Modem vs. Router: Learn the Differences (and Maybe Save Some Money)

If you’re a first-time internet plan buyer or are considering modifying your current internet setup, you'll want to know what the difference is between a router and a modem. Most people don’t know what these pieces of hardware do — and they don’t have to — because many internet service providers (ISPs) will handle router and 01modem installation and set-up as part of their package deals.

While your local ISP is more than happy to streamline the installation process, it works in their favor to keep you renting their equipment, which is what you are most likely to do if you don’t understand how the equipment works. It’s also important for you to understand routers and modems if you ever have to troubleshoot a faulty internet connection.

Below, we discuss the differences between modems, routers, and modem/router combos; make clear the advantages and disadvantages to each; and show you which options best suit your needs.

What is a modem?

Put simply, a modem brings an internet connection into your home.

Your modem communicates with your internet provider and translates the information it receives into a digital signal. This signal can then be sent out via cable connection (usually Ethernet) to other devices.

While most modems allow you to connect just a few devices to them via cable, none of them offer the ability to connect devices to them wirelessly. This is where the router comes into play (more on that later).

A modem is a piece of hardware, usually in the shape of a small box, that receives information from your ISP through a coaxial cable (think TV cable) plugged into the wall. Depending on your type of internet service, you could have a phone line instead of the coaxial cable, or you might have a fiber-optic cable. It will also always be powered through a power supply plugged into a wall outlet.

Match your modem to your internet connection type

Modems come in three different types based on the service provided by your ISP: cable, DSL, and fiber-optic. It's important to pair the type of modem you have with the service offered by your ISP, as they are not all compatible.

For instance, a cable modem — while offering faster speeds than a DSL modem — won't function properly if you are paying for DSL internet access through your ISP. In addition, if you have a cable modem but upgrade to fiber optics through your provider (currently the fastest internet offering), you would have to purchase a new modem that is compatible with fiber.

Match your modem to your internet plan speed

On the topic of speed, modems can vary greatly in the different speeds they provide. Learn more about download and upload speeds here.

Typically, the speed of modems, routers, and even your internet packages will be listed in two numbers where the download speed will always be the bigger number. For example, 300/20 Mbps would mean a download speed of 300 Mbps and an upload speed of 20 Mbps.

If you happen to live in an area where fiber internet is available, you may see your internet download speeds reach up to 1,000 Mbps, or 1 Gbps. While faster is sometimes better, depending on your needs, gigabit internet will always be the most expensive broadband internet option.

What is a router?

A router is the device that will take the data sent from your modem and disperse it throughout your home network via a Wi-Fi signal. 

Think of your home network as all of the devices you would want to connect to the internet. TVs, phones, computers, and even smart fridges comprise a growing list of devices that can be connected to the internet via your router.

It’s helpful to think of routers like traffic controllers. The router is essentially doing the same thing as the controller — directing where your internet goes and does not go. Routers are essential in not only providing a connection to friendly devices but also keeping out unknown or potentially harmful cyber threats.

Routers come in many different shapes and sizes; however, they will always be plugged into the modem usually via Ethernet cable. And like their modem counterparts, they will always be powered through a power supply plugged into a wall outlet.

The bulk of routers on the market today are wireless routers in that they provide the ability to connect to the internet through a Wi-Fi network. Non-wireless routers still exist; however, for the common household or office, having a router provide wireless internet is the main feature most people want.

When choosing a router, consider the size of your home as well as how many connected devices you have. Dual-band (and even tri-band) routers have become popular with heavy users who connect many devices. They function by transmitting and receiving multiple frequencies, making it more likely that your wireless devices will have a strong connection to work with.

Other things to consider when choosing your router include:

• What internet speeds it supports
• Whether it uses Wi-Fi 5 or Wi-Fi 6
• How many Ethernet ports it has (if you plan on connecting devices with Ethernet cables)

Why do I need a modem?

In short, you need a modem to bring the internet into your home. You cannot have a router and no modem. You can, however, have a modem and no router.

Consider that you can only connect up to a few devices into a modem, and it will always be via hardwire. There is no option for Wi-Fi. You can certainly save money going this route, although you limit your home network substantially without the convenience of a wireless network.

How do I pick a modem?

Picking a modem can seem arduous or confusing at first because of the breadth of products available, but you can greatly narrow your options by looking at your local ISPs to see what services they provide. 

Modems are made to be compatible with only one service option, so if your area only gets cable internet, then you should only look at cable modems. The same goes for cable as well as fiber-optic.

Once you’ve identified what type of modem you’re looking for, it’s important to choose the right speed for your modem. Make sure your modem is as fast or faster than the speed you are paying for through your ISP. For instance, if you are paying for 500/30 Mbps, but your modem’s speed is only 300/20 Mbps, you are paying for a speed that you cannot achieve through your hardware.

This problem is referred to as a bottleneck, which you always want to avoid. In some cases, you may want to invest a little extra money into a modem that offers higher speeds than you think you need today in case you eventually want to increase the speed of your internet service.

You will also want to check to make sure your modem is compatible with your actual ISP. The Netgear Nighthawk Docsis 3.1 Cable modem, for example, lists that it is compatible only with Xfinity from Comcast, Cox, and Spectrum. It is not recommended to buy a modem without first ensuring it will work with your ISP.

Should I rent or buy a modem?

There are pros and cons for both renting or buying your hardware.

When considering buying your own modem, be aware that you stand to spend more money upfront as you will need to buy both a modem and a router. You can also go the popular modem/router combo route where the functionalities of both devices are combined into one convenient box. This may also be cheaper than buying separate devices.

As discussed previously, buying also requires you to do some research. You will need to make sure everything is compatible, and you will need to make decisions on speeds for your kit. However, if you can get yourself to do the work and are fine with a higher upfront cost, you stand to save a decent amount of money long-term if you go the buying route.

Consider that most big-name ISPs are currently charging a monthly fee to rent a modem or modem/router combo. These rental fees average out at about $14 a month — that’s almost $170 a year. For just $30 more upfront, you could have yourself a solid modem/router combo such as the Netgear Nighthawk AC1900.

But renting has its pros — namely convenience. Not only will your ISP install and set up your rental hardware, but they will usually update or replace old or malfunctioning hardware. If you buy your own tech and something goes wrong, chances are your ISP will not be sending anyone over to help, so all the troubleshooting will be left up to you.

To arrive at the answer to the rent vs buy question, ask yourself some questions here:

• Do you enjoy tinkering and learning about technology? Buy.
• Do you like knowing how to fix things and having more manual control over your home network? Buy.
• Do you value convenience and want things to work without having to do any research or extra work? Rent.
• Do you not care about having manual control over your home network? Rent.

Remember, even if you enjoy saving money (which most of us probably do), it will be up to you to handle setting up and maintaining your hardware if you buy. If you aren’t very tech-savvy, the renting route may be for you.

Modem vs. router FAQ

Bottom line

There is a wealth of information surrounding the technology of modems and routers. Thankfully, knowing the basics is all you really need to access the internet, save some money, or fine-tune your setup.

If you’re considering buying your first setup, start by examining what type of internet service and the download speeds you can get in your area and go from there following our guidance above.