French DSL is like a rude French waiter. Why?


Over at Wired, a non-economist writes:

France has more broadband DSL customers than most countries, including the United States. But if you happen to be one of the millions of customers having major problems with your connection, then life can be a living hell. High-tech service in France is like service in a Parisian cafe -- intermittent and snooty.

The problem is that there are at least 10 DSL companies battling for a share of the French market. The companies do a good job of selling services, often bundling phone and TV service with DSL. Unfortunately, the companies make promises to gain subscribers without having the infrastructure in place to make good on them.

Despite often appalling DSL service in France, there has been no severe public backlash.

In a country where government controls keep most critical services -- like medical care -- reliable and affordable, people are used to taking their complaints through the proper channels.


The author of this piece implies that competition is the problem and government intervention the solution. But what's really going on? What's the market failure here and what, if anything, can the government do to fix it? I'll be posting my answer soon - in the meantime, comments are open and I'm looking forward to reading your suggestions.

5 comments:

  1. Anonymous Says:

    Maybe that's a short-run problem only? The market needs time to adjust and reach an equilibrium.

  2. Mary Says:

    The government has to intervene and force the companies to keep their promises. If companies are lying, customers can't do much about it. They can sue them, but its probably not worth the trouble.

  3. Anonymous Says:

    hey everyone,
    i am not really familiar with french dsl services but some research gives u a different perspective from that of Wired.... DSL in France is moderately-priced, only 30 euros per month for a 60MB/s connection, competition has given companies incentive to develop better technologies and increased M&A activity gave customers a wider variety of products from the merged companies. So as increased competition has led to lower prices, improved technology and greater choice i think there no reason for government intervention or any case of market failure...
    DSL companies would probably prefer having employees who can actually deal with people having major problems with their connection, but maybe they can't find any! if there any place for government intervention i think that would be in the labour market, maybe some efforts to "push" students towards a higher education in telecommunations technology.

  4. Anonymous Says:

    It could be that the market is not big enough for that many companies (assuming that in order to provide and keep upgrading the infrastructure would require large investments and therefore the need of a large client base). Since the market is quite competitive, one would not expect large price differences for similar products. Therefore, the companies who would not have managed to get a big enough share of the market, would not be able to provide or expand the infrastructure required to provide the service and make a profit.

    Theoretically companies should exit the market as they realise that the returns are not high enough for the investment required in infrastructure. Thus no government intervention would be required.

    However it could be the case that large investments have already been made, although these investments might still not be enough to provide a good service. In this case, either companies might not yet be willing to exit the market, or are happy with low returns. In that case, if any, I would expect government internvention to take the form of regulation.

    Third possible solution would be for some of the companies to merge, however that might give rise to issues regarding competition and market share.

  5. Anonymous Says:

     

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