$50 a month for 1Mbps: How AT&T and Verizon rip off DSL customers

Tens of millions of people in the AT&T and Verizon service territories can only buy slow DSL Internet from the companies, yet they often have to pay the same price as fiber customers who get some of the fastest broadband speeds in the US.

That’s the conclusion of a new white paper written by the National Digital Inclusion Alliance (NDIA), a broadband advocacy group.

AT&T has been charging $60 a month to DSL customers for service between 6 and 10Mbps downstream and 0.6Mbps to 1Mbps upstream, the white paper notes, citing AT&T’s advertised prices from July 2018. AT&T charges $60 a month for 50Mbps and 75Mbps download tiers and even for fiber service with symmetrical upload and download speeds of 100Mbps. These are the regular rates after first-year discounts end, before any extra fees and taxes.

Verizon similarly charges $65 a month for 100Mbps fiber service (including a $10 router charge), and $63 or $64 a month for DSL service that provides download speeds between 1.5Mbps and 15Mbps, the white paper says. The price is this high partly “because Verizon ADSL service at any speed requires paying separately for a landline telephone account.”

“[I]n recent years, the nation’s two largest telco ISPs, AT&T and Verizon, have eliminated their cheaper rate tiers for low and mid-speed Internet access, except at the very slowest levels,” the NDIA wrote. “Each company now charges essentially identical monthly prices—$63-$65 a month after first-year discounts have ended—for home wireline broadband connections at almost any speed up to 100/100 Mbps fiber service.”

The exceptions are for Verizon DSL service with download speeds of 768kbps or less and for AT&T service with download speeds from 768kbps to 5Mbps. For those extremely slow services, “the two companies charge $10 a month less,” or $50 a month, the NDIA wrote.

AT&T didn’t dispute any of the specific prices from the NDIA report but called it “misleading.” AT&T said in a statement to Ars:

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. The claims made in this report are completely misleading and do not reflect all options available to consumers.

AT&T also said that it hasn’t “eliminated speed tiers.” Instead, AT&T says that “Over the last several years we’ve simplified our Internet portfolio, offering an entry-level price point that’s remained relatively constant while the speed offered has increased.”

A Verizon spokesperson did not respond to requests for comment on the NDIA’s white paper.

Tier flattening

The NDIA calls the practice of charging identical prices for wildly different speeds “tier flattening.” It affects both urban and rural customers who live in areas where AT&T and Verizon haven’t upgraded networks because they face no competition, because the upgrades wouldn’t result in higher profits, or both. These customers end up using “the oldest, slowest legacy infrastructure,” while paying much higher per-megabit prices than other Internet users.

Tier flattening “imposes 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,” the NDIA wrote. “It also victimizes millions of underserved households in the two companies’ rural service areas.”

Customers with the slowest speeds end up paying more than $65 a month for each megabit per second of download speed, while people with higher speeds pay about 60 cents per megabit. The NDIA detailed the price-per-megabit range in this chart:

Extracting profit from low-speed customers

Bringing high speeds to sparsely populated areas is generally more expensive on a per-customer basis than doing the same in urban areas, of course. But AT&T and Verizon have failed to upgrade networks in rural America and some urban areas, the NDIA noted:

Slower ADSL speeds at lower rates—i.e., what most reasonable people would expect—should be providing a cheaper alternative. Given that capital investment by AT&T and Verizon in their legacy ADSL networks in the past ten years has been minimal, the cost of service on those networks should be significantly lower than the cost of service on recently constructed fiber-to-the-node and fiber-to-the-premises networks. Instead, both companies seem bent on extracting as much profit as possible from their lower-speed customers.

AT&T noted that DSL networks have “higher costs of maintenance and fewer subscribers” than its fiber-to-the-node and fiber-to-the-home premises.

We previously wrote about the NDIA in September 2016 when it successfully pressured AT&T to stop exploiting a loophole that it used to deny a discounted home Internet service to poor people in areas where it hasn’t upgraded its network.

AT&T’s statement to Ars pointed to the existence of that program, “Access from AT&T,” as evidence that it charges reasonable prices. Access makes $5 or $10-per-month Internet service available to households in the federal Supplemental Nutrition Assistance Program. AT&T is required to offer this under a condition that the Federal Communications Commission imposed on its purchase of DirecTV.

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