The Free Market Lie: Why Switzerland Has 25 Gbit Internet and America Doesn't

The Free Market Lie: Why Switzerland Has 25 Gbit Internet and America Doesn't

You may have heard about 25 Gbit symmetrical internet in Switzerland. This is often cited as the fastest dedicated (non-shared) residential connection in the world. However, did you ever wonder why Switzerland has such fast internet at a reasonable price while the United States and other countries like Switzerland’s neighbor Germany are falling behind?

What is the fundamental difference between the countries that leads to such a stark difference in internet speeds and prices?

Free markets, regulation, technology, or all three?

Let’s take a closer look at the situation in Switzerland, Germany, and the United States.

As mentioned, in Switzerland, you can get 25 Gigabit per second fiber internet to your home, symmetric and dedicated. If you don’t need such extreme speed, you can get 1 or 10 Gigabit from multiple competing providers for very little money. All over a connection that isn’t shared with your neighbors. In fact, someone could offer 100 Gigabit or more today; there is nothing preventing this other than the cost of endpoint equipment.

In the United States, if you’re lucky enough to have fiber, you might get 1 Gigabit. But often it’s shared with your neighbors. And you usually have exactly one choice of provider. Maybe two, if you count the cable company that offers slower speeds for the same price.

In Germany, you are in a somewhat similar situation to the United States. Fiber service is limited to one provider and is often shared with your neighbors.

The United States prides itself on free markets. On competition. On letting businesses fight it out. A deregulated market with no brakes.

Germany, on the other hand, is famous for over-regulation, making it difficult for businesses to operate, yet it is in a similar situation to the United States.

Switzerland has a highly regulated telecom sector with strong oversight and government-backed infrastructure projects, but regulations in Switzerland differ from those in Germany.

So why is the country that worships free markets producing stagnation, monopolies, and inferior internet, while the country with heavy regulation is producing hyper-competition, world-leading speeds, and consumer choice?

And at the same time, the country with the most regulation is suffering the same problems as the country with the least.

The answer reveals a fundamental truth about capitalism and regulation that most people get wrong. To understand the failure, you have to understand what economists call a “natural monopoly.”

A natural monopoly is an industry where the cost of building the infrastructure is so high, and the cost of serving an additional customer is so low, that competition actually destroys value. Think about water pipes. It would be insane to have three different water companies each digging up your street to lay their own pipes. The rational solution is to build the infrastructure once, as a shared, neutral asset, and let different companies compete to provide the service over that infrastructure.

In Germany, the “free market” approach meant letting any company dig up the street to lay their own fiber. The result is called “overbuild.” Billions of euros spent on redundant concrete and asphalt. Money that could have been spent on faster equipment, lower prices, or connecting rural areas, instead wasted on digging the same hole twice.

The United States took a different path, but the result is equally bad. Instead of overbuild, they got territorial monopolies. In most American cities, you don’t have a choice of fiber providers. You have whatever incumbent happens to serve your neighborhood. This is a cartel. Each company gets its own protected territory, and consumers get no choice.

Now look at Switzerland. Here, the physical infrastructure, the fiber in the ground, is treated as a neutral, shared asset. It’s built once, often by a public or semi-public entity. Every home gets a dedicated 4-strand fiber line. Point-to-Point. Not shared. That dedicated fiber terminates in a neutral, open hub. And any internet service provider can connect to that hub.

This means you, the consumer, have genuine choice. When you sign up with a provider, you simply give them your OTO (Optical Termination Outlet) number. No technician needs to visit. No one needs to dig up your street. The competition happens on price, speed, and customer service but not on who happens to own the cable in front of your house.