Nathalie Kosciusko-Morizet, the recently appointed French Minister for new technologies in France, held a press conference this week on the progress of fiber to the home (FTTH) deployments in France. The presentation came after a closed door meeting with Jean Claude Mallet, president of ARCEP (the French regulator), members of the telecommunications and fiber industry, and representatives of local government collectives. These discussions on FTTH have been going on for several months, but have resulted in only a few pilots and a set of experiments in fiber to buildings under the control of ARCEP.
More recently, all operators have been highlighting the downturn of the economy and several regulatory issues to justify a freeze in their investments. “We have reached an initial agreement,” said the Minister, “and now we can say we have entered the first step to bring fiber to the home in France to everybody. This first phase focuses on fiber deployments in the most populated zones (major cities) and we still have some decisions to finalize by the end of this quarter. The second phase, starting in July, will be to facilitate the deployments in areas with lower population density. For this phase, we are setting up a collaborative task force to create the dynamic to reach our goals.” Are these just words or will the government take concrete steps?
Competition through the network
Mallet adds, “It may take more than 10 years to achieve fiber to the home for everybody, but today we wanted to find a way to jump start the process.” The chosen approach has been to segment the problem and to split the territory in two zones in terms of population density. In densely populated areas, competition is fierce between the operators to put fiber in the ground. They are willing to invest and compete at the infrastructure level. Each operator is actively building its network. Therefore, the incumbent, France Telecom, has an important advantage because of its own network, paid for the largest part by the tax payers when the company was government owned (privatization started in 1996). The other incumbent, Numericable, is the only cable operator in France which also has a large fiber network, not yet completely enabled for digital entertainment and data servce.
Because of the unbundling of the local loop, a highly controversial regulatory decision in 2004, Iliad-Free, the largest and most active operator in France, introduced a highly successful competitive offer on the DSL market with the first triple play service in France (free TV (80 channels), free phone and up to 20 mbps Internet access) , priced at a flat fee of €29 per month. France Telecom, which has 50 times more revenues than Iliad-Free, has seen its market share dwindle: Free owns about 30% of the high speed broadband market in France. Numericable has about 5%, but it owns the second largest fiber network.
No government incentives for the very high speed broadband
Today, under pressure from users and municipalities, the government has decided to push FTTH and create a new fiber local loop, but it doesn’t really want to invest money in the network. The approach is questionable in light of investments they are making in other sectors. The government has to find a way not to create a new digital divide between densely and sparsely populated areas. But as Mallet says: ”No one knows the exact return on investment levels for fiber networks to the home.” The operators are not willing to take risks. They invest and try to utilize their own network as a platform to squeeze their competitors, to innovate only if there is a short-term return on investment, and to use the content business and other tricks to lock in customers.
Impact of technology choices
The first step mentioned by Kosciusko-Morizet is the result of experiments conducted by ARCEP during the first quarter of 2009, all in dense population areas (Paris, Marseille, Lyon and Montrouge). They were needed because of different technology choices made by France Telecom (GPON) and Iliad-Free (P2P Ethernet). The technologies do not need the same amount of fiber threads (as GPON is a shared approach), involving “mono fiber” build up. P2P Ethernet uses “multi-fiber” build up.
In August 2008, a law in France created a set of principles to put fiber in the buildings. The goal is to maintain competition between the operators by allowing customers to switch providers whenever they want. Aimed at reducing installation costs (which is borne by the operator) and repetitive installations in the multiple dwelling buildings, the law (mutualization) says that one operator will install fiber for all apartments in a building. The operator will be chosen by the “syndic” (the building’s home owners’ association) and the installed network must be opened to all other operators so they can offer competitive high speed access and services.
Many problems have occurred because several operators can share a GPON fiber but they can’t in a P2P configuration where each apartment needs a unique set of fiber. With regard to mutualization, where each operator can connect its outside network to the network of the building, there are unresolved issues: should it be inside the building (a private property) or outside the building (public domain)? ARCEP’s regulation also requires France Telecom to lease its own dark fiber networks at a published price to its competitors. ARCEP requires France Telecom to allow other operators who using its empty ducts at a published price to put their own fiber in the ducts (note: FT had been able to put a lot of ducts when it was a government-owned enterprise and is able to fill them with fiber at very low cost).
ARCEP rules in public consultation
The public consultation process for rules proposed by ARCEP to boost fiber investments in dense areas has commenced and will terminate on 30 April 2009. The final regulations will be approved in June. It is consistent with decrees published in January 2009 (following the August 2008 law) that prescribe the terms for installing fiber in buildings. ARCEP’s new rules may include a list of municipalities included in densely populated areas.
“This list will evolve,” says Mallet. “It will fit the operator’s practices. We don’t want to create a formal distinction between dense and non-dense areas.”
ARCEP does not want to promote a specific technology. It will set a framework where different technologies can be implemented under equal conditions, as both have to be interoperable and allow other operators to use the infrastructure put in the building by a different operator. This is challenging because it has to balance the cost borne by the operator in charge of the infrastructure for a given building with the interests of the other operators who want to use it to reach their customers in the same building. Most of the negotiations for the last 3 months have focused on this balance. The mutualization point can be in the building in cities where buildings are connected to an underground sewer system that is accessible (Paris only). Otherwise it will be outside the building. It can also be placed into a building with a minimum of 12 or 24 apartments (to be decided).
ARCEP will determine the appropriate solution on a case by case basis. ARCEP also proposes different duties and tariffs for operators that have installed fiber infrastructure in a building (which will be different from tariffs on commercial operators). All trials completed by June 2009 will be deemed to conform to the new rules.
Going outside the dense areas with the help of municipalities
The second step mentioned by Kosciusko-Morizet will focuse on less populated areas and will rely more on local government collectives and municipalities to facilitate the mutualization (sharing) of the fiber local loop. They are also asked to pay for these out of their budgets. Kosciusko-Morizet say the Caisse des Depots et Consignation (the state-owned bank in France for local collectives) will have to evaluate a special type of debt financing to allow them to build their own fiber network, preferably with the help of operators (or alone if the operators do not show interest).
An early example in France is the department of Haut de Seine, adjacent to Paris. A task force will be set up immediately with the operators, the local collectives and the Caisse des Depots to work on all further issues and coordinate activities. Fiber installations in less populated areas should start by the summer of 2009.
Mallet concludes by saying that ARCEP will help operators to work together with municipalities to ensure the openness of the network. One result of this process could be that the less densely populated areas, many of which are the poorest in France, will have to pay for their fiber infrastructure whereas the more populated, the richest areas like Paris, will not.
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