Summary



____ MARKET PRICING SURVEY OF RETAIL COMMUNICATIONS SERVICES IN CALIFORNIASAMPLE OF RESIDENTIAL COMMUNICATIONS SERVICES AND PRICE CHANGES 2010 – 2017 COMPARED TO WIRELINE BASIC VOICE SERVICE_______________________________________________________Staff ReportCalifornia Public Utilities CommissionCommunications DivisionApril 2018CALIFORNIAPUBLIC UTILITIESCOMMISSIONSTAFF REPORTSimin Litkouhi Lisa PrigozenAuthorsTom GlegolaSupervisorRobert WullenjohnManagerCynthia WalkerDirectorCommunications DivisionThis 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 SERVICETable of Contents TOC \o "1-3" \h \z \u Summary PAGEREF _Toc510801651 \h 3I.Retail Pricing Survey PAGEREF _Toc510801652 \h 4April 2017 Price Findings: PAGEREF _Toc510801653 \h 7II.Surveyed Pricing Trends PAGEREF _Toc510801654 \h 8Price Comparison 2017 to 2014: PAGEREF _Toc510801655 \h 14III.Broadband Service Regional Price Differences PAGEREF _Toc510801656 \h 14IV.Basic Wireline Service Rates and Charges PAGEREF _Toc510801667 \h 16Basic Service Rate Findings: PAGEREF _Toc510801668 \h 18V.Conclusion PAGEREF _Toc510801669 \h 19Appendix A PAGEREF _Toc510801670 \h 20Appendix B……………………………………………………………………………………………………………………………………. PAGEREF _Toc510801670 \h 25SummaryThe 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 the retail 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 prices have increased since 2010, 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 rates in 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 remain moderately 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 markets remains appropriate. Retail Pricing SurveyIt is difficult to obtain objective and comprehensive price data in a market where prices 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 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 compare the lowest available retail price of 8 categories of communications 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 interconnected VoIP; and10GB Shared Mobile– Family Voice and Data plan. As already mentioned, this survey identifies the 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 published tariff or non-contracted service. Consumers that purchase a service at a promotional price will eventually be subject to a price increase if 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 market prices for initiating service by type are displayed and footnotes provide 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, shows the postpaid prices of services offered by each of the 15 service providers we researched. Beneath Table 1, Chart 1 shows this same data pictorially. Table 1 Surveyed Nominal Prices for Various Communications Market Services in California Prices as of May, 2017 (see endnotes for data sources and service details)Wireline BasicFixedBroadbandVoIPMobileVoiceMobileDataMobile Voice & DataWirelineBasic & Unlimited Long DistanceFixed Voice & Broadband10GB Shared Mobile Voice & Data AT&T$23.25$40.00$19.99$59.00$42.00AT&T Mobile $30.00$15.00$30.00$60.00Comcast-$29.99$20.00----$49.99 Cox-$29.99$10.00----$49.99Cricket---$25.00$30.00$30.00--N/AFrontier$20.00$19.99$27.99---$40.99$60.98MagicJack--$2.92-----MetroPCS---$30.00$30.00$30.00 --Skype--$2.99-----Sprint---$40.00$40.00$40.00--N/AConsolidated$21.99$15.00$10.00---$37.53 Spectrum (Charter + Time Warner)-$44.99$19.99----$64.98T-Mobile---$70.00$70.00$70.00--N/AVerizon Wireless---$30.00$20.00$30.00-- $60.00Vonage--$9.99----- - Chart 1Surveyed Nominal Prices as of April 2017 for Various Postpaid Communications Market Services in California26554181589226 g00 g15211042371395b00b11119101179576a00a3416198806501h00h26554181216152 f00 f22530831589227 e00 e18424481179849 c00 c18933761589102d00d April 2017 Price Findings:On average, the three categories of bundled services (#6, 7 and 8) were the most expensive; however, these bundles usually cost 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 plans offer fewer features, especially if they exclude long distance, and therefore the price is not directly comparable. Nomadic VoIP service providers (Magic Jack and Skype) offer low prices for voice services; however, these require a separate broadband service connection, so the prices of these services may not be directly comparable. Surveyed Pricing TrendsCharts A through H, below, show nominal retail prices over time for each surveyed service category from December 2010 to May 2017. 