2024 Telecom and ISP Rate Changes: Circuits, POTS, and Server Licensing

There’s a saying that what goes up must come down but when it comes to pricing in the telecom sector, we are yet to see the downturn. If the current trend of price hikes in the telecom and ISP space is concerning, or you’re struggling to find cost-effective alternatives, fear not. The Lightyear team is here to unpack it all. 

The Macro-Economic Environment

Before we dive into the factors specific to the telecom market, let’s consider the influence of the global economy. Inflation is impacting many countries in the world. Where there is a higher inflation rate, there is a concurrent increase in the cost to provide (and purchase) products and services. It is standard practice for ISPs to include a rate increase in their contracts in line with inflation, even though bandwidth costs typically decline in general over time.

What Historical Data Says for the Telecoms Market

Image Source: Broadband Now

Interestingly, much of the historical pricing data for the telecom industry trends lower year-on-year. The current rising prices, especially in the US,  are therefore something of a statistical anomaly, with several areas not following this trend. Here’s what you need to know.

Internet / WAN Services

Firstly, there’s fantastic news for our digital-powered economy. The average cost per Mbps of internet services has shown consistent secular decline over the past two decades. However, in the very short term, rate increases of up to 8.8% have been seen as an offset to inflation. Inflation is already declining significantly from 2022 highs, so rate increases recently seen are unlikely to persist, but they are painful nonetheless. Obviously, there’s no magic wand to fix inflation woes, but there are a few things you can do to mitigate the effects.

• If you are happy with your service provider, don’t be shy to negotiate your renewal. Often, simply daring to negotiate will help you to secure more reasonable costs. 

• If you aren't satisfied with the deal offered and you are using an out-of-term/month-to-month contract, or have a contract expiry looming, now is the time to start researching alternatives. While you don’t have as strong a negotiating position as someone with an existing relationship, you can make a deal for better rates and terms.

Simply staying on top of pricing trends in the open market for various circuit products can help arm you as you approach renewals or new RFPs. See here for content Lightyear published in 2023 regarding Dedicated Internet Access pricing trends. 

Plain Old Telephony Services (POTS)

On the POTS side of the telecom industry, rate increases are not new. In fact, we’ve covered some factors escalating this, such as analog voice decommissioning and the end of copper lines in POTS, in previous articles. It boils down to new technology decreasing demand and higher maintenance costs leading POTS into obsolescence. However, POTS is still in use for fax and alarm lines and elevator phones. The US has now rescinded some of the laws that mandate service providers to continue POTS services. Most providers will no longer approve new POTS installations, and increased costs (as high as $1,300) inevitably follow. The UK has also scheduled a complete turndown of all POTS services for December 31st, 2025. These sky-high costs are not inflation related, and likely to persist. Luckily, some VoIP POTS alternatives are now widely available, meeting most emergency telephone benchmarks at a much better price. 

Server Licensing Costs

Here, we have seen some massive rate hikes (some as high as 1200%) for licensing due to merger and acquisitions activity within the industry. These primarily affect businesses that maintain premises-based physical server hardware and infrastructure, however, that’s quite a large group. For example, 100% of the current Forbes Fortune 500 use premises-based servers with virtualization licenses.

This makes it an excellent time to explore a migration to the cloud and other competitive alternatives to keep licensing costs lean. However, as anyone who has planned a server migration before can attest, this is a time-consuming and potentially business-disruptive process. Luckily, most of these changes won’t be felt until you need to renew or purchase additional licenses. Now is the time to plan, both for the cost impact and to properly phase any migration you need. 

If you’re looking to optimize the cost per Mb for your internet bandwidth, find suitable replacements for your POTS lines, or if you want to explore the options available to avoid the increased licensing costs for premises-based servers, you’ve come to the right place.

Lightyear’s Telecom Operating System was created with exactly this purpose in mind. You can use the Lightyear Platform to create RFPs for any of the services described in this post and check market rates, or talk to any of our network experts to think strategically through any price-related woes you’re facing.