____
MARKET PRICING SURVEYOF RETAIL COMMUNICATIONS SERVICES IN CALIFORNIA
SAMPLE OF RESIDENTIAL COMMUNICATIONS SERVICES AND PRICE CHANGES 2010 – 2017COMPARED TO WIRELINE BASIC VOICE SERVICE
______
Staff Report
California Public Utilities Commission
Communications Division
April 2018
CALIFORNIA
PUBLIC UTILITIES
COMMISSION
STAFF REPORT
Simin Litkouhi
Lisa Prigozen
Authors
Tom Glegola
Supervisor
Robert Wullenjohn
Manager
Cynthia Walker
Director
Communications Division
This Staff Report was prepared by California Public Utilities Commission (CPUC) staff. It does not necessarily represent the views of the CPUC, its Commissioners, or the State of California.
MARKET PRICING SURVEY OF RETAIL COMMUNICATIONS SERVICES IN CALIFORNIA
SAMPLE OF RESIDENTIAL COMMUNICATIONS SERVICES AND PRICE CHANGES
2010-2017 COMPARED TO WIRELINE BASIC VOICE SERVICE
Table of Contents
Summary
I.Retail Pricing Survey
April 2017 Price Findings:
II.Surveyed Pricing Trends
Price Comparison 2017 to 2014:
III.Broadband Service Regional Price Differences
IV.Basic Wireline Service Rates and Charges
Basic Service Rate Findings:
V.Conclusion
Appendix A
Appendix B…………………………………………………………………………………………………………………………………….5
Summary
The Commission’s Communications Division (CD) periodically surveys expenditures of California voice and broadband subscribers and reported its findings in the Telephone Service Affordability Report to the Legislature in 2010 and also the Market Pricing Survey Staff report in 2014. Basic voice service rates are also published annually on the CPUC web site. This report, an update of the Market Pricing Survey Staff report of 2014, concerns prices available to potential subscribers for a number of different services from California’s largest service providers. The retail pricing survey is meant to capture the lowest available (i.e., entry) rate for different types of services from the providers most prevalent in the state. This report shows the results of theretail pricing survey conducted in 2017, along with trends over time.
Our most significant findings in this pricing report are as follows:
-The lowest available prices of various communications services vary over time;
-While fixed broadband Internet service product offerings vary by region, most service providers generally have uniform prices throughout California.
-Traditional wireline voice service priceshave increased since 2010,[1] though the increases since 2014 have been relatively small;
-The differences in the prices of various voice and data services offered by each provider have significantly reduced;
-Prices for wireline voice service are generally higher than VoIP, but are lower than wireless voice and bundled voice packages; and
-Basic service ratesin real constant dollars peaked in previous decades, both under cost of service and incentive regulation, but has trended upward following declines in the “real” inflation adjusted price.
-A comparison of regional prices of broadband service showed that most providers offer uniform, or at least very similar, pricing across regions, with cable providers generally offering lower prices and higher speeds.
Because several communications sectors remainmoderately or highly concentrated, as evidenced in the Market Share Analysis of Retail Communications report, and in the Competition Proceeding Decision (D.16-12-025), monitoring the State’s communications marketsremains appropriate.
I.Retail Pricing Survey
It is difficult to obtain objective and comprehensive price data in a market whereprices can change frequently, companies often utilize temporary price discounts and price and/or service availability may depend on a consumer’s location. Additionally, the growth in bundling of voice, data and video offerings[2]makes separating voice from data and other charges increasingly difficult. Thus our pricing assessment, which is not exhaustive, is based on a sample of the lowest priced market rates available to consumers each year, from 2010-2017.
We comparethe lowest available retail price of 8 categories ofcommunications services offered by 15 of the largest service providers in California. As with the 2014 Report, the survey design includes the following categories of communications services:
- Wireline– Traditional telephone service via copper cables to a customer’s premise using TDM Protocol;
- Fixed Broadband– Internet access service typically via DSL, coaxial cable or fiber optic connections;
- VoIP– Fixed and non-fixed interconnected voice telephone service to a customer’s premise using interconnected Internet Protocol;
- Mobile Voice only– Typically provisioned via a wireless cellular network;
- Mobile Data only– Internet access typically provisioned via a wireless cellular network;
- Mobile Voice & Data– A bundle including both Mobile Voice and Mobile Data (includes “smart phone” voice and data subscriptions);
- Wireline Basic Unlimited Long Distance– A bundle including Local and “Long Distance,” a phone service that allows a customer to call anywhere in the US at no additional cost;
- Fixed Voice & Broadband– A bundle including Fixed Broadband with Wireline voice or fixed interconnectedVoIP; and
- 10GB Shared Mobile– Family Voice and Data plan.