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). Price Chart AWireline Voice Price TimelinePrice Chart BFixed Broadband Price TimelinePrice Chart CVoIP Price TimelinePrice Chart DMobile Voice Price TimelinePrice Chart EMobile Data Price TimelinePrice Chart FMobile Voice & Data Bundle Price TimelinePrice Chart GWireline Voice Local & Long Distance Bundle Price TimelinePrice Chart HFixed Voice & Broadband Bundle Price TimelinePrice Comparison 2017 to 2014Table 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 drops may 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 2Comparison of the Standard Deviation for the Surveyed Prices of Communications Market Services in California ?Wireline BasicFixed BroadbandVoIPMobile VoiceMobile DataMobile Voice & DataWireline Basic & Unlimited Long DistanceFixed Voice & Broadband10GB Shared Mobile 2014Standard Deviation1.6612.9318.1511.4317.1810.7010.848.438.16Average$21.50$30.70$22.69$46.67$25.83$47.50$48.99$39.18$90.00Minimum$19.99$14.99$2.99$30.00$10.00$30.00$39.99$27.99$80.00Maximum$24.00$54.99$66.99$60.00$60.00$60.00$66.99$49.99$100.002017Standard Deviation*1.3410.048.104.908.7214.629.418.300.00Average$21.75$29.99$13.76$31.00$27.00$38.33$45.84$53.59$60.00Minimum$20.00$15.00$2.92$25.00$15.00$30.00$37.53$42.00$60.00Maximum$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 all of 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.Broadband Service Regional Price DifferencesThe 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, prices vary less so, as the largest service providers generally charge uniform prices throughout California. 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 CountyBoron – rural, Kern County Crowley Lake – rural, Mono CountyLos Angeles – urban, Los Angeles CountyRancho Tehama Reserve– rural, Tehama CountySacramento – urban, Sacramento CountySalinas – urban, Monterey CountySan Diego – urban, San Diego CountySan Francisco – urban, San Francisco CountySan Jose – urban, Santa Clara CountyWillits – 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 be uniform, 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 broadband service also encounter these pricing differences. For example, as indicated in Image 1, below, offers broadband using fiber technology to some neighborhoods in San Francisco, while it offers consumers in other neighborhoods broadband service at lower speeds, though at the same cost. Image SEQ Image \* ARABIC 1 Comparison of Broadband Service Prices in Different Neighborhoods in San FranciscoDigital 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. Basic Wireline Service Rates and ChargesFor 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.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. 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. 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&T rate was no-longer applicable in 2012 and LifeLine rates therefore do not escalate following the lifting of price caps. 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 2Table 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. 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 3URF CARRIER BASIC SERVICE MONTHLY RATES AND CHARGESFor VOICE GRADE ACCESS LINESAs of April 1, 2017?Company Flat Rate Measured Rate Subscriber Line ChargeCombined State & Subscriber Line ChargeAreaAT&T$26.00$23.25$4.51$30.51StatewideFrontier/ Verizon $22.00$13.40$6.50$28.50Frontier California Inc. (GTE)$5.24$27.24Frontier California Inc. (Contel)$22.00$15.00$0. 70$22.70Frontier Communications of the Southwest$21.00$17.00$6.50$27.50CTC/CA Embedded Market Area$20.00NA$2.26$22.26CTC of CA West Coast Market AreaConsolidated$21.99$15.99$6.50$28.49Near RosevilleBasic 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. Consumer fixed monthly rates include both a state and a federal charge component and these charges should be combined to assess the actual consumer total charge.AT&T’s combined basis service charges are higher than Verizon’s and Consolidated combined basic service charges. AT&T has the highest measured rate charges. ConclusionStaff will continue to monitor entry-level retail prices using our retail pricing survey. Overall, for all services surveyed, market prices exhibit fluctuations up and down over time, depending on the service provider and service. However, since 2015, most prices have gone down or are at the same price level, and many of the services included have improved with increased features or data allotments, for example, perhaps owing to competition Additionally, since 2014, the difference in prices offered by different providers have trended closer to each other.The price of basic service should be evaluated relative to the broader market offerings. For example, for most consumers, AT&T’s basic service can be substituted by purchasing VoIP or mobile voice service at lower or higher prices depending upon available minutes, long-distance, bundling and the service provider chosen by the consumer. While Verizon’s wireline basic local service prices were higher than AT&T’s between 1984 and 2010, AT&T’s price increases since 2008 have resulted in AT&T’s prices exceeding Verizon’s since 2011. However, when considering the subscriber line charge, AT&T’s current basic service price is comparable to other providers. When comparing