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Renting vs Buying a Modem: What’s Best for Your Budget

If you have broadband, you’re probably renting a modem or modem/router combo from your provider. But is the money worth the convenience?

With rental fees from big ISPs like Comcast and Time Warner increasing by as much as 33% in the past year, many consumers are foregoing the monthly fee and buying their own modems. A modem that costs $150 pays for itself in a little over a year. After that, you stand to save $8–$10 per month for as long as the modem keeps ticking. [1]

…The catch is that buying a modem isn’t always the best decision. Depending on your situation, installing and maintaining your own modem might be more expensive and time-consuming than it’s worth.

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In this guide we’ll lay out the facts and help you decide if you’re better off renting or buying the magic box that makes your Internet work.

Behind the scenes of the modem rental system

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Image Source: Wikimedia Commons

Why do Internet Service Providers (ISPs) rent modems in the first place?

First, because it streamlines the process of getting customers connected. To be fair, the majority of consumers don’t want to monkey around with their hardware and network settings; they just want their Internet to work — yesterday. If your goal is saving time, $8–10 per month for installation and tech support can be, if not a winning proposition, at least a workable one.

Secondly, renting modems is a substantial revenue source for ISPs. The modems and technicians cost money, but in the long run renting hardware is a win for their bottom line. (To the tune of $300 million per quarter, according to a recent report from analyst Ken Kam.) [2]

Thirdly, modem rentals function similarly to cell contracts as a roadblock to consumers contemplating switching to a different provider. The more hassle it becomes to switch providers, the fewer customer will take the plunge — even considering rate increases and service issues.

Before we get into the nitty-gritty of how modems work and what to look for, let’s consider the pros and cons:

Pros and cons of renting a modem

Pros:

  • Free tech support
  • Easy setup (they do it for you)
  • Free replacement when it’s outdated

Cons:

  • More expensive in long run
  • Lower-quality hardware
  • Rental prices subject to change

Pros and cons of buying a modem

Pros:

  • Saves money in the long run
  • Choice of higher-performance modems
  • Easier to switch providers

Cons:

  • Steep upfront cost (~$80–150)
  • No tech support
  • Installation can be tricky

…So should I rent or buy?

Whether to rent or buy a modem ultimately comes down to two factors: time vs. savings.

Ask yourself these questions:

  1. Am I technically proficient enough to install it?
  2. Am I going to live in the same coverage area for more than a year?
  3. Am I unsatisfied with the performance of the models my ISP rents?
  4. Is it worth spending a few hours of my time to save ~$120/year?
  5. Does my ISP allow customers to use their own modems?

If the answer is “yes” across the board, then buy a modem. Even the expensive models required by certain ISPs can be found refurbished on Amazon for significantly lower than list price. Either way, you save money.

Even if you aren’t terribly technical, it’s sometimes possible to get help from your ISP technician, at least with the installation. Just make sure you have the modem and router purchased and ready when you call to get your service hooked up; since they’re coming to your home anyway the technician should be able to double-check that everything is compatible, and will likely set it up for you at no extra cost. Just be polite!

Another important bullet to note in the list above is your service area; if you plan to move, there’s no guarantee that the modem you purchase will be compatible with the requirements of your new ISP. Some providers, AT&T for example, don’t actually allow you to use your own modem with their service.

Things to consider when buying a modem:

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Image Source: Wikimedia Commons

Before you can hook up a new modem you have to decide which to buy. It’s an investment and should ideally last more than a year or two to pay for itself, so you should have a basic idea of how modems work and what the standards to look for are. Important factors here:

  • ISP requirements
  • DOCSIS standards

Figuring out your ISP’s requirements is easy: just check their site for the list of modems compatible with their service. Chances are they’ll have a convenient list of recommended models and specs. If they don’t, call them up and double check before you buy anything.

DOCSIS (Data Over Cable Service Interface Specification) standards are a little more complicated. Long story short, DOCSIS is an international standard for transferring data via cable TV.

The specifications come in ratings (DOCSIS, 1.0, DOCSIS 2.0, etc.). The only part that matters to you, the consumer, is what kind of speeds each specification can handle.

The current cutting-edge specification is DOCSIS 3.1. A DOCSIS 3.1 modem can be a good investment if you plan to upgrade your speed in the next couple years, or simply have been having performance issues with the 3.0 or lower modem provided by your ISP. On the other hand, the current standards are backwards-compatible with older specs, so unless your broadband service delivers speeds of 10gbps, you might be better off with a cheaper, older model. The choice here comes down to your pocketbook, and how much intensive streaming you intend to do.

