French Competition Watchdog Approves France Telecom's Quad-Play Ambitions

France telecom has been given the go-ahead by the competition authority (Autorité de la Concurrence) to begin cross selling mobile and fixed line services, making the marketing of quad-play bundles including mobile services, Internet, TV, and fixed line voice services a possibility. The decision is particularly targeted at the telecommunication sector, with the competition authority noting that: "The trend towards fixed and mobile convergence leads to a universal operator model, resulting in the emergence of new business practices… convergence has occurred through diversification of operations, merger or partnership, the market today is moving towards a model of one universal operator able to meet all consumer needs. Operators can use the customer base and data held in one market (e.g. mobile) to move into another market (e.g. broadband Internet). Secondly, to provide 'all in one' convergence offers. These can include triple play (phone, Internet, and television, or more recently quadruple play (fixed and mobile, Internet and television) and convergence."

The competition authority notes that Bouygues launched a quad-play service under the Ideo brand in October 2008, while SFR is poised to do the same but have cross marketed for some time. Fixed-line player Illiad is also entering the mobile market. That, however, is still some years away after the government awarded France's fourth 3G licence to fixed-line operator Iliad's Free, with a planned service launch in 2012 (see France: 5 May 2010: Iliad's Q1 Revenues Up 4.7% on Growth of Free Brand).

France telecom has been seeking the all clear to begin offering such packaged quad-play services and the competition authority is receptive in noting that there is the potential for cost savings and increased competition which can feed down to consumers (see France: 4 May 2010: Orange France Pledges Quad-Play Launch by End-Q3). However the competition authority also notes that it can produce "anticompetitive effects when used by a dominant firm using its' leverage to oust its competitors". They note that:

1. Convergence offers may increase the costs of changing operator to the consumer.
• Increasing customer lock in is a significant part of the attraction for carriers and by bundling services the effect is multiplied. This includes the value-added services taken by mobile users, porting telephone numbers, and technical issues and delays in changing over from one broadband provider to another
2. Market dominance effects are enhanced by convergence.
• The operators with the largest market share for broadband or mobile can offer better tariffs due to scale and have other technical advantages with quad-play encouraging migration to one operator bets able to meet all needs, multiplying scale advantages.
3. Barriers to entering the mobile market could distort the overall market in favour of the mobile operators.
• Spectrum limitations limit competition in the mobile segment and the advantages of universal operators could produce an undue advantage in the fixed-line market. The fourth operator Free could meet competition if it quickly negotiates network roaming but the Authority notes that these negotiations have 'stumbled'.

Outlook and Implications

The competition authority therefore retains some say in how the market will develop, noting that "commitments, the conditions of re-engagement of customers subscribing to an offer of coupling, the synchronisation term for subscriptions to broadband and mobile, the standardisation of certain features to ensure interoperability and portability of current and future converged services".

Standards and regulations are to be created either by the carriers or by telecoms regulator ARCEP, and offers from France telecom will be studied on a case by case basis to determine whether competition is being negatively affected.

France Telecom has faced a tough domestic market with flourishing competition based on triple play offerings—and pan-European regulation hitting company revenues even while the domestic broadband and mobile markets perform well in subscriber terms France Telecoms has viewed quad play entry as a key way of improving its prospects and been pushing for this move which it will now likely follow through on in short order—under regulatory oversight (see France: 4 May 2010: Orange France Pledges Quad-Play Launch by End-Q3).

Relevant stories

France: 29 April 2010: France Telecom's Q1 EBITDA Down 4.8%, Sees Few Signs of Recovery;

France: 17 March 2010: French Fixed Broadband Subs Up 10% During 2009, Sees Significant Fibre Growth;

France: 10 May 2010: French Mobile Subscriptions Up 5.6% Y/Y During Q1;

France: 2 December 2009: Iliad Turns Up Heat in Broadband Market with US$30 Triple-Play Offer;