basic service rates to market prices, it is also appropriate to combine the state rate with the federal line charge as these are both revenue to the basic service provider and more accurately reflects the price paid by the consumer. When excluding the federal subscriber line charge, wireline basic local voice service rates are generally less expensive than most other communications services. However, when including the subscriber line charge, basic local service rates are about the same as the providers’ VoIP service rates, which include long distance. Further, when basic service is combined with unlimited long distance, wireline service is no longer the lowest price offering. Mobile voice and VoIP services are generally less expensive than wireline voice when including unlimited long distance. There is not much regional price difference in California. The lowest priced services are comparable for most providers; however the level of service offering changes by providers. Comcast offers uniform pricing for same speeds across regions at the lower level of prices. AT&T’s lowest prices are higher than Comcast’s, and offer lower speeds.This report offers the latest results of Staff’s periodic monitoring of market prices via the retail pricing survey. This is just one aspect of the competitive marketplace. Past reports to review in context with this report produced by the Communications Division are the “Market Share Analysis of Retail Communications in California”, the “Affordability of Basic Telephone Service Survey” and the “Limited English Proficiency” reports. These reports can be found at: . Additionally, D.16-12-015 directs Staff to produce a comprehensive report on the state of competition in communications markets by the end of 2018. Appendix ASurvey of Regional Fixed Broadband Service Providers April 2017CompanyAlamoBakersfieldBoronCrowley LakeComcast $29.99 up to 10mbps, $39.99 up to 55mbps,$49.99 up to 100mbps, $59.99 up to 200mbps, $69.99 up to 250mbps, $89.99 for up to 1G, $299.95 for 2G???AT&T$40 up to 10mbps$40 up to 50mbps where available; 18/1.5 mbps in about half the blocks. ??Wave$49.95 for 50/5 mbps, $69.96 for 100/5 mbps, $79.95 for 250/10 mbps???Sonic$40, 20/1 mbps, limited availability???Brighthouse (Charter)?$44.99, Starting at 60 mbps??Race??$25 for 25 mbps, $60 for 1G?Suddenlink???$44.99 for 50/5 mbps, With TV/Phone bundle, $79.99 for 50/5 mbps, $99.99 for up to 200 mbps, $109.99 for up to 400 mbps, $134.99 for up to 1GFrontier???$19.99 for 1 mbps with phone, $49.99 for up to 15 mbps with phoneSurvey of Regional Fixed Broadband Service Providers April 2017(continued)CompanyLos AngelesRancho TehamaSacramentoSalinasComcast ??$29.99 up to 10mbps, $39.99 up to 55mbps,$49.99 up to 100mbps, $59.99 up to 200mbps, $69.99 up to 250mbps, $89.99 for up to 1G, $299.95 for 2G$29.99 up to 10mbps, $39.99 up to 55mbps,$49.99 up to 100mbps, $59.99 up to 200mbps, $69.99 up to 250mbps, $89.99 for up to 1G, $299.95 for 2GAT&T$40, up to 10, 18, 25 or 45 mbps depending on availability, $60 up to 100 mbps, $30 up to 5 mbps that is only available where higher speeds are not?$40 for up to 50 mbps, $60 for up to 100 mbps, $80 for 1G$40 for up to 24/3mbps in some areas, mostly up to 12/1mbpsSonic$40, up to 20, 40 or 50 mbps where available, $70 for "double" line to increase capacity?$40 for 20/1 mbps, $70 for "double" line to increase capacity?FrontierFiOS: $40 for 50/50 mbps, $50 for 100/100mbps, $60 for 150/150mbps $160 for up to 300/300mbps???Time Warner (Charter)$44.99 for 100 mbps???Ducor?$24.95 for 1/.384 mbps, $67.95 for package (6/1)??Consolidated??$15 for 5 mbps, $25 for 18mbps, $35 for 30mbps, $40 for 50 mbps, $50 for 100 mbps ?Survey of Regional Fixed Broadband Service Providers April 2017(continued)CompanySan DiegoSan FranciscoSan JoseWillitsComcast ?$29.99 up to 10mbps$39.99 up to 55mbps$49.99 up to 100mbps$29.99 up to 10mbps$39.99 up to 55mbps$49.99 up to 100mbps$29.99 up to 10mbps$39.99 up to 55mbps$49.99 up to 100mbpsAT&T$40 Up to 50 mbps, $60 for up to 100 mbps, $80 up to 940 mbps$40 for top speed available: most have up to 12/1 mbps or 18/1 mbps; a few blocks 75/8 mbps, a few with 24/3 mbps, 45/6 mbps$40 Up to 50 mbps, $60 for up to 100 mbps, $80 up to 1000 mbps, $40 Highest available speed is 18/1 mbps. Some census blocks have 12/1 mbpsWave?$39.99, $49.95 for 50/5, $69.96 for 100/5, $79.95 for 250/10??Sonic?$40 for 20, 40, 50, $70 for "double" line to increase capacity$40 for 20, 40, 50, $70 for "double" line to increase capacity ?Time Warner (Charter)$44.99 Starting at 100 Mbps???Cox$29.99, up to 10, 25 where available, $39.99 up to 100, $49.99 up to 200???Raw Bandwidth?$29.95 for Up to 3/.5 mbps, $39.95 for up to 12/1, $49.95 Up to 20/1.5$29.95 for Up to 3/.5 mbps, $39.95 for up to 12/1, $49.95 Up to 20/1.5? ................
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