Free Is, That Is

A French broadband provider's new offer is the envy of the world

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Steven Cherry:

Hi, this is Steven Cherry for IEEE Spectrum's "This Week in Technology." The United States invented the Internet, and yet, 40 years later, the U.S. is an also-ran when it comes to broadband services. The most recent

Cisco Broadband Quality

Index put the U.S. at a 93, which isn't bad, but it's a national embarrassment next to the leader, South Korea, which scored 157, or when compared to the other 11 countries whose scores topped 100.

Last month, two announcements put the U.S.'s broadband woes in context. Comcast, the country's largest cable provider, raised its rate from [US] $55 to $60, and that's for its basic broadband. Meanwhile, in France, the upstart provider Free offers data rates that are often double those of Comcast's, plus television programming, plus telephone services, all for less than Comcast's old price. Then last month, it improved the number of television channels to 150 and the number of countries you can call on your phone for free to 103. The service now also includes an access modem that's like getting a Sony PlayStation instead of a plain old set-top box. How do the French do it?

With me in the studio today is Dave Burstein. He's a longtime expert on the computer industry; about 10 years ago he shifted his focus to broadband technologies and Internet television. He's the editor of a highly respected industry newsletter, DSL Prime. He chairs two annual conferences, Fast Net Futures and Web Video Summits. And he's the coauthor of the book DSL: A [Wiley] Tech Brief, published by Wiley.

Dave, welcome to the podcast.

Dave Burstein: It's been a long time since I've been on the radio with you.

Steven Cherry: Dave, going into the Internet age, the French started out with a single national telephone system, one of those classic inefficient bureaucracies. Today they have fierce competition, which in turn has led to low prices and killer broadband speeds. The U.S., by contrast, deregulated the telephone industry in the 1980s, but today most areas of the country are controlled by a comfortable duopoly. Prices are high, and data rates are low. When did up become down and hot become cold?

Dave Burstein: Competition died in the U.S. beyond the big two almost 10 years ago. It turns out that competition requires enormous courage on the part of the government to stand up to the existing carriers and protect the little guys.

Steven Cherry: So how did the French do it?

Dave Burstein: Well…they had the b—s. We didn't. And that's what it really came down to. The generally conservative French governments decided they had to have competition, and they did what it took to fight the incumbents.

Steven Cherry: So what did it take?

Dave Burstein: What did it take? The head of Free, who's famous for the €30 triple play, told me once that his company was doing great—this was about 2002—and it will as long as the regulator protected them. In the U.S., as we deregulated, nobody survived in the consumer market for broadband.

Steven Cherry: Just to be clear: €30 is about US $45, and that offering is a little bit more now. It's about $48.

Dave Burstein: Well, actually, the big news from France—as I asked you whether I could be provocative—is how much more expensive it's getting. A lot of people in France are really getting angry, because for 100 channels of TV, phone calls to 100 countries, and something that's typically a 10-megabit broadband, the price has now gone up to €36 from €30. That's what, 50 bucks? Forty-nine bucks? I forget what the exchange rate is these days, and they think that's far too expensive. Here in the U.S., we usually pay about $115, $125 for the same thing.

Steven Cherry: Is it fair to say that it's just the existence of competition that keeps the French prices? Even if they feel they're high, they're certainly low by U.S. standards.

Dave Burstein: Competition really can work. Doesn't always. And the other thing that made France different is a brilliant madman named Xavier Niel.

Steven Cherry: Now, he's the guy at Free…

Dave Burstein: Right, and he changed the Internet in the Western world. Around 2001, he said, "I can do this cheaply, well, and give some people a really great service, and I'll get millions of customers."

Steven Cherry: Well, let's talk about that service, the "triple play" as we call it: That's broadband service, television services, and telephone. Just take us through the French offering right now.

