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Summary:

Readers here shouldn’t be surprised about the broadband miracle in France, for we have written about it again and again and again. But it is good to see the Wall Street Journal write about how France went from a laggard to a broadband leader, mostly because […]

Readers here shouldn’t be surprised about the broadband miracle in France, for we have written about it again and again and again. But it is good to see the Wall Street Journal write about how France went from a laggard to a broadband leader, mostly because of a quasi-socialist government that pushed sharing of networks as a concept. You know the same concept that was supposed to take root after 1996 Telecom Act.

WSJ writes about Iliad, that has 1.1 million customers, and charges $36 a month for 81 TV channels, unlimited phone calls within France and to 14 countries, and a high-speed connection. And they are not alone. It is one aggressive market, and despite all the challenges, even France Telecom is doing well, mostly because it has adopted the “broadband mantra.” There are others, and you can get the complete lowdown on the France Page on the Broadband Wiki. [It also reminds me, if anyone can help me translate this, I can bring the numbers up to date.]

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  1. Jackson West Monday, March 27, 2006

    Looks like you already updated the numbers, but to paraphrase the recent updates: As of the first quarter of 2005 there are 7.4 million broadband subscribers in France (out of a population of approximately 60 million). France Telecom was fined 80 million euros in November of 2005 for their anti-competitive practices between 1999 and 2002.

    Man am I jealous of the low price and high speed…

  2. The WSJ article is very interesting and it’s certainly a market to watch. However, Iliad can charge what it does because it didn’t pay for the infrastructure on which it rides. France Telecom bears the capital and labor costs and Iliad makes it look easy.

    The actual cost of delivering those bits to consumers is many times $36. FT has 200,000 employees. Where do their salaries come from?

    I am happy that consumers are happy, and Iliad is doing some innovative stuff. But it’s not a miracle, it’s just a case of passing the costs off to the “other guy”.

  3. Competitive providers does benefit from the exisiting infrastructure that was put in place by FT. However, FT has been deploying these networks, whether it is Local Loop Copper or Fibers with budgets that were provided by Tax payers in France. The fact that the regulator is openning access these assets (LLU) to new entrants does not seems so unfair. As long as the cost of maintaining these equipments is shared accross the board there should be no specific complain. It seems to me that France has understood the Economical value of Telecommunication and the huge impact of ubiquitous Broadband Access drive growth. Unfortunately there is other major issues in this country that are reducing its competitiveness.
    In a sense, Singapore & Singtel have been following the same path and it has been proven extremely positive.

  4. Don’t hesitate to send me an email about what you would want me to translate : I can help you out with translation if you want :-)

    Continue well – broadband rocks in France which should learn that true competition can be good for companies (iliad stock is rising like crazy) and users (great penetration, usage in sharp rise…)

  5. The price Iliad and others are paying to FT for the local loop is around 10$ per month for a fully unbundled line (no more switched voice provided by FT) and around 3$ per month for a “partially” unbundled line, but in this case the client pays 16$ (tax included) to FT for his voice subscription. The 16$ per line per month that is paid on the 30 M phone lines in France is actually what pays for a large part of FT’s employees.
    And this does not include all the fees paid by new entrants to access other parts of FT’s infrastructure. I will give detailed numbers here when i have more time, but you can be sure that the price has been computed by the regulator to make sure that FT was duly compensated for time and labor… and FT has made sure that the parameters in this calculation were good enough.
    I think the bright idea that the regulator had back in 2002 was to set a very low price for partial unbundling, that gave an opportunity to new entrants but did not deprive FT of any revenue as clients were still paying a subscription.
    Up to the beginning of 2005, partial unbundling was driving ADSL numbers. Now that VoIP offers are more mainstreet, full unbundling is taking up. The numbers at the end of 2005 are: 2.23 M partially unbundled lines, 0.6 M fully unbundled lines, out of 8,9 M DSL lines.

  6. Andrew Schmitt Tuesday, March 28, 2006

    I read the same article this morning and found it rather one sided. While France Telecom is no model of efficiency, all of the fixed costs are paid by that unit and the CLEC has the advantage of an almost 100% variable cost model business.

    They also have the luxury of cherry-picking the easiest lines, and the best customers. France Telecom must serve everyone.

    You also neglected to mention that the same article highlights Iliad as being the #1 source of formal complaints, with over 1/2 of all consumer filings.

  7. andrew,

    i agree with your premise. and well, i wasn’t picking iliad as an example only. (complaints – well that’s the downside of cheap price.)

    there are many other competitors in the market, and there is real competition. i think the aggressive competition is forcing everyone to either shape-up, and this includes france telecom, or ship out.

    on the france telecom, i think they have done a good job of holding their own, and competing with the little guys.

  8. thierry and pascal,

    thanks for the translations. i appreciate that.

  9. Andre Oppermann Tuesday, March 28, 2006

    Iliad has got some very interesting press releases and annual reports on their website. To quickly summarize they have EUR 724m revenues with 1,595,000 ADSL customers. Of those 1,304,000 are using their VoIP service (unlimited calls to all fixed lines in France, west Europe and north America), 1,100,000 have IPTV and 195,000 subscribe to additional PayTV. The company is having an EBITDA margin of 31%.

    FY2005 numbers: http://www.iliad.fr/actualites/CP20060315 Eng.pdf
    Management Report on FY2005 (interesing read, lots of background information): http://www.iliad.fr/actualites/ManagementReport2005.pdf
    FY2005 results presentation (very interesting, further information): http://www.iliad.fr/actualites/ILIADRA2005.pdf

    All arguments that the competitors are getting a free ride on the backs of the incumbents are completely unfounded. For example in France CLECs have to pay EUR 10.82/month per copper line to France Telecom. FT itself charges around EUR 16/month (incl. approx. 20% sales tax) for a normal analog phone line. Discouting having to provide the voice switch and its associated costs makes it about the same. Assuming that all 30,000,000 fixed lines in France were only sold to CLECs FT would still make some 3,9bn revenues a year. This should be sufficient to maintain their entire copper plant and allow for some profits too.

    Unbundling at low (cost oriented) prices is the right way to go because in Europe the ILECs built their copper plants backed by a government guaranteed monopoly over the last 50 years or so. It is simply not viable to expect competitors to trench up all streets again to run a parallel infrastructure. It’s far more efficient and cost effective to use the existing one for all of them. So in the old days the incumbants were able to get away with whatever price they wanted to charge the customer. Now they actually have to provide some real service for it. Only the intense competition from Free and others made FT clean up its act, raise bandwitdth, lower price and compete for the good of the customer.

  10. isn’t it true though that, like lots of services in France, if you are not in Paris (or maybe Marseille), good luck getting any real broadband anywhere else in province?

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