Modem vs Router: Difference, and Do You Need Both?
Modem vs Router: Difference, and Do You Need Both?
23 February 2024

Do I Need a Modem and a Router? (And What Do They Do?)

When you sign up for home internet from an internet service provider (ISP), they’ll tell you that you need a modem or modem/router combo, usually one you can rent from them for a small fee added to your internet service monthly bill. Although it’s convenient just to tack on a few extra bucks on your bill each month, over the long haul, renting can cost you (see the breakdown below) more than a store-bought modem.

We present a lot of information in this post, and the details may seem overwhelming. When you get to the “how to choose a router for home” section, you may decide that it’s simply easier to rent the equipment from your ISP than have to learn all this technical mumbo-jumbo. It’s honestly not that difficult to do your own connections, and purchasing your own devices can save you money in the long-run. You can do it yourself by watching YouTube videos, and many of the leading brands of routers and modems offer excellent customer service (read their reviews).   

So, which is the best option for you? Let’s explore internet modems, WiFi routers, and gateways.

What is the Difference Between a Modem and a Router?

What is a modem? In basic terms, a modem is a device that connects other devices, such as computers, to the internet. It does so by sending and receiving signals from your internet service provider.

What is a router? A router (or residential gateway) creates a local area network (LAN) in your home and connects your devices to WiFi. 

What’s a gateway? This device is a combination of a modem/router. 

If you want to connect a single device to the internet, a modem will suffice. To access your internet service using just a modem, you must directly connect your computer and modem using an ethernet cable.

But who has just one connected device?

  • 28% of US households have at least three smart devices connected (Telecompetitor)
  • Overall, in 2023, US households averaged 21 connected devices (Deloitte)

With all those connected devices — computers, phones, wearable tech, game consoles, IoT devices and home security — a modem isn’t enough. You need a router that provides WiFi connections to the internet (and one that can handle multiple devices).

If you have more than one device you want to connect to the internet via WiFi, you must have a modem AND a router or a gateway.

Cost to Rent a WiFi Router vs Modem

Here’s a look at four better-known internet service providers in the U.S. Monthly fees range from $7 to $15 for a modem. Prices are subject to change, and some ISPs offer specials for new customers, so these prices are just for comparison’s sake.

Three of the four ISPs offer WiFi boosters for additional fees between $3 – $10 per month and $129.99 for purchase. The following fees can vary.

  • Xfinity: $15/month for the xFi Gateway modem/router combo.
  • AT&T: Modem/router is included in the monthly rate of $55 (with auto pay and paperless billing); AT&T also offers an optional All-Fi Booster to improve the WiFi signal for $10/month.
  • Spectrum: No charge for a wired modem, but a WiFi router costs $7/month, plus $3/month for WiFi Pods (which improve the strength and range of WiFi coverage).
  • Cox: $15/month for a Panoramic WiFi modem, $129.99 per Panoramic Wifi Pod 2.0 (to improve the strength and range of WiFi coverage).  

As you can see, renting equipment appears reasonable and may be ideal if you only need internet service for a short period (under a year). On the other hand, the rental costs add up, and in the long run it may make more sense for you to buy your own.

For example, an Xfinity gateway for a year will cost you $180. Stay with your Xfinity for five years, and you will have spent $900 renting the modem. If you rent any WiFi boosters at AT&T or Spectrum, you’ll pay an extra $120 a year (on top of your primary internet service charges). If you intend to stick with an ISP for over a year, investing in your equipment can save you money (potentially thousands of dollars).

The downside of choosing your own modem and router is that your internet service provider won’t fix the hardware if something goes wrong. The manufacturer’s warranty should cover that, however. 

How to Choose a Modem, Router, or Gateway

If your provider allows you to use your own modem, router, or gateway, there are a few factors you need to consider that can help you determine the best device for your service and needs. Your best bet may be to head to your local Best Buy, Walmart, Target or local electronics store (if any still exist in your area), and talk to their in-house experts. 

  • ISP compatibility (your internet service provider may have a list of recommended brands)
  • Speed of your internet connection
  • Number of devices you want to connect 
  • Size of your living space
  • Your budget

On average, modems (with speeds under 1 GB) will run around $60 to $90. For a high-speed (1 GB or more) modem, expect to pay $150 to $270. Prices for a router can range from $20 to $500. If you prefer to buy a gateway instead of a standalone modem and router, expect to pay anywhere from $40 to over $700.

If you have cable internet from Comcast (Xfinity), Spectrum, or Cox, you will need a DOCSIS (data over cable service interface) cable modem (it allows you to connect your modem to coaxial cable from your ISP). For providers offering DSL (digital subscriber line) internet, you will need a DSL modem. 

DOCSIS modems come in two specs: 3.1 (handles speeds of 1,000 Mbps or 1 gigabit or more) and 3.0 (handles under 1 gigabit).

This is where knowing your internet speed can help you buy a modem that can sufficiently support that speed. You want to avoid buying a modem that can’t support high speeds. For example, if you have a 1,000 Mbps (1 gigabit) internet plan, but your modem can only handle 100, you may have issues with your internet not working correctly. However, buying a (potentially more expensive) modem that can handle higher speeds than your internet plan offers can be a waste of money.

When shopping for a modem, you may notice numbers in the product description, such as 3 x 4 or 32 x 8. These represent the number of upstream (sending an email or opening a webpage) and downstream (streaming movies or other content) channels that are responsible for balancing out your internet speed while managing upload and download requests.    

DSL is an older technology, versus cable, and won’t have the speeds experienced with cable or fiber internet you may see up to 100 Mbps (which is sufficient to stream high-quality content like movies). 

DSL internet requires a telephone line connection. This means your DSL modem needs to have an RJ11 phone jack, similar to landline wall phone jacks.  

Pros and Cons of Renting or Buying a Modem, Router, or Gateway

Price aside, there are a few pros and cons to think about when you’re deciding whether to rent or buy your modem, router or gateway. 

One major advantage to renting your equipment from your ISP is that most providers will help you troubleshoot or replace a malfunctioning device free of charge. If you purchase your own device, and it malfunctions, you’ll have to fix it or replacement it (of course, this depends on the manufacturer’s warranty, which is typically one year). Some modems, like those from NetGear, come with 90 days of free technical support. 

Purchased equipment can go with you if you move, whereas you must return rented equipment. Fail to do so, and you’ll have to pay a replacement cost. While a gateway does the work of both a modem and a router, if your gateway doesn’t work, neither will your internet. It also means you have to purchase another gateway or a modem and a router.

Other disadvantages of ISP rental equipment, include potential weak WiFi signals (making it difficult to use the internet), lack some parental controls, and it may not be as secure as store-bought devices.

If you don’t have the budget to buy your own equipment, or the price of internet service is more than you can afford, there are provider programs and federal and local programs that can help you reduce your monthly bill or get a free modem. 

Photo 187068723 |  Urby86 | Dreamstime
Illustration 24849076 | Maksym Yemelyanov | Dreamstime