Michael Why do we pay $60 a month for phone and internet in America, have to shell out $2.50 per minute for calls to Germany if we forget to enter a special number or sign up for a special plan, and pay an additional $60 for cable with premium channels? In European countries, a comparable package costs about a third of that.
In May of this year, the Stanford professor Lawrence Lessig came to Yahoo and explained it to us. Contrary to what one might expect from a high-tech nation, America ranks only 15th worldwide in terms of internet availability. Even in Bucharest, the coverage is better than in Chicago! The problem is a lack of competition among providers, as the owners of telephone and cable networks operate as state-sanctioned quasi-monopolists.
How did the USA end up in this complicated situation? In 1996, the Telecommunications Act mandated that the telephone company AT&T had to make its network available to third-party providers without charging excessive fees. This was never the case for the television cable network; companies like Verizon and Comcast were not required to grant competitors access to their cable infrastructure, which had been built by them at great expense. This unequal treatment led to endless disputes between telecom and cable companies, and in 2000, the Supreme Court indirectly decided that the government could no longer force telephone companies to open their networks under dictated conditions. Thus, partial government regulation gave way to a process governed only by the laws of the monopoly market.
Completely different in Europe: There, the state massively intervened in the economy in the 90s, forcing the telecommunications operators to "debundle", and also to offer their service lines to third-party providers at non-excessive fees, "unbundled" from their own telecommunications services. The goal of the measure was to strengthen competition, advance technological development, and, in the long term, reduce prices for consumers.
Looking back, it is essentially an economic history experiment, conducted from the year 2000 onwards, taking place on two continents with different rules of the game. Which approach provides consumers with better conditions in the long run? Which one advances technological development the fastest? Should the state regulate entrenched monopolies or allow established companies to operate freely? The argument in favor of regulating monopolists is that it stimulates competition. As a counterargument, the established monopolists at the time claimed that government intervention would hinder future investments and bring technological progress to a halt.
The result is obvious today: America is not only significantly lagging behind Europe technologically in the telecommunications sector, but it also charges the end consumer higher fees for poorer service. We look enviously at your affordable internet, telephone and cable offers, Europeans! You can watch the previously mentioned Lessig lecture on video for free on the internet, but it's 54 minutes long! The section about American problems with telephone and cable monopolies starts at 6:48.