With Free, France shows the US what an open mobile market should be
If you hadn't noticed, T-Mobile has been on a rampage lately in the US. It has offered cheaper contract-free plans, paid users cold hard cash to switch, and generally crashed other carriers' parties. The result has been a wave of new customers for T-Mobile and cheaper, me-too plans from AT&T and Verizon -- all a boon to US consumers. But over in France, an alternate-reality version of this scenario has been playing out. Until recently, old guard carriers like Orange and SFR have trundled along, milking customers while stifling innovation. Then, trampling over them on a white horse, came a Bizarro T-Mobile carrier called Free Mobile. It's been a far greater competitive threat than T-Mo in the US and, thanks to its radical plans, France has become a wireless utopia with some of the cheapest rates in the world.
Let's backtrack a bit to the bad old days of mobile in France, circa late 2011. The market was lorded over by Orange (the largest carrier with a 41 percent share), SFR and Bouygues Telecom. At that time, it was hard to find a plan under 40 euros (about $55) with 1GB of data or more. As shown here, when the iPhone 4S came out, a SIM-only contract could be had on SFR for 37 euros ($50) with 1GB of data, or 39 euros on Orange ($53). Calls weren't unlimited on any of those plans, and tethering was strictly a non-non. 4G was nowhere in sight.
In early 2012, Free Mobile was launched by the French entrepreneur Xavier Niel (fun fact: he also owns the rights to the song "My Way"). The company hit the market with a revolutionary offering: 3GB for 20 euros ($28) with unlimited calls and texts, plus no fixed contract term. Though the company had limited infrastructure and leased spectrum from Orange to boost capacity, the offer struck a chord with consumers. That's putting it mildly. Free grabbed four percent of the market, or about 854,000 subscribers in just three months.
Though the company has had teething problems with reports of slow download speeds, it has been on a constant growth curve since. (Full disclosure: I was on Free last year in France, but switched because I constantly had data issues.) As of the end of 2013, Free had 8 million customers, giving it a 12 percent share of the French market, just behind Bouygues. The company's data plan is now even better, as well: 20 euros for unlimited texts and calling, with a borderline-ridiculous 20GB of 4G data included per month. To top it off, it's about to start selling contracts and activated SIM cards directly from vending machines, as pictured below.
The benefits to the French public go way beyond Free. Rates are lower across the board, and Orange, SFR and Bouygues have all launched discount brands. Each offers 3GB of 4G data for the same 20 euros, a tempting offer for those who might be concerned about Free's service (and don't need 20 frigging GB). All four companies have aggressively built out their 4G networks as well, and have nearly as many antennas as permits issued, 11,890 -- meaning most major centers in the nation now have high-speed LTE.
Whether or not this wireless paradise can carry on is another matter. SFR was just sold to broadband behemoth Numericable for 13.5 billion euros, pending regulatory approval. Other operators, like Orange and Bouygues, have seen steep revenue declines thanks to the price war, and may be looking at mergers or buyouts to stanch the bleeding. However, French consumers may be resistant to any resulting price hikes, having tasted some of the cheapest LTE in the world.
Back in the US, where comparable wireless plans are triple the price, there's a critical auction coming up as a result of TV stations voluntarily giving up spectrum. If you're all for competition, you may have mixed feelings. FCC chair Tom Wheeler has decided that the amount of frequency available to each company will be limited, so that Verizon and AT&T don't use their much bigger war chests to buy it all up. That'll help T-Mobile, Sprint and other smaller players address their main weakness: poor coverage, especially outside of big cities.
As you'd expect, AT&T and Verizon aren't keen on this, with AT&T even threatening to pull out of the bidding (though it later backpedaled). They claim that the current rules will limit the auction's revenues – and the purpose of the auction is to make money for the government. However, if the FCC caves in to their demands, the result could be far worse for consumers. AT&T and Verizon would strengthen their networks, making consumers even more likely to avoid T-Mobile, Sprint et. al. That could lead to even higher prices, and rates in the US are already some of the highest worldwide. Though that puts the Feds in a tricky position, they should take note of how quickly things changed in France with more competition. If similar consumer benefits can be had stateside, they'd make any billions gained at an auction look like chump change.