As already mentioned, thissurveyidentifiesthe lowest available prices from each service provider for each of the services they offer, not an average of what people pay. Six months was chosen as the minimum duration of a service price of contracts. The price commitment may be subject to contract or subject to change as in a publishedtariff or non-contracted service. Consumers that purchase a service at a promotional price will eventually be subject to a price increaseif they continue the service, without a further discount. However, to survey only “non-introductory prices” would exclude available prices in the market. Many services surveyed did not include a promotional rate, while others did. In any case, without a contract, prices for all services are subject to change. Where promotions were less than 6 months, the non-promotion price is reported. Thus, for simplicity, the available monthly marketprices for initiating service by type are displayed and footnotesprovide details about the service and whether the price was promotional.
Services within the same category might offer varying amounts of usage allowances, features or capabilities. Broadband services might include different allotments of data transfer available per month and mobile voice services might include texting or voicemail services. Again, the footnotes or endnotes provide details about what is included with each service.
Table 1, below, showsthe postpaid prices of services offered by each of the 15 service providers we researched. Beneath Table 1, Chart 1shows this same data pictorially.
Table 1
SurveyedNominal Prices forVarious CommunicationsMarket Services inCaliforniaPrices as ofMay, 2017 (see endnotes fordata sources and service details)
Wireline Basic / Fixed
Broadband / VoIP / Mobile
Voice / Mobile
Data / Mobile Voice & Data / Wireline
Basic& Unlimited Long Distance / Fixed Voice & Broadband / 10GB Shared Mobile Voice & Data
AT&T / $23.25[i] / $40.00[ii] / $19.99[iii] / $59.00[iv] / $42.00[v]
ATT Mobile / $30.00[vi] / $15.00[vii] / $30.00[viii] / $60.00[ix]
Comcast / - / $29.99[x] / $20.00[xi] / - / - / - / - / $49.99[xii]
Cox / - / $29.99[xiii] / $10.00[xiv] / - / - / - / - / $49.99[xv]
Cricket / - / - / - / $25.00[xvi] / $30.00[xvii] / $30.00[xviii] / - / - / N/A
Frontier[3] / $20.00[xix] / $19.99[xx] / $27.99[xxi] / - / - / - / $40.99[xxii] / $60.98[xxiii]
MagicJack / - / - / $2.92[xxiv] / - / - / - / - / -
MetroPCS / - / - / - / $30.00[xxv] / $30.00[xxvi] / $30.00 [xxvii] / - / -
Skype / - / - / $2.99[xxviii] / - / - / - / - / -
Sprint / - / - / - / $40.00[xxix] / $40.00[xxx] / $40.00[xxxi] / - / - / N/A
Consolidated / $21.99[xxxii] / $15.00[xxxiii] / $10.00[xxxiv] / - / - / - / $37.53 [xxxv]
Spectrum (Charter + Time Warner) / - / $44.99[xxxvi] / $19.99[xxxvii] / - / - / - / - / $64.98[xxxviii]
T-Mobile / - / - / - / $70.00[xxxix] / $70.00[xl] / $70.00[xli] / - / - / N/A
Verizon Wireless / - / - / - / $30.00[xlii] / $20.00[xliii] / $30.00[xliv] / - / - / $60.00[xlv]
Vonage / - / - / $9.99[xlvi] / - / - / - / - / - / -
Chart 1
Surveyed Nominal Prices as of April 2017 for Various
Postpaid Communications Market Servicesin California[4]
April 2017 Price Findings:
-On average, the three categories of bundled services(#6, 7 and 8) were the most expensive; however, these bundles usuallycost less than purchasing the combined services separately.
-Rates for wireline basic voice services,excluding long distance (#1), are closely clustered compared to other service categories(#2 through 8).
-Prices for wireline voice service (#1) are generally higher than VoIP (#3), but are lower than wireless voice (#4) and bundled voice packages (#6, 7, and 8). These plansoffer fewer features, especially if theyexclude longdistance, and therefore theprice is not directly comparable.
-Nomadic VoIP service providers (Magic Jack andSkype) offerlow prices for voice services; however, these require a separate broadband service connection, so the prices of these services may not be directly comparable.
II.Surveyed Pricing Trends
Charts A through H, below,show nominal retail prices over time for each surveyedservice categoryfrom December 2010 to May2017. The main trends we noticed include:
-Traditional wireline voice service prices have increased since 2010, however there is very little increase since 2014, and appear as the least volatile in rate change (See Price Chart A);
-The prices of numerous voice and data services, including bundled services, offered by each provider have converged.(See Price Charts A, C, F, G and H)
-Prices of mobile voice and data services appear to be converging, if one treats T-Mobile price in the survey as an outlier. (See Price Charts D and E) T-Mobile offers lower priced plans outside the parameters set by this study.
