of the 28 cities we studied. This approach provides a more comprehensive picture of the state of internet access, and a robust dataset to analyze. In total, we examine 760 plans across Asia, Europe, and North America.

The lack of consumer choice in the U.S. internet service market is well documented. Most households are served by only one or two ISPs, effectively locking them into a monopoly or duopoly market.¹¹ The Institute for Local Self-Reliance found that residents often have few, if any, choices when shopping for internet service, and they are usually limited to one of only six companies: AT&T, CenturyLink, Charter, Comcast, Frontier,¹² or Verizon.¹³ Many areas aren’t served by any of these providers, including rural communities that the private sector has ignored and low-income urban neighborhoods that providers selectively avoid (a practice known as digital redlining).¹⁴

The lack of competition exacerbates the digital divide—not just between urban and rural communities, but also between households that can afford a home internet connection and those that cannot. Study after study has found that cost remains one of the biggest barriers to internet adoption.¹⁵ Without robust competition, prices tend to increase. Households increasingly rely on the internet for school, work, community, job opportunities, medical care, access to social safety net benefits, and so much more—and navigating the new realities of the COVID-19 pandemic has intensified this dynamic and laid bare the impact of the digital divide.

As we weather this public health crisis and its economic fallout, access to the internet is critical, and the disparities in access have never been more clear. In an April 2020 survey, 53 percent of U.S. adults said that the internet has been essential for them during the pandemic.¹⁶ But access to the internet is far from equal, and the digital divide disproportionately affects low-income households and Black, Indigenous, and people of color (BIPOC) communities. As the economy slows and companies lay off millions of workers, more and more people are struggling to pay for basic necessities—including internet service. The survey also found that 28 percent of consumers reported concerns about how to pay their home internet bills over the coming months, with higher percentages reporting these concerns from Black and Brown communities and low-income households.¹⁷ The digital divide is more stark than ever.

This report begins with an overview of our research methodology. We then present our findings in three parts: First, we examine our global dataset, focusing on the total cost of connectivity, network technologies, monthly prices, advertised speeds, value (based on the relationship between average monthly cost and average advertised download speed), and broadband affordability. Second, we examine the litany of ancillary fees and hidden costs that consumers must navigate to determine the total price of internet service. Third, we examine the U.S. market, focusing on its municipal networks, marginalized communities, and lack of pricing transparency. Finally, we present recommendations for U.S. policymakers that build off our research.