Dave Burstein: The French offering right now at Free—and the competitors had to match them, including France Telecom—starts with the best set-top box that some of the smartest engineers on the Internet have been putting together for Free. The new one is incredible. When you say it's like a PlayStation, yeah, and they're giving it away with a €36 subscription, which is amazing. And what's different is they started out saying not "How we can make money, how we can fit our service, what we can offer." They said, "We're going to make the most incredible Internet for our customers. That means we're going to get more customers." And Xavier is a billionaire now, literally.

Steven Cherry: And what are data rates like for that service?

Dave Burstein: Right now, they're using DSL, and they always give you whatever your line can handle. If you happen to have a negative loop length, you might get 28 megabits. In practice, most of Paris gets 10 megabits or so, although I happened to rent an apartment there one summer, and it was only 2 megabits, because we happened to be the extreme. Most of France is getting 10 to 15 megabits as part of this offering now, and they're going to get fiber now.

Steven Cherry: Yeah, let's get to the fiber in a second. But DSL, you know—not to get too complicated about it—service gets better and better the closer you are to the service substations, and those distances are relatively short in France, especially in Paris, and so the data rates are pretty high.

Dave Burstein: That's a little bit of it, but the more important thing is that they don't throttle you like most of the carriers do in the U.S. Most Verizon lines in New York could comfortably give the same 15 megabits. They actually, because Verizon hasn't upgraded any of them for a decade, can't give you more than 6. But they charge you an arm and a leg if you want that maximum speed, and mostly they just cut your speed for no decent technical reason to a meg and a half or 3 megabits. The difference that started in Japan, and was followed in France, was they said, "We're going to give the customer as much speed as is practical. We're not going to try to slice and dice it for marketing reasons, and we're not going to throttle our customers."

Steven Cherry: And then beyond that, you mentioned that Free is putting in more and more fiber.…

Dave Burstein: Xavier absolutely blew the mind of everybody in the industry four years ago when he said he was going to put in fiber for the same €30 price, which is now €36. And they threw in some more things, but still that's cheaper than just DSL in some parts of the U.S. Really frightening. And he could do it for two reasons: One, because he's a madman who's made a billion dollars and can do what he wants to do. And he can say, "Well, it may take 20 years for my fiber investment to pay off, but I don't care. It's a better thing for my customers. It will make me a hero." And here's the kicker: When you have a lot of competition—at that point he had six competitors in France instead of two in the U.S.—you can really break out of the box by doing something wonderful for your customers.

In the U.S., Verizon putting in fiber can't pay off like that. It's great they built FiOS; it's one of the best networks in the world. But when they did, their one competitor, the local cable company, upgraded in turn to DOCSIS at 50 and 100 megabits, so Verizon had no huge advantage. When you only have one competitor, you want to look at the other guy [and] say, "What's the game theory on this? If I invest and make something great, are they just going to counter me and we both make less money and we don't recover our investment?" When you're in France with six companies, it's much easier to invest. It's not so easy to have everybody keep up with you. So Xavier said, "I'm going to kill France Telecom [and] get another 4 million customers by putting in fiber. It doesn't add up so neatly, but I'll get so many new customers from all those competitors that I'm going to be ahead of the game."

Steven Cherry: And a country like South Korea doesn't have any madmen as far as I can tell, but they have the best broadband in the world right now, right? They have that Cisco score of 157, they have 100 percent broadband penetration, and there the story is also competition?

Dave Burstein: There the story was mostly competition, actually. Back 10 years ago, the government decided they wanted a better phone system and a better Internet system. So they persuaded a competitor to create. They went to some of the big chaebol [South Korean conglomerates] and said, "We're going to give you a phone license. Come on in." And so Hanaro was created. And Hanaro in 1999 was one of the first DSL companies in the world ahead of the United States, because they were a new competitor. They had to come up against Korea Telecom; they had to do something better. So there again, what got them going was the government created competition. The competition got things working.

Steven Cherry: Some of those countries are in Eastern Europe, which has really made a big push toward broadband. Latvia is now tied with the United States and France at that 93 level in the Cisco rating, and they had a rating of 58 two years ago.

