Monday, August 6, 2012

Internet Connection in France and the U.S. and the Need for Regulated Competition.

As a European traveling regularly to the United States, my experience with the internet in north America has been mixed: easy free access with decent speed in some institutions like libraries (the NY or Chicago public libraries for instance) or campuses (UMD, or UW Madison, but not so much UCLA), easy and free in caf├ęs in most big cities (Starbucks has now made it free), and expensive and bad in most hotels (even downtown New York).
Now more tellingly, my experience with the internet connection at most of my friends' homes has been rather disappointing. Their connection is usually rather slow, the wi-fi is not very strong, and then they seem to pay a whole lot more than we do in France. This is surprising for someone like me who grew up looking to America for the cutting edge stuff in everyday life. 
Of course I live in Paris so my experience is slightly biased and does not necessarily reflect what it may like in French rural areas. Besides, I'm always suspicious of personal impressions. They may reflect something but they are clearly not scientific and can be highly subjective.

Then, I started reading articles that seemed to confirm my initial impressions. This latest article in Slate last week summarized the finding of a recent report that "suggests that the U.S. is lagging behind many of its international counterparts, most of whom have higher levels of competition and, in turn, offer lower prices and faster, with the exception of a few places like San Francisco,( and more surprisingly Chattanooga;  Tenn.; Lafayette, La.; and Bristol, Va.
The Slate article makes a parell between electrification and modern broadband policy which makes sense since, today the internet is as important for economic development as the electricity was at the end of the 19th century. But the crux of the article is in its somewhat political conclusion:
But unlike electrification, our present inside-the-Beltway policymakers have mostly ignored nonprofit approaches as a solution to expand affordable, reliable, and fast access to the Internet. And since community networks don't have lobbying arms working the corridors of power in Washington, key decision-makers have silently watched as cable and DSL lobbyists have created substantial new barriers to community networks in 19 states—limiting both competition and local authority and leading to worse, more expensive service than in a growing list of other countries that don't create these regulatory barriers. (Slate)
In other words, this is yet another good example as to why government is needed to regulate the market. Interestingly, a complentary conclusion can be drawn from the French example.

What has made internet connection cheaper and more efficient is a policy that forced the former state-owned monopoly, France Telecom (which sells mobile and Internet services as Orange), to open its network to rival operators such as Free.

 Almost immediately, independent ISPs and carriers from other countries began to lease access to France Telecom’s infrastructure and compete to offer broadband services. New companies like Iliad (offering services since 2002 as Free) emerged as fierce competitors, benefitting from the fact that they did not have to pay the initial costs of laying wires. And now, those companies are beginning to build their own infrastructure in order to meet a growing demand for faster speeds at low prices.
Free, for example, has always charged the same monthly rate, but continued to add new features to its service. Today, Free offers competitive DSL prices in Paris, and has begun to lay its own fiber in the city to provide even faster speeds. Eligible customers can get a connection with download speeds of up to 100 mbps (50 mbps upload) for the monthly fee of €29.99 ($34.47 adjusted for PPP), the same cost as Free’s standard DSL package. To get comparable speeds in most major US cities would cost over $100 per month.
(As a result), Paris has emerged as a model in providing fast speeds at competitive prices—a shift which can be traced back to government policies instituted a dozen years ago. (New America Foundation)
So one can conclude from the experience in both France and the United States that the solution is half way between unregulated free market, and  state-owned monopoly since in both cases competition is limited, either by large corporations or by the state.
What is needed then is a regulated market, but in order to do that one needs to go beyond the blind ideological faith in laissez-faire economy as it is often the case in the United States or the blind ideological fear of competition as it is often the case in France. 


tina said...

The US is actually finding more ways to hasten internet speed. Thanks for the enlightenment and the observations.

PC Richard & Son said...

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PC Richard said...

It was not always like this. A decade ago the U.S. ranked at or near the top of most studies of broadband price and performance. But that was before the FCC made a terrible mistake.