-There is no clear pricing trend for fixed broadband service (See Price Chart B).[5]
Price Chart A
Wireline Voice Price Timeline[6]
Price Chart B
Fixed Broadband Price Timeline
Price Chart C
VoIP Price Timeline
Price Chart D
Mobile Voice Price Timeline
Price Chart E
Mobile Data Price Timeline
Price Chart F
Mobile Voice & Data Bundle Price Timeline
Price Chart G
Wireline Voice Local & Long Distance Bundle Price Timeline
Price Chart H
Fixed Voice & Broadband Bundle Price Timeline
Price Comparison 2017 to 2014
Table 2 below shows the primary differences between the market pricing survey results of 2014 versus the most recent results from 2017. In all but 2 service categories, entry level prices have dropped. These price dropsmay be accompanied by a drop in aspects of the service, such as fewer gigs of data available or fewer voice features, but more than not this was not the case. These were the lowest available prices for service entry at the given time, a snapshot of the cost to enter a retail market. The fact that many of these prices have dropped may indicate positive effects of competition. Competition may also play a part in the trend for 2017 prices to be closer to each other (by service category) than in 2014. The standard deviation in Table 2 reflects how closely prices match each other.
Table 2
Comparison of the Standard Deviation for theSurveyed Prices of Communications Market Services in California
Wireline Basic / Fixed Broadband / VoIP / Mobile Voice / Mobile Data / Mobile Voice & Data / Wireline Basic & Unlimited Long Distance / Fixed Voice & Broadband / 10GB Shared Mobile
2014
Standard Deviation / 1.66 / 12.93 / 18.15 / 11.43 / 17.18 / 10.70 / 10.84 / 8.43 / 8.16
Average / $21.50 / $30.70 / $22.69 / $46.67 / $25.83 / $47.50 / $48.99 / $39.18 / $90.00
Minimum / $19.99 / $14.99 / $2.99 / $30.00 / $10.00 / $30.00 / $39.99 / $27.99 / $80.00
Maximum / $24.00 / $54.99 / $66.99 / $60.00 / $60.00 / $60.00 / $66.99 / $49.99 / $100.00
2017
Standard Deviation* / 1.34 / 10.04 / 8.10 / 4.90 / 8.72 / 14.62 / 9.41 / 8.30 / 0.00
Average / $21.75 / $29.99 / $13.76 / $31.00 / $27.00 / $38.33 / $45.84 / $53.59 / $60.00
Minimum / $20.00 / $15.00 / $2.92 / $25.00 / $15.00 / $30.00 / $37.53 / $42.00 / $60.00
Maximum / $23.25 / $44.99 / $27.99 / $40.00 / $40.00 / $70.00 / $59.00 / $64.98 / $60.00
*T-Mobile offers only “One Plan” which bundles unlimited domestic voice, text and data. It is not possible to compare T-Mobile offering with other service offering and prices for One Plan was excluded when calculating the numbers in this table except for when calculating the Mobile Voice &Data.
Price Comparison 2017 to 2014:
-In 2014, the prices of the wireless and broadband service plans offered by each provider varied. However, since 2014, there is a downward price trend for allof the providers with lower variation in prices of all wireless services.
-In comparison to 2014, standard deviation in 2017,has declined or stayed the same for all services except for Mobile Voice and Data showing conversion of prices across providers.
III.Broadband Service Regional Price Differences
The Commission’s investigation into the state of competition in the California communications market included only a limited review of broadband service prices. As a result, CD Staff determined to include in this report an analysis on whether subscribers in different regions of the State paid different prices for the same services. In general CD Staff found that while broadband service availability varies by region and even by neighborhood,pricesvary less so, as the largest service providers generally charge uniform pricesthroughoutCalifornia.
To obtain a representative sample, CD Staff surveyed the broadband options and pricing in the following cities and Census Designated Places (CDPs):
- Alamo – suburban, Alameda County
- Bakersfield – urban, Kern County
- Boron – rural, Kern County
- Crowley Lake – rural, Mono County
- Los Angeles – urban, Los Angeles County
- Rancho Tehama Reserve– rural, Tehama County
- Sacramento – urban, Sacramento County
- Salinas – urban, Monterey County
- San Diego – urban, San Diego County
- San Francisco – urban, San Francisco County
- San Jose – urban, Santa Clara County
- Willits – half rural, half urban, Mendocino County
Complete data obtained from this survey is found in Appendix A. In general, this comparison showed most providers offer uniform, or at least very similar, pricing across regions, with cable providers generally offering lower prices and higher speeds. For example, in the six cities and CDPs in this sample where Comcast and AT&T compete, AT&T’s lowest prices are higher than Comcast’s, with AT&T providing broadband service at slower advertised speeds.