Dave Burstein: Yup, and there again, it's the government decided they wanted a good Internet. Phone companies are huge, huge monsters. An AT&T or a Verizon is a $100 billion company with 200 000 employees. They're so big that the government is in their face all the time inevitably, whether it be pole attachments, rate setting, or deciding whether or not Comcast can buy out half the TV stations in the country. So they're always dealing with government. So government, if they had any courage, can get what they want from the utilities. In Latvia, the government said, "We want a great Internet phone company: You want that rate hike? You build fiber."

The surprise is Russia, which also has one of the fastest Internets. Now, that's actually for a different technical reason. The way the Internet was built in Russia is they have all these rows and rows, you know, block after block of these Stalin-era flats of apartment buildings. The way they built the Internet in Russia is, instead of upgrading the existing phone wire, they ran fiber to the basement of each of these buildings. When you do that, you get a natural 50 or 100 megabits. So it just turned out that that was the way that Russia was built on the Internet. And they have a faster Internet than most of Germany.

Steven Cherry: Wow, that's pretty remarkable. Dave, Free with the six other competitors, I guess they're distinguishing themselves with fiber but also with the set-top box. Tell us a little bit more about that.

Dave Burstein: I want one. I want one. I've had the chance to interview the head of Free a couple of times. He's a geek who dropped out of high school to start a mini-tel company, set up the first ISP in France, loves the Internet, and likes hanging out with geeks. So he turned around and told his folks, "Make the best set-top box in the world, and we're going to give it to our 4 million customers." And they did. I haven't seen it live. I don't know if the software performs quite as smoothly as an iPad does, and I'm sure they're going to have a few kinks along the way. But they turned around and built something incredible. It's three or four times the power of anything in a set-top now. It may be comparable to the Sony PlayStation in some important ways.

Steven Cherry: I guess it's got a big hard drive and it's got a Blu-ray built into it. This is really a lot like sort of a fantasy Apple TV or…

Dave Burstein: No, no, no. Steve, you're wrong. It's much better than any of them because he designed it from the beginning to open standards and to let you do what you want with it. It only has a 250-gig hard drive. That's not enough these days! So not merely does it have a connection for an external USB, it's got an eSATA that lets you plug in another hard drive if you want that runs as fast as the one inside the box. You're working with WebKit, the same thing that Google Chrome and Apple Safari has built in, so you can start adding whatever you want. And he's not doing the kind of nonsense we see from everybody else, like Apple that says no flash on their machine, okay? Or Verizon who pulls down the speed.

Something very few people know is, six years ago, Verizon had a stealth project to do just the same thing. An open set-top box that let you do anything you wanted on the Internet. They thought this was going to be the cable killer, and they were very proud they were going to do that. And they said, "Sure, we might lose all our TV customers because they're going to watch something on the Internet instead, but we don't care. We don't make our money on TV. We're the phone company and now the data company." And in fact, the head of the company, Ivan Seidenberg, said, "You know, we have to get cable out of the house. And if we have to give up our TV revenues to do it, it's worth it." They never released that box. Free did, and again, it's partly because of a madman. It's partly because of somebody who I'm convinced genuinely wants to be a great guy and give a great Internet to the people of France and become a hero.

Steven Cherry: Very interesting. You know, it's just like reading your newsletter, Dave. I learn something new and important every time, and probably something we could do a podcast about every issue.

Dave Burstein: Well, steal it freely! I have a very funny rule: [I'm] the only reporter I know that says, "Please take my material. And if it turns out you don't have time in your short piece or in your tweet to give me a credit, I don't care. I get my ego fed enough. I don't need any more credits. Get the news out there."

Steven Cherry: Very cool. And thanks for coming down to the studio.

Dave Burstein: Thank you for having me.

Steven Cherry: We've been speaking about a remarkable Internet, TV, and telephone service from the French company Free, with Dave Burstein, a journalist and consultant who follows broadband and television technologies. He's the editor of DSL Prime, a free industry newsletter, which we have a link to on our Web site.
For IEEE Spectrum's "This Week in Technology," I'm Steven Cherry.

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