Measuring Price Change in the CPI: Telecommunications Services

The Consumer Price Index (CPI) defines telecommunications services as those services associated with wireless and landline telephone communications, internet access, and television services.

The CPI category telephone services is part of the education and communication major group and has two components: wireless telephone services and landline telephone services. The CPI publishes monthly indexes for telephone services and both of its components at the U.S. level only.

Internet services, a component of the information technology, hardware and services index, is included in the education and communication major group of the CPI. The CPI publishes a monthly internet services index at the U.S. level only.

Cable and satellite television services, a component of the video and audio index, is included in the recreation major group of the CPI. The CPI publishes a monthly cable and satellite television services index at the U.S. level only.

Definition for Wireless Telephone Services

Charges for personal wireless/cellular telephone services where the telephone is portable and sends and receives signals for calls through the airwaves. Services priced are primarily specific plans offered by cellular companies and prepaid plans. All service charges, applicable per-plan charges or per-minute call charges, and other charges normally included in a cellular plan are eligible for pricing. Internet access is also eligible. Exclusions are pagers, pay phone charges, and residential landline telephone service. Other phone services, such as long-distance and phone service activation, are excluded unless they are automatically included with a plan at no extra charge. Monthly fees charged by the carrier for the cost of a device are not eligible. Any plans for use by businesses are not eligible.

Definition for Landline Telephone Services

Charges for all types of local and long-distance residential services are eligible for collection, including charges for dial tone services, line maintenance and access, 911 services, directory assistance, touch-tone service, and other special features and mandatory charges. Also eligible are prepaid long-distance calling cards and bundled services that combine landline telephone services with internet access and/or cable television services. Applicable taxes and fees are included if available. Purchases, leasing, or rental of telephone equipment, cellular telephones and cellular service, and intercoms are excluded.

Definition for Internet Services

Charges for Internet access and other online services such as web hosting, domain names, and file hosting for non-business use are eligible for collection. Mobile internet access provided by wireless carriers through equipment such as mobile hotspots and bundled services that combine internet service with landline telephone services and/or cable television services are also eligible. Applicable taxes and fees are included if available. Wireless telephone plans that include internet access are not eligible in this category. Fees for online activities such as music or video downloads, streaming media (both music and video), fees for online gaming, and subscriptions to online newspapers or magazines are excluded. Fees to access additional information or services provided by particular websites such as those offered by popular sporting websites are also excluded.

Definition for Cable and Satellite Television Services

Charges associated with the residential use of cable television, satellite television, or live television on internet-connected devices are eligible for collection. Examples of monthly subscriber fees are charges for services such as basic cable, expanded basic cable, digital cable, streaming video services provided by cable/satellite TV providers, and premium movie channels like HBO, Cinemax or Showtime. Also eligible are charges for bundled services that combine television services with landline telephone services and/or internet access. Hardware like televisions, satellite dishes, installation kits and satellite accessories are excluded, as well as third-party subscription video streaming services (like Netflix) and satellite radio services. Applicable taxes and fees are included if available. Pay-per-view programming and video on-demand purchases or rentals are included in the index category but excluded from collection.

Relative Importance

The relative importance of an item category is its percent of the CPI weight as of December of the most recent year.

Table A. Relative importance, December 2018
Item	Relative importance
Education and communication	6.596
Telephone services	2.234
Wireless telephone services	1.661
Landline telephone services	0.572
Information technology, hardware and services	1.200
Internet services and electronic information providers	0.786
Recreation	5.694
Video and audio	1.817
Cable and satellite television service	1.509

Sample selection

In order to determine where to collect information on specific categories, including the four telecommunications services categories, a Telephone Point of Purchase Survey (TPOPS) is conducted by the U.S. Census Bureau. The TPOPS is used to collect data about where consumers purchase goods and services and how much they are spending. The data from the TPOPS are then used to select the retail establishments in which BLS monitors the prices of telecommunications services. Most outlets in the telecommunications services categories are traditional wireless and landline telephone companies, satellite television companies, and internet service providers that sell bundles of services that include landline telephone and/or cable television services.

Bundled services are now a common method for consumers to purchase residential telephone services, internet access, and cable or satellite television. Telephone companies, internet service providers, and cable television companies all sell these products, which can be bundled into one package eligible for selection in each of three different CPI categories. When selecting sample in either the landline telephone services, internet services, or cable and satellite televisions services categories, if a bundled service is selected, it is assumed the customer’s primary intent is purchasing the service defined by the CPI category. For example, phone service must be included in the service bundle along with either internet or television services when selecting the sample in the landline telephone services category. Once an outlet is selected based on the TPOPS, a specific service is selected for use in the CPI. Detailed characteristics are recorded so that the same item can be priced over time and, if the carrier discontinues that item, the most similar substitute can be identified.

Price Change and Quality Adjustment

For the telecommunications services categories, the CPI returns every month to the sampled outlets or their websites (or both) to obtain the current prices of the selected items, including any changes or promotional offerings. Any characteristics of the selected items that have changed are also identified and reviewed. When the price of an item changes, BLS tries to determine a reason for the change; however, if the characteristics remain unchanged, the CPI usually reflects the price change without any adjustments.

If the originally selected item in the sample is no longer available for sale, a replacement item is selected, generally the one that is most similar to the discontinued item. A CPI analyst evaluates every item replacement to determine the following:

Price change

If the replacement is essentially the same as the predecessor item, the CPI can treat any price difference between the replacement item and its predecessor as pure price change. If the characteristics of the item changed and the reported change is one that provides little value to the consumer, the CPI will show the unadjusted price change. For example, changing to fiber optic cable for local phone calls makes carrier operations more efficient, but customers might see little change in their purchased service.

Quality adjustment

If the replacement is different from its predecessor and the value of the difference in quality can be accurately estimated, a quality adjustment can be made to the previous item’s price to include the estimated value of the difference in quality. For example, CPI analysts have estimated the value of additional monthly wireless high-speed data. So if a carrier adds data to a wireless service plan, the CPI adds the value of additional data to the price of the predecessor item. Similarly, should the carrier reduce the amount of data included in the priced wireless service plan, the value of the extra data would be subtracted from the predecessor’s price.

Additionally, CPI analysts have developed estimates of the value of various quality-determining attributes associated with landline telephone, internet, television services, and bundles of those services, such as internet download speed and the number of included television channels, through the estimation of hedonic regression models. Quality adjustments based on those estimates are applied when possible.

Imputed price

If the replacement is different and the value of the difference cannot be estimated, the CPI uses an imputed price for the item in place of the collected price. An imputed price is the price of the predecessor item adjusted by the average change in price of other similar items.

Data

Access data for wireless telephone services, land-line telephone services, internet services and electronic information providers, and cable and satellite television service in our online database.

Additional information

Additional information may be obtained from the Consumer Price Index Information Office by email or calling 202-691-7000. Information on the CPI's overall methodology can be found in the BLS Handbook of Methods.

Last Modified Date: April 24, 2019