France Sees Disappointing Take-Up of FTTH as Only 50,000 Customers Connect

The French regulator has released figures which show a 35% rise in users connecting to ultra high-speed (up to 50-Mbps download speeds) broadband, over the six months to the end of June. Regulator Arcep found 230,000 users had signed up to ultra high-speed broadband services; however, only 50,000 of these were using an fibre-to-the-home (FTTH) network, with the remaining 170,000 connecting via upgraded ADSL cable networks.

Despite the growth in ultra high-speed broadband take-up, Arcep has expressed concern about the slow take-up of new services, in particular FTTH, as users of ultra high-speed broadband services only make up a very small percentage of France's European population of an estimated 62.5 million people. The regulator states that some 4.5 million homes are now located within reach of a fibre-optic network, with 650,000 of these capable of using FTTH at the end of June—representing a 50% increase on the end of 2008.

The French regulator has also announced the country was home to 17.3 million ADSL subscribers at the end of June 2009, an increase of nearly 2% on the previous quarter. Arcep says in total, the country had 18.675 million broadband subscribers, up 12% year-on-year (y/y), with the alternative operators claiming roughly half of this number.

Arcep also stated the number of unbundled lines stood at 6.986 million, up by 4.8% compared to the previous quarter. The figures also show incumbent France Telecom claimed 8.639 million fixed-line broadband subscribers, representing a market share of 48.7%—its lowest rate since the existence of the ADSL market.

Outlook and Implications

• Has Fibre Stalled in France? Since the inception of fibre-optic networks for domestic broadband use, France's operators have been bickering about the best model for deploying this infrastructure. At the end of June, France Telecom said it would put its FTTH roll-out on hold, after the regulator recommended using a multifibre solution in large cities over France Telecom's monofibre solution, where one fibre is used for all operators to connect individuals in one building (see France: 1 July 2009: France Telecom Postpones FTTX Roll-Out over Regulator's Single Fibre Plans). Earlier this month, the French competition authority gave the green light to Arcep's proposal to have operators deploy multifibre architecture in buildings in urban areas, meaning operators are committed to installing a fibre for each of its competitors upon request, with these competitors sharing the cost of deployment. Iliad, the second-placed fixed-line operator with some 4.5 million subscribers, has stated it has the means to finance its own FTTH network in France, but has yet to announce any firm plans or commit any investment to fibre roll-out. The regulator is now moving toward a pan-operator agreement on fibre roll-out, but it must get the incumbent France Telecom on board if it hopes to restart the process.

• Alternatives to Fibre in France: Arcep says the latest ultra high-speed broadband additions give France more subscribers than any other country in Western Europe, citing recent figures from Idate. However, the regulator is concerned that broadband adoption has been sluggish in relation to number of homes connected. Cable currently accounts for the bulk of fibre coverage in the country, following alternative operator Numericable's investment in replacing part of its horizontal coaxial cable network with fibre. This network may well be a driving force behind ultra high-speed broadband subscriber growth in the near future, particularly if Numericable's cut price triple-play bundles are a success (see France: 24 September 2009: Numericable Starts Fixed-Line Price War with Cut-Price Triple-Play Offering). As competition heats up in France, with recession-hit consumers looking to cut spending (see France: 30 July 2009: France Telecom's Q2 Earnings Down 3%, Warns of Tough H2), the country's alternative operators are stealing a march on France Telecom. SFR recently announced 275,000 new net broadband Internet active customers over the first six months of the year, meaning its broadband Internet customer base had increased by 11.3% y/y on a comparable basis, and totalled 4.154 million customers at the end of June (see France: 1 September 2009: SFR H1 Earnings Down 7%; French Operators to Appeal to EU over Fourth Mobile Licence). Low-cost, high-speed cable and ADSL services are currently outstripping the growth of FTTH in France, allowing the country's alternative operators to steal market share from the dominant incumbent.

• What is the Future for FTTH in Europe? As competition and regulation increases across France and the EU (see France: 23 September 2009: French Parliament Passes Controversial Anti-Piracy Law), and the ongoing recession cuts customer spend, there are now some doubts as to whether this is the best time for operators to commit to costly FTTH roll-out. In countries where some form of pan-operator sharing agreement has been reached, such as the United Kingdom, network construction seems to be forging ahead (see United Kingdom: 18 August 2009: BT Launches Free ADSL+ 20-Mbps Broadband Upgrade, Accelerates Fibre Roll-Out), whereas elsewhere, such as Spain, alternative operators are calling for government intervention to boost the process (see Spain: 4 December 2009: Orange Spain Urges Government to Support Fibre Deployments and Move Faster with Frequency Allocations). Worryingly, recent statistics released by the Danish regulator have shown have limited demand for ultra-high-speed services, with the number of over-50-Mbps users nearly halving over the last year. However, Denmark is a mature, highly penetrated market, and a combination of a lack of differentiating services, the recession, and the Scandinavian trend for migration to mobile-only connectivity has undoubtedly contributed to this. However, there is some evidence that, for the vast majority of users, the devices and applications to justify acquiring ultra high-speed broadband services simply do not yet exist.