Vive la High-Speed Internet!

French policy has nurtured competition among providers, advancing the country to the cutting-edge of broadband technology

by Jennifer L. Schenker

What a difference a few years make. In 2001, France had one of the weakest markets for broadband Internet access in the developed world, with less than a quarter of the penetration of the U.S. Today, it has sailed past the U.S. to become one of the world's most wired nations, with more than one in five inhabitants enjoying high-speed Internet connections.

What's even more interesting is how the French are using their fast hook-ups. According to tech research firm Analysys, a remarkable 52% of broadband connections in France today are used for voice-over-Internet protocol, or VoIP, phone calls—far and away the highest level in Europe and perhaps in the world. In Britain and Germany, by comparison, just 6% of broadband connections are used for VoIP.

The Battle of the Boxes

The French also have gotten off to a fast start in Internet TV. Analysys figures 2.6 million households in France now get TV over the Net using Internet protocol technology (IPTV). That's about 10 times the number using IPTV in Britain, qualifying France as the European leader in video-on-demand services.

How did the land of wine, cheese, and luxury goods become a world-beater in cutting-edge Net services? Part of the credit goes to what could be called the Battle of the Boxes. Paris and other cities are plastered with ads for state-of-the-art home Internet gateways—with names like Livebox, Freebox, Neufbox, and Dartybox—that offer connection speeds of up to 28 megabits per second, plus voice calls, TV, and Wi-Fi. They usually come for free with a monthly broadband subscription starting around €30 ($41).

Competition is fierce among the boxes and the Net service providers who provide them. And the value consumers get for their money is far better than in Britain or the U.S., where monthly fees can be more than twice as high for slower connections and fewer services. "France has become a clear leader," says analyst Chris Lewis of telecom consultancy Ovum in London.

France Outstrips U.S. in Infrastructure

At stake is much more than bragging rights—or smoother video streams from YouTube (GOOG). Having a top-notch data infrastructure is a critical factor in 21st century economic competitiveness, and by that measure France is on the rise. In recent years, the country has gone crazy for the Net, with skyrocketing use of everything from e-shopping to blogs. Though its labor costs are high, France enjoys some of the highest productivity in the world, in part due to heavy use of information technology.

By comparison, "the U.S. is living on borrowed time," says Peter Cowhey, a former official with the U.S. Federal Communication Commission and now professor of telecom policy at the University of California, San Diego. The next generation of information services will require very fast and cheap connections, he says, and while the U.S. is still ahead in software and Web innovation, it is falling behind in network infrastructure. That gives a potential leg up to the European and Asian countries that have rolled out better broadband services.

How did France—not always seen as a paragon of the free market—turn into such a hotbed of broadband competition? The surge can be traced government actions at the start of the decade that have proved far more effective at stimulating broadband competition than the policies of the FCC.