Study Shows How Bad Most of the Country Is Getting Ripped Off By Their ISPs

Most Americans pay roughly the same price for their internet connection, even if their service is painfully slow.

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Aug 7 2018, 1:00pm

Image: Shutterstock/Jason Koebler

Despite the ample hype over gigabit fiber and next-gen (5G) wireless, the reality is there are huge swaths of America where broadband competition is actually getting worse.

In countless markets nationwide, phone companies like Frontier, Verizon, and CenturyLink have all but given up on upgrading aging DSL lines at any real scale, pivoting instead to business services or flinging video ads at Millennials. This apathy has gifted cable giants with a greater monopoly over broadband than ever in many areas, especially at faster speeds.

And while the slow strangulation of real fixed-line broadband competition is great news for Comcast, it’s decidedly less stellar news for you.

Eroded competition not only ensures you can’t switch ISPs to punish terrible customer service or net neutrality violations, but it means millions of you will continue to pay higher and higher prices for speeds straight out of 2002.

A new study by the National Digital Inclusion Alliance drives that point home.

According to the report, tens of millions of AT&T, Verizon, and CenturyLink customers are stuck paying an arm and a leg for last-generation DSL that fails to even meet the FCC’s 25 Mbps definition of broadband. Frequently, these users are paying the same rate for substandard speeds as those in more competitive markets pay for much faster service.

“In recent years AT&T and Verizon, the nation’s two largest telco Internet providers, have eliminated their cheaper rate tiers for low and mid-speed Internet access, except at the very slowest levels,” notes the report.

Ideally, customers on slower DSL lines (say 1-6 Mbps downstream) should pay less money. But thanks to no competition, that’s not happening. Frequently, these users are told they have to pay higher and higher rates for the same slow DSL, with upgrades nowhere in sight.

For example, many users on lines as slow as 1.5 Mbps downstream are stuck paying $63-$65 a month. That doesn’t include misleading fees or usage caps and overage penalties, which drive up consumer costs even higher.

Meanwhile in healthier markets, symmetrical gigabit broadband tiers often cost roughly the same ($70), though that price point jumps to $120 or more when there’s limited competition.

“This policy of upward ‘tier flattening’ raises the cost of Internet access for urban and rural AT&T and Verizon customers who only have access to the oldest, slowest legacy infrastructure,” notes the report.

A chart in the paper illustrates this phenomenon, though again you should note that this doesn’t include hidden fees, usage caps, overage penalties and other “creative” surcharges routinely used to covertly jack up prices even further post sale:

Image: National Digital Inclusion Alliance


The study is quick to highlight how the end result of this lack of competition is routinely ugly for vast swaths of America, assuming you can get broadband in the first place.

AT&T, for example, has repeatedly come under fire for its refusal to upgrade DSL users in low-income areas in Detroit and Cleveland. Verizon has similarly faced routine criticism for its refusal to upgrade or repair DSL lines in countless states, which appears to be apathy driven by the company’s shifting focus toward online video and advertising via its AOL and Yahoo acquisitions.

This competitive failure results in “higher rates on millions of urban households who are relegated to slow ADSL technology by AT&T’s documented ‘digital redlining’ of lower-income neighborhoods,” as well as “Verizon’s refusal to deploy broadband upgrades in some entire cities like Baltimore and Buffalo,” notes the report.

AT&T responded to the study by insisting there’s absolutely nothing to see here.

“Attempting to assess internet service offerings by only looking at standard rates does not give a complete picture; the internet service market is more competitive than ever and most customers make their purchases at bundled and discounted rates,” AT&T said in a statement to Motherboard.

Except the claim that U.S. broadband is “more competitive than ever” isn’t true.

A recent report by Leichtman Research notes that the nation's biggest cable companies added a whopping 83% of all net broadband subscribers last quarter as customers annoyed by slower DSL speeds flee to cable. In many instances, Verizon has actively encouraged these departures as it tries to free itself from taxpayer-subsidized lines it no longer wants to maintain.

And while AT&T and Verizon have been quick to suggest that emerging wireless technologies and competition will make this all irrelevant, that’s not how any of this works.

Wireless still isn’t available to vast stretches of the country, and usage caps, overage fees and bizarre limitations (like having to pay more for HD video) often make such connections ill-suited as a real home broadband replacement. AT&T and Verizon also dominate the transit and backhaul lines feeding wireless connections, keeping prices high there as well.

Ideally, healthy competition and balanced regulatory oversight are supposed to keep giant telecom monopolies on their best behavior. But as the attack on net neutrality and skyrocketing prices make clear, we’re intent on letting ISPs run amok, doubling down on many of the bad ideas that helped build the current broken U.S. broadband market in the first place.