Consumers Most Willing to Pay More for Faster Broadband at Lower Speeds, TPI Says

Consumer willingness to pay extra for faster broadband is much greater at lower speeds, said a Technology Policy Institute paper discussed at a Thursday event. "All the action" in fixed terrestrial and satellite services is in improved data speeds up to 50 Mbps, said TPI President Scott Wallsten, one of the three authors. After that, he said, consumer willingness to pay more drops, flattening out on a graph. "Households’ valuation of bandwidth is highly concave, with relatively little added value beyond 100 Mbps," said the paper, based on two surveys of more than 1,400 people nationwide (one including latency as a factor, the other not). "Households are willing to pay about $2.34 per Mbps ($14 total) monthly to increase bandwidth from 4 Mbps to 10 Mbps, $1.57 per Mbps ($24) to increase from 10 to 25 Mbps, and only $0.02 per Mbps ($19) for an increase from 100 Mbps to 1000 Mbps." Consumers are "willing to pay about $8.66 per month to reduce latency from levels obtained with satellite Internet service to levels more common to wired service," added the paper. "Household valuation of increased data caps is also concave as caps increase from 300 GB to 1000 GB, although consumers place a significant premium on unlimited service." The data suggests the FCC set broadband performance tier bid weights about right in a planned Connect America Fund Phase II auction of broadband support for fixed services, said Jeffrey Prince, an Indiana University business economics and public policy professor. But he said the data suggests the auction's latency penalty is too severe.