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Home Internet Prices Fall, as Smartphone Use Grows

smartphonesAs more Americans buy more powerful smart phones that allow them to access the Internet anywhere, the price of setting up Internet service at home has dropped in the last year.

The decreasing price of home Internet service is one interesting bit of data from the American Institute for Economic Research’s Everyday Price Index. The index starts with the U.S. Consumer Price Index, which measures a basket of goods and services in the economy, and then strips out everything except what consumers need to purchase on a regular basis like gasoline, food and home technology services.

For the new August edition, released on Wednesday afternoon, the overall Everyday Price Index decreased 0.5 percent,  after registering no change in July. Over the last 12 months, the EPI has decreased 2.8 percent. The decline in everyday prices has been driven by lower gasoline prices.

Gasoline declined 5.4 percent in August and has declined 23.3 percent over the last 12 months. The Energy Information Administration forecasts gasoline prices will be lower in 2016.

The price of Internet services decreased 1.2 percent in August, and has fallen 3.0 percent over the past year.

Theodore Cangero, data scientist at AIER and the lead author of the monthly report, noted that according to Pew, in May of 2011, 35 percent of Americans owned a smart phone, but by October 2014, that number had increased to 64 percent. “In three years, we’ve have nearly a doubling of smartphone usage,” Cangero said.

Cangero said he could find no data immediately about whether Americans are cutting their Internet service, and why. But he said that it would make sense that, with smart phones as their competition, Internet providers would be trying to attract and retain home modem customers on price.

“You can just go to any public library or coffee shop, and you have the Internet on your phone at all times anyway. Why pay for an internet connection in your house?” he said. Cangero noted that many people who spend a lot of time browsing the Web or working on their PC at home, or who want traditional cable TV and buy a package that includes Internet access, would have a good reason to maintain their connection.

Some consumers have used services like Billcuterz, a company that will negotiate lower rates with your provider, to save on their Internet bill, Cangero said.

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