Producer Price Indexes Introduced for Internet Service Providers—NAICS 518111

To expand service sector coverage in the Producer Price Index (PPI), the Bureau of Labor Statistics (BLS) introduced new price indexes for Internet service providers—North American Industry Classification System (NAICS) 518111—in July 2005. Data for these indexes, which date back to July 2004, will appear in table 5 of the PPI Detailed Report and are available online through the BLS website.

Within the Internet service providers industry, separate indexes are published for dial-up and asymmetric DSL Internet access; leased-line and symmetric DSL Internet access; and other Internet access and related services.

The dial-up and asymmetric DSL Internet access index primarily covers transactions between Internet service providers and individual households. Dial-up Internet access is a service offered over standard telephone lines, in which a modem on the user’s computer converts the analog signal used on telephone lines to a digital signal used by computers. Asymmetric DSL also is offered over standard telephone lines, but this service is distinct from dial-up access in that it allows for an “always on” connection and faster access speeds. Asymmetric DSL provides customers with greater capacity to download information from the Internet than to upload information to and across the Internet.

The leased-line and symmetric DSL Internet access index tracks prices of transactions between Internet service providers and institutional clients that require a large amount of Internet bandwidth capacity for their data processes. With leased-line Internet access, all or part of a private telecommunications line (a T-1 or T-3 line) is reserved for an individual client. With symmetric DSL, the client has equal capacity to download and upload information to and from the Internet.

The other Internet access and related services index includes advertising services sold by Internet service providers and the provision of Internet access using any technologies other than dial-up, DSL, or leased lines.

In most cases, PPI measures Internet access transactions with an average-price methodology: the total revenue from all of a firm’s transactions associated with a specific type of Internet access is divided by the firm’s total number of connections of that type of Internet access. A connection is defined as an individual account for Internet use. The total number of connections in this calculation includes all of those for which bills were submitted and all of those that were offered free of charge in the selected month.

Average pricing is preferred for Internet access transactions to account for heavy discounting. Discounting of Internet access to both household and institutional clients is common. For transactions with household clients, firms frequently offer promotional deals to attract new customers; these deals typically include one or more months of free service. For transactions with institutional clients, rates typically are negotiated with each client individually, with extensive discounting taking place in highly competitive markets and for firms that are considered likely to maintain service over an extended period. With average pricing, prices reported by responding firms decrease as these promotional and competitive discounts are introduced or expanded and increase as these offers are discontinued or curtailed. In cases in which it is not possible to obtain an average price, the price for a specific Internet access transaction is collected.

Last Modified Date: January 3, 2006