What’s in a Label?

In today’s world, product labels are ubiquitous. Consumers rarely make purchases without consulting labels. A common thread with these labels is they are governed by regulatory bodies who mandate, verify, and enforce reporting standards so consumers may easily understand the products. Product labels therefore are important tools for consumer protection. However, one extremely significant product that is consumed on a daily basis, broadband internet service, comes without standardized labels. Economists have examined the presence (and absence) of standardized labels through the lens of information economics, that studies the extent to which markets and their players process and convey information The literature highlights that information is imperfect, obtaining information is costly, and that there are important asymmetries of information. This paper explores these issues in the context of broadband labels. We conclude that despite the vast quantities of information available about broadband prices and service characteristics (and possibly because of it), consumer broadband labels remain an important tool for consumer protection. This is especially true given how important broadband has become during the Pandemic era. However, the costs and benefits of the types and amounts of information disclosed and the clarity underlying the reported price and performance metrics will need to be carefully considered before the labels are adopted.