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I’m going to tell you something about my new life in France. And then you are going to weep. Ready?
Our family moved to Toulouse, France in late August after living in the San Francisco Bay area for 15 years. We lived in a lovely two-bedroom house in North Oakland.
We were (mostly) happy Comcast customers. We subscribed to Comcast broadband, which gave us up to 25 Mbps download speeds for $85 per month. We didn’t have cable or a home telephone. For mobile, we had two iPhones on AT&T’s network. For $144 per month, we had 450 minutes of calling time (not including nights and weekends). My wife’s phone had 2GB of data each month while mine had a grandfathered unlimited plan.
At various times, I tried to switch from Comcast, but the DSL speeds offered by rival services were just too slow where we lived. So, we stuck with Comcast because, in the end, we had no real choice.
In total, roughly, were paying $229 per month for our telecom costs.
Now we live in the city center of Toulouse, France, in an apartment where I’m a broadband customer of a company called Numericable. Here’s what I get for $63 per month: 100 Mbps download speed, 250 cable channels, a home telephone with unlimited international calling, and a mobile phone that includes unlimited minutes and 3GB of data usage each month. (The only tradeoff was losing my unlimited AT&T data plan; but I also never come close to using 3GB.)
Separately, I’m getting ready to sign my wife up for a $20-per month mobile plan with mobile provider Free that comes with unlimited calling and 3GB of data.
So, our telecom costs here will be $83 per month. About one-third of the cost — for services that are astronomically superior.
Trust me when I say that you don’t know how truly awful things are in the U.S. when it comes to broadband and wireless until you leave. Not only have I experienced this, but I was reminded of it again recently with this story in the New York Times, “Why the U.S. Has Fallen Behind in Internet Speed and Affordability.”
The story talks about a study, “The Cost of Connectivity,” that the New America Foundation’s Open Technology Institute published. It looks at cities, rather than whole countries. But the rankings are still depressing for those of you living in the U.S.
“Our findings remain consistent — the majority of U.S. cities included in our report lag behind their international peers,” the authors wrote.
Well, duh. The interesting question is: Why?
Here’s my big lesson from living in France for two months: Government has played a strong role in ensuring competition, and that has increased choice and driven down prices for consumers.
Go ahead, America. Read that last sentence a few times. I know it probably makes your head hurt.
The problem is that in current U.S. economic policy, politics, and culture, Americans have been told that they have a choice. Either you believe in government regulation, or you believe in free markets. Government intervention is the enemy of innovation and competition.
It’s a choice that is as simple as it is false. Unfortunately, a gullible American public has swallowed it whole.
France, and much of Europe, has developed a far more nuanced view of how markets and government relate to each other. And as the Times story notes, that is in large measure due to the work of Jean Tirole, the economist at the Toulouse School of Economics who just won the Nobel Prize.
As it happens, you might say Tirole is the reason I’m in Toulouse. At TSE, he helped start the Institute for Advanced Studies Toulouse, where my wife received a three-year post-doc. I had the good pleasure of joining my wife and her colleagues in toasting Tirole with champagne at the TSE on the afternoon he received his news.
While his work is complex, he has had a big influence on how European governments view regulation. One important message is that it’s a big mistake to take an ideological approach to regulation. One-size-fits-all is a mistake.
Instead, according to Tirole’s work, it’s important to understand the dynamics of each market to determine the appropriate level of regulation to increase efficiency, fairness and innovation. In some cases, that might mean a lot of regulations. In other cases, it might be none.
In the case of France Telecom (which later became Orange), the French government set strict rules for the sharing of its former telecom infrastructure. More importantly, it has continued to enforce those rules.
So, when I moved to Toulouse, I had a difficult time choosing between broadband and mobile packages offered by Orange, SFR, Bouyges, Numericable, and Free. My 100 Mbps service prompts some disparaging frowns from new French friends who have 1Gbps connections for the same price as I pay, thanks to the fiber optic line that runs to their house. My 500-year-old apartment building doesn’t have fiber.
Compare that to telecom policy in the U.S. Years ago, the government broke up Ma Bell, only to end up with more regional monopolies. Then, the U.S. government passed the Telecom Act in 1996, in theory to prompt more competition. For a brief moment, it looked like that might happen. But eventually, rules about costs of sharing networks and other factors such as weak enforcement of competition rules drove many telecom startups out of business.
Instead, the incumbents went on a consolidation binge, with the U.S. government demanding only modest concessions as they rubber-stamped deal after deal. Today, your choices are pretty limited. As a result, the incentives to invest in network infrastructure are low, and costs are high.
As the Times story says: “For relatively high-speed Internet at 25 megabits per second, 75 percent of homes have one option at most, according to the Federal Communications Commission — usually Comcast, Time Warner, AT&T, or Verizon.”
Of course, it would seem impossible that someone will stand up in the near future and demand that the U.S. government play a stronger role. Politicians and regulators would be cowered by an army of telecom lobbyists and pundits who would chew their heads off.
But the real problem is that the average American has bought into this false choice: government vs. competition. And so, they are not going to insist on the new regulations and stronger enforcement that might a lead to more competition.
Instead, expect that for years to come, you’ll continue to overpay for crappy broadband. This is the price you pay for being suckers, and it’s a big one.
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