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Here’s a rundown on the up/down speeds the specs currently on the market can handle. Check what speeds you’re paying for, and so long as the spec of your new modem can handle that speed you’re set to jet:

DOCSIS 1.0/1.1: 38Mbps Down / 9Mbps Up
DOCSIS 2.0: 38Mbps Down / 27Mbps Up
DOCSIS 3.0: 152Mbps Down / 108Mbps Up
DOCSIS 3.1: 10,000Mbps Down / 1,000Mbps Up [3]

Setup considerations

The overall process of installing a new modem looks like this:

  1. Unplug old modem
  2. Plug in new modem
  3. Activate MAC (Media Access Control) address
  4. Activate router, if applicable

Unfortunately, the details of each step differ from provider to provider. Some require a particular order with the cables… or explicitly deactivating the old rented modem… or activating online rather than over the phone… among other small considerations.

The important part here is that you pay close attention to the instructions on your provider’s site. Activating the MAC address is the most important step; it’s generally printed in teeny-tiny print on a sticker under the modem.

What about the router?

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Image Source: Talkroute

Real quick, let’s clear up what routers do: connect devices via magic Wi-Fi. One of those devices is your modem, which delivers all the glories of the Internet to your network. So if your router delivers data slower than your modem reels it in, you’re only getting a percentage of your bandwidth to each device. Which is lame.

Most ISPs that rent modems also want to rent you a router. (Or, more commonly, a combo device.) While there are pros and cons to renting a modem, you’re almost always better off buying your own router, especially if you’re using a high-end modem.

Routers are easy to set up compared to modems and cross-compatible from company to company, so even if you switch providers you’re not going to be stuck with the bill for your pricey hardware.

Using your own router also gives you more control over your network, if you want to indulge your inner nerd and configure goodies like remote access and custom security. (We’ll be posting a guide to optimizing your router in the near future.)

How to find the right router

The specifications behind routers are pretty complex, and wading through the marketing fluff and jargon can be a little intimidating.

On a basic level though, your goal in picking out a modem is simple: to get a router that can handle the same speeds as your modem. (And deliver those speeds to multiple devices; the more devices, the more a high-end router stands to help you.)

Here are the factors that matter for the average user, assuming you want to stream video, play a few video games, and share the network with your roomies or family:

Network type: Wi-Fi is based on a wireless networking standard. The network type your router supports sets the ceiling on the speed and range of your home wireless network. The latest standard is called 802.11ac (catchy, right?), and allows Gigabit speeds, AKA 5G Wi-Fi.

The catch is that 802.11ac must be supported by your device as well as your router. If your devices are 802.11n or lower, an 802.11ac router won’t do you any good, and you can get a great 802.11n router for much cheaper.

However, then you’re stuck with a 450 Mbps limit if you update your devices. Assuming it’s in your budget to go 802.11ac, it’s a good investment.

Here are the standards, and what speeds they support:

  • 802.11ac: Gigabit speeds
  • 802.11n: 450 Mbps
  • 802.11g/a: 54 Mbps
  • 802.11: 2Mbps

Throughput: known colloquially as “speed,” throughput is a measurement of how fast your router can transmit data. The speeds listed on the box are based on ideal circumstances, so if it’s possible to check speed tests and reviews online, those are more trustworthy.

Bands: Most wireless connections go over the 5Ghz band, but dual-band and tri-band routers tap into the 2.4Ghz band (commonly used by other household devices) to help spread the traffic. For most users, dual-band is the best bet. Tri-beam really only makes a difference for power users.

Beamforming: a signal processing feature that allows data to move faster when inconveniences like walls and other signals get in the way. Beamforming gives the most bang for buck when supporting multiple devices in a large, obstacle-filled environment like a multi-level house or sprawling office.

Field-tested routers

…If you’re still feeling lost, here are our picks for entry level, middle level, and top tier routers:

Entry level: TP-LINK TL-WR841N

TL-WR841N_un_V2_1041_large_0_20150724113937

Middle level: TP-LINK Archer C8

Archer-C8-01

The big picture

Regardless of whether you view equipment fees as an overpriced add-on or a reasonable service charge, buying a modem (and router) will save money for most consumers.

Besides offering some annual savings, getting your hands dirty installing your own modem demonstrates the basics of how Internet works, making you more independent and informed when considering your broadband options in the future.

2 Comments, Add Yours Below.

Mr Zimmer, great article. I know little and understand less about the tech world. However, I read your article and was able to comprehend it! Most of it anyway! Appreciate your down to earth easy to understand presentation. Thanks!

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