When Thomas Philippon moved to Boston from his native France 20 years ago, he was a graduate student on a budget, and was happy to discover how cheap American telephone use was. In those days of dial-up Internet connections, going online involved local phone calls that could cost more than $10 apiece in France. In the United States, they were virtually free.
Philippon got a doctorate in economics at Massachusetts Institute of Technology and is a professor at New York University. Over the years, he has noticed something surprising about his adopted country: Internet usage is no longer a good deal.
His parents pay about 90 euros (or $100) a month in the Paris suburbs for a combination of broadband access, cable television and two mobile phones. A similar package in the U.S. usually costs more than twice as much.
Why? Philippon offers his answer in a new book, The Great Reversal: How America Gave Up on Free Markets. A few companies, he writes, have grown so large that they have the power to keep prices high and wages low--great for those corporations, bad for everyone else.
Many Americans have a choice between only two Internet providers. The airline industry is dominated by four carriers. One or two hospital systems control many local markets. Home Depot and Lowe's have displaced local hardware stores.
Big companies have become only slightly larger in Europe this century. The difference? Politics.
The European Union has kept competition alive by blocking mergers and insisting that established companies make room for new entrants. In telecommunications, smaller companies often have the right to use infrastructure built by the giants.
In air travel, European discount carriers have received better access to the gate slots they need to operate. The largest four European airlines control only about 40 percent of the market. In the United States, that share is 80 percent.
The irony is that Europe is implementing market-based ideas--like telecommunications deregulation and low-cost airlines--that Americans helped pioneer. Philippon estimates that the new era of oligopoly costs the typical American household more than $5,000 a year.
Some solutions feel conservative: reducing licensing requirements and other rules that hamper startups. Others feel progressive: blocking mergers, splitting up monopolies and forcing big business to share infrastructure.
But both parties are still confusing the interests of big business with national interest. American families are paying the price.
Editorial on 11/12/2019
Print Headline: America's corporate overcharging