Additionally,though a provider’s pricing may beuniform, it does not necessarily mean that services offered are uniform. For example, the lowest price for AT&T’s aDSL service is $30 or $40 per month in all locations sampled across the State. However, subscribers in one location may pay $30 for broadband service at advertised speeds of up to 5 mbps downstream, while others may pay $30 for broadband service at advertised speeds of up to 30 mbps downstream.Subscribers to Sonic.net broadband service also encounter these pricing differences.
For example, as indicated in Image 1, below, Sonic.net offers broadband using fiber technology to some neighborhoodsin San Francisco, while it offers consumers in other neighborhoods broadband service at lower speeds, though at the same cost.
Image 1
Comparison of Broadband Service Prices in Different Neighborhoods in San Francisco
Digital Subscriber Line (DSL) service is particularly sensitive to the distance and length of its underlying copper facility technology between the Digital Subscriber Line Multiplexer and the customer location. This means that though a service may be offered at a single monthly rate to all consumers, the actual service speed that a customer may receive will vary. This distance sensitivity is less pronounced for cable and fiber facility technologies, though there are other factors inherent in networks that can cause variability in speed between customer locations and time of use.
IV.Basic Wireline Service Rates and Charges
For most Californians, the price of traditional wireline service is set at the discretion of the service provider,since basic service regulation price caps were lifted in January 2011 for the four largest service providers in the State.[7]
Chart 2 below shows the basic residential service rates in current dollars adjusted by inflation for AT&T California (formerly Pacific Bell) and Verizon California (now Frontier) from 1984 to 2017.[8] This means, for example, that the inflation-adjusted rate shown between 1994 and 2008 declined because of the rate of inflation, not due to a change in the nominal (unadjusted) rate. Since 2011,AT&T’s basic rate adjusted values have exceeded previous rate peaks coincident with rates established by the CPUC in its 1984 and 1994 rate setting proceedings. In contrast, the rate for Verizon (now Frontier), which has historically exceeded AT&T’s, is now less than AT&T’s and less than the CPUC 1994 rate setting peak.[9] Since 2008, the inflation-adjusted rate for both providers has risen, but more so for AT&T than for Verizon.
Chart 2 also shows the LifeLine rates in current dollars for AT&T California and Verizon California (now Frontier) from 1984 to 2017. The historical trend of LifeLine telephone rates being set at 50% of the AT&Trate was no-longer applicable in 2012 and LifeLine rates therefore do not escalate following thelifting of price caps.[10] In real, constant dollars, the price of LifeLine today is less than in 1984,1994 and 2010. Further, the price as of October 2017,has not changed much since 2012.
The data used to construct Chart 2 are shown in Appendix B attached to this report.
Chart 2
Table 3, below, shows the wireline basic service rates of the URF carriers in California inclusive of both the state tariffed rate and the federal subscriber line charge. Historically, under cost of service regulation, the costs of provisioning local telephone service were bifurcated between state and federal jurisdiction.[11] The FCC created the subscriber line charge as a means to recover interstate local access costs attributed to federal jurisdiction. The URF carriers have discretion whether or not to recover their federal jurisdictional assigned costs. Thus, the total amount recovered by the URF carriers for their basic service is the sum of the state and federal charges. It is appropriate to combine these as they represent the true service provider offered price to the consumer for subscribing to wireline basic service.
When considering the charges their customers pay, AT&T monthly combined charges currently are higher than Frontier (Verizon California) combined charges for flat rate basic service.
Table 3
URF CARRIER BASIC SERVICE MONTHLY RATES AND CHARGESFor VOICE GRADE ACCESS LINES
As of April 1, 2017
Company / Flat Rate / Measured Rate / Subscriber Line Charge / Combined State & Subscriber Line Charge / Area
AT&T / $26.00 / $23.25 / $4.51 / $30.51 / Statewide
Frontier/ Verizon / $22.00 / $13.40 / $6.50 / $28.50 / Frontier California Inc. (GTE)
$5.24 / $27.24 / Frontier California Inc. (Contel)
$22.00 / $15.00 / $0. 70 / $22.70 / Frontier Communications of the Southwest
$21.00 / $17.00 / $6.50 / $27.50 / CTC/CA Embedded Market Area
$20.00 / NA / $2.26 / $22.26 / CTC of CA West Coast Market Area
Consolidated / $21.99 / $15.99 / $6.50 / $28.49 / Near Roseville
Basic Service Rate Findings:
-In inflation-adjusted dollars, LifeLine basic service rates have increased only slightly since 2012.
-In inflation-adjusted dollars, AT&T California’s basic service rates have exceeded Frontier/Verizon California’s in the last seven years.
-In inflation-adjusted dollars, the single largest increases to basic service rates have occurred under rate regulation in 1994.