Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / Why Your Internet Bill Is Rising Despite Falling CPI
Transcript
- Lucas: So the headline number keeps falling, but your internet bill keeps going up. That's not just an anecdote — it's a structural quirk in how we measure inflation. Luna: I've seen that in my own bill. My provider quietly raised the monthly rate by five dollars this spring, and I barely noticed because it was bundled with my streaming service. Lucas: Exactly. And that bundling is part of why the official data can look so disconnected from what people actually pay. The Bureau of Labor Statistics tries to price a standalone internet service, but most of us don't buy it that way. Luna: So what does the CPI actually show for internet service right now? Is it rising or falling? Lucas: The latest CPI reading from June shows the overall index at 332.6, down from 333.98 the month before. But the internet service component has been creeping up at around two and a half percent year-over-year. It's one of those categories that's bucking the goods deflation trend. Luna: And core inflation is still running at 3.3 percent, even though the Fed's preferred gauge — the core PCE — ticked up in June. So services like internet are part of that stickiness. Lucas: Right. Core PCE went from 130.09 to 130.3, which is a small move, but it's the direction that matters. Services are the reason the Fed can't declare victory on inflation even as goods prices keep falling. Luna: So let's go back to the internet bill. Why is it so stubbornly higher when other tech-related prices are dropping? Lucas: Part of it is that the CPI tries to capture the actual price you pay, but it has to account for promotional pricing. Providers love to lure you in with a one-year teaser rate, then bump it up. The BLS has to decide whether that bump is a quality change or a price increase. Luna: And they've been treating it as a price increase, which is why the index keeps rising. Lucas: Right. But there's another layer: the end of the Affordable Connectivity Program. That federal subsidy used to knock thirty dollars off the bill for low-income households. When it expired, those households suddenly faced the full price, and that's now showing up in the data. Luna: So the CPI is capturing a real shift in who pays what. But for the average listener, the bigger issue might be that their own bill is going up even without a subsidy cliff. Lucas: Exactly. And that's where the disconnect happens. The headline CPI is falling because goods like used cars and furniture are getting cheaper. But services — especially ones with limited competition like broadband — can keep raising prices because there's no real alternative. Luna: And that's the structural story. It's not just about the Fed's next move. It's about how market power shows up in the inflation data. Lucas: So when you look at the June CPI, the overall number masks this divergence. Goods are falling, services are climbing. And internet is a perfect example of a service where the provider has pricing power. Luna: What would break that pricing power? More competition, maybe, or better regulation? Lucas: Competition would help, but in many areas there's only one or two providers. And the barriers to entry are huge — laying fiber is expensive. So the pricing power is baked into the market structure. Luna: But there's also the psychological effect. When your bill goes up five dollars, you notice it. When a TV drops by fifty, you might not. So even if the CPI says inflation is cooling, people's lived experience can feel different. Lucas: That's the thing. The CPI is a weighted average, but our personal inflation rate depends on what we buy. For a household that spends a big chunk on services like internet, healthcare, and rent, their inflation rate is probably higher than the headline. Luna: And that's why the Fed's focus on core services makes sense, even if it frustrates people who want lower rates now. Lucas: Exactly. And if you're following the Fed's internal debate, you know there's a hawkish camp pointing at services inflation, and a dovish camp that says goods disinflation will eventually pull everything down. The internet bill is a good test case for who's right. Luna: But what can the average person actually do about a rising internet bill? Besides calling and threatening to cancel, which does work sometimes. Lucas: That's actually the best lever. Call your provider, ask about retention offers. But also check if there's a smaller regional provider or a fixed wireless option that might be cheaper. And if you're bundling, sometimes unbundling can help you see what you're really paying. Luna: So there are practical steps, even if the macro trend is against you. Lucas: Right. And it's worth remembering that the CPI for internet is still up two and a half percent year-over-year. That's not runaway inflation, but it's higher than the overall index, and it's a reminder that not all prices move together. Luna: And that's the kind of insight that makes me feel like I can make smarter decisions with my money. Which is actually why I love doing this show. Lucas: Yeah, and it's why we keep making it. And if you've found yourself nodding along, maybe thinking about how this applies to your own budget, that's exactly what we're going for. If you want to help keep these conversations going, you can support the show at buy me a coffee dot com slash fexingo. It's a small way to make sure we stay ad-free and keep digging into these questions. Luna: Even the price of a coffee helps. And honestly, every little bit lets us spend more time on episodes like this one. Lucas: No pressure, just appreciate you listening. Anyway, back to the internet bill — one more thing that might surprise you: it's not just the monthly price that's creeping up. Installation fees, equipment rentals, even early termination fees are all part of the cost of service, and the CPI tries to capture those too. Luna: So when you add all that up, the real cost of being online has gone up more than the headline suggests. Lucas: Exactly. And that's a good reminder that the CPI is a sophisticated tool, but it's not perfect. It's a guide, not a gospel. And when your own bill doesn't match the narrative, it's worth asking why. Luna: So next time you see a headline saying inflation is cooling, you'll know to look a little deeper at the services line. Lucas: Exactly. That's the takeaway. Thanks for joining us on Inflation Explained. We'll catch you next time.