IHS Global Insight Perspective | |
Significance | Arcep has failed to introduce any regulation or even guidelines concerning the pricing of NGN construction or access—meaning the squabbling between the operators will continue. |
Implications | Although the unwillingness to commit investment is understandable in the current economic climate, a break in the FTTH deadlock would benefit all the operators—and with Arcep seemingly unwilling to broker a deal, they must now set aside their differences and move ahead with vital NGN deployment. |
Outlook | Arcep has shown repeated reluctance to tackle France Telecom's dominance, and if this is seen to be the key obstacle to the development of NGNs, the newly-empowered EU regulator may well be forced to step in. |
The head of French regulator Arcep has told a press conference that he opposes any functional separation of France Telecom, as the regulator publishes new proposals to allow operators the freedom to set access prices and choose technologies for fibre-to-the-home (FTTH) rollout.
Speaking to Les Echos, Head of Arcep Jean-Claude Mallet denied the need for the separation of France Telecom's wholesale access unit from its retail business, pointing out that EU guidance states this option should only be considered if other attempts to improve competition have failed, which he believes is not the case in France today. France's alternate operators, in particular second-placed SFR (owned by Vivendi), have recently called for the separation of the incumbent in order to stimulate competition and break the deadlock surrounding the rollout of next-generation network (NGN) FTTH.
Meanwhile, following several months of consultation, Arcep has published proposals to accelerate FTTH roll-out, including allowing operators the freedom to choose the technology they use for NGNs, and allowing them to set prices for wholesale access to these networks. Arcep says it will not intervene in setting these tariffs unless there is dispute between market players, indicating the financial risk of NGN roll-out and the need for operators to be compensated for investment. The regulator also proposes letting operators decide which network technology to install, albeit with some conditions attached, such as access for competitors to network ducts during rollout. The operators and interested parties now have until the end of April to comment on the regulator's proposals.
Outlook and Implications
- Operators Face FTTH Technology and Pricing Clash: France's operators have not only been divided on who should make the first move on FTTH roll-out, but also on which technology to deploy: point-to-point, which is favoured by Iliad, or GPON, which is championed by France Telecom. After three months of head-scratching, Arcep has decided to let the operators decide which network technology to install, saying both technologies have their drawbacks. Point-to-point is costly to deploy initially, but can be easily unbundled for third-party access, much like copper line. Meanwhile, GPON networks are cheaper to construct, but will require several splitters to allow access, and thus have higher long-term operational costs. Arcep has specified that point-to-point operators, in urban areas must allow rivals to use their network ducts to add their own dedicated line within a building, but that the rival must contribute to the cost of the construction. In the case of GPON, rival operators must be given the option of installing their own splitter onto cables, again in return for a contribution to construction costs. However, Arcep has significantly failed to address the ongoing problem of pricing—both how much "contribution" is expected to network construction and wholesale access rates once networks are in place. In effect, the regulator has failed to introduce any regulation or even guidelines concerning the pricing of NGN construction or access—meaning the squabbling between the operators will continue.
- Is France Telecom Blocking FTTX Roll-Out? In 2006, Iliad announced a one-billion-euro (US$1.3 billion) investment in FTTH, prompting similar pledges from the other operators and giving the impression that France would become a European leader in fibre roll-out. However, after three years, only 170,000 homes were using FTTH at the end of 2008, of which 130,000 were cable customers, according to regulator figures. France's alternate operators appeared to be moving towards an agreement on the rollout of fibre in the country (see France: 17 December 2008: Numericable Joins Orange and SFR in Agreement on FTTX Network Sharing), but France Telecom has been somewhat insistent on going its own way. However, in December France Telecom lashed out at Iliad's Free for refusing to accept proposals for a joint network roll-out in Paris (see France: 12 December 2008: France Telecom Accuses Rival Free of Holding Up Fibre Roll-Out). France Telecom has attracted some hefty fines in the past for abuse of its dominant position (see France: 3 April 2009: EU Court Rejects France Telecom Appeal of Antitrust Fine), and there is little doubt the operator's attitude has proven an obstacle to the growth of competition in the country's fixed-line market. However, the alternates are also guilty of some very petty squabbling over NGN construction costs, with each trying to gain some financial advantage in any proposals. Although the unwillingness to commit investment is understandable in the current economic climate, a break in the FTTH deadlock would benefit all the operators—and with Arcep seemingly unwilling to broker a deal, they must now set aside their differences and move ahead with vital NGN deployment.
- Could France Face EU Intervention? SFR owner Vivendi has recently called for the functional separation of France Telecom, while the media giant and fixed-line operator Iliad have complained to the EU, claiming the incumbent's dominance is stifling competition (see France: 19 March 2009: Vivendi Calls for France Telecom Fixed-Line Separation). Arcep has said that any decision would be have to be taken within a European frame of reference. The European Commission has stated that splitting an incumbent operator into two companies would only be recommended in exceptional cases, and as a last resort; however, there have been some indications that Brussels is running out of patience with the slow growth of NGN's in France. France Telecom has understandably been unwilling to open its FTTH networks without some official regulatory guarantees that the alternates will do the same (see France: 4 November 2008: France Telecom to Miss 2008 FTTH Targets). However, as the domestic regulator has yet to issue any such guarantees, it is expected that the incumbent will continue to deploy fibre as it sees fit, and then charge what it likes for access to this network. Arcep has shown repeated reluctance to tackle France Telecom's dominance, and if this is seen to be the key obstacle to the development of NGN's, the newly-empowered EU regulator may well be forced to step in.