Department of Labor Logo United States Department of Labor
Dot gov

The .gov means it's official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Producer Price Indexes

PPI Introduces Hedonic Quality Adjustment for Internet Access Indexes

Effective with the release of Producer Price Index (PPI) data for December 2016, on January 13, 2017, the Bureau of Labor Statistics began using hedonic quality adjustment for broadband items within PPI data for Internet access services:

Broadband Internet access services include digital subscriber lines (DSL), cable, and fiber optic services. These services are subject to rapid technological change because download and upload speeds typically increase over time. This means specific items within the broadband internet access sample of the PPI periodically are replaced with items with faster download and upload speeds.

To account for these changes, we must determine the value of quality adjustment (VQA)—the value of the increased broadband download or upload speed. Ideally, PPI survey participants would provide this information, but often this does not occur. As a result, we use a hedonic model to estimate the value of the increased speed. The regression formula used in the hedonic model is based on Equation 1, and the results for 2016 are shown in Table 1.

Equation 1

Log Pit = Α0 + Β2 (Log X2i) + Β3 (Log X3i) … (Βk Log Xki) + Υi

Log Pit  is the Log price of the i th model in period t
Α0  is the intercept
Log Xi  are the logged variables representing observed product characteristics
Β2 … Βk  are the regression/slope coefficients
Υi  is the residual or error term

Table 1. PPI Hedonic Model Regression results for broadband internet access for 2016 a,b,c

 CoefficientStandard Errort-statisticP-valueVariance
Inflation Factor



Log Download Mbps




Company A


Company B


Company C


Log Download: Residential


Log Download: Company B


(a) Adjusted R-Squared = 0.9400; F = 59.17; Root Mean Squared Error = 0.0933
(b) Base Configuration: Business; Several Companies
(c) Dependent variable: Log Price

The main variables of interest in this model are Log Download Mbps and Log Download: Residential. These two variables permit changes in download speed to be valued for both residential and business broadband. In this case, Log Download: Residential is not significant, which implies that there is no difference in the pricing behavior between residential and business broadband Internet access services.

PPI plans to re-estimate the hedonic broadband Internet access model annually.

Learn more about the use of hedonic models in the PPI »

For further information on PPI data for Internet access services, contact Jason Carnival at or (202) 691-7734.

Back to Top Back to Top


Last Modified Date: March 6, 2019