Xavier Niel, France's Broadband Maverick

39 Comments

Special Report: One afternoon during my recent trip to Paris, I found myself walking down a broad avenue in the 8th Arrondissement, a chic business district where high-fashion boutiques are interspersed with the offices of venture capital firms and powerful attorneys.

I was busy gawking at shoes and other high-end fashions rendered unaffordable by the falling U.S. dollar when I turned into a narrow alleyway. Suddenly I was standing outside of an utterly ordinary-looking building, drab like the gray Parisian skies. I peered closer to read the signs that had been rendered somewhat blurry by a glass facade: Iliad and Free.fr.

xaviertothetop.gifI had come to the right place. The modest exterior, I knew already, was misleading, for it masks what is arguably one of France’s most dynamic technology companies, one that I feel epitomizes a true, 21st century broadband service provider.

Illiad is the brainchild of 40-year-old Xavier Niel, a self-made billionaire (a rarity in the Old World). Its flagship service, Free.fr. (it also owns One.Tel and Kertel, a calling-card operation) isn’t the biggest broadband service provider in France – that honor goes to incumbent France Telecom, which has over six million of the country’s 14 million broadband subscribers — but it has taken the French telecom market by the scruff and given it a vigorous shake.

How? By offering a flat-rate, high-speed Internet connection for 30 euros ($43) a month. That gives Free.fr’s three million subscribers a connection speed of roughly 28 megabits per second over DSL, free IPTV (and a free set-top box), a free Wi-Fi hub, and unlimited voice calls to some 70 countries.

And if you think this is the end of it, think again. Don’t be surprised if French consumers get 100 Mbps to their homes within a couple of years, and a connection speed of a gigabit per second before the next French president is sworn in – all for the same price.

One Flat Rate

Perplexed by the panoply of features offered by his service, I asked Niel how Free.fr does it. “We are a broadband service provider,” was his matter-of-fact reply. “Everything else — from voice to IPTV to storage – is just a feature that rides on this data service.” For the rest of the telecom industry, long addicted to metered minutes and billable items, this is rebellious thinking.

“I work on a 50 percent margin, so that means 10 euros is my margin,” Niel said. He reasons that if it’s going to cost him 0.008 eurocents for a call, as long as he’s making a 50 percent gross margin a month on his data business, he’s sees no reason to charge his customers more. “Whatever I can give our customers for 20 euros, I will give them.” As long as he gets his 10 euros in gross profit.

omxavier.gifMeeting Niel, whose hair has grown too long, curling of its own accord, and whose clothes, despite his billions, have a distinctly slept-in look to them, was higher on my list of things to do in Paris than seeing either the Louvre or the Eiffel Tower. He has a colorful – some would even say checkered — past. But that only seems to add to his maverick persona; he would fit in easily at any Silicon Valley startup.

Do-It-Yourself Culture
xavierwithdslam.gif

“We would go to the big equipment suppliers in Europe and the U.S., and they would laugh at us and say come back in 20 years,” he recalled. But Free.fr was short on patience, and so it decided to do what any Silicon Valley startup would – build its own mousetrap.

“Since we had to do things cheaply, we had to do it all ourselves,” Niel said.

Having covered Silicon Valley for as long as I have, Free.fr’s startup DNA was instantly recognizable to me. The median employee age is 29. Social background and demographic details clearly take a backseat to merit. For those seeking technology challenges, Free.fr is an epicenter of creativity.

Niel gets animated when talking about Free.fr and the future of broadband; he drags me along on a tour of his operation like a man possessed. Our first stop is the call center, which, with the exception of a handful of Windows PCs, is run entirely on Ubuntu-based PCs (hey, it’s free). “Less than three minutes to respond to a call is good,” he says. “Anything more is not good.”

One floor down, he shows off his labs, where a bunch of engineers work on fine-tuning the set-top boxes for IPTV. Another dozen or so are tasked with cobbling together boards from merchant silicon that power Free.fr’s modems, set-top boxes, and even the fiber for future home access boxes.

When the backend billing systems from outside suppliers proved to be too expensive, Free.fr wrote its own system. They did the same thing for DSLAMs. “We design everything and send it to factories in China and outside of Paris,” Niel explains.

He shows off a new plastic casing his team has developed that houses the fiber that will feed Free.fr’s fiber-to-the-home network. It’s not going to win any design awards, but it will shave off a few euros worth of costs and for Niel, that is all that matters.

The last time anyone attempted such vertical integration was a century ago, when Ma Bell made everything from handsets to switches. When I mention that to Niel, he laughs, and hustles over to his network operations center. Expecting to see a wall of plasma screens like the ones I’ve encountered at the old AT&T and MCI, I’m greeted instead by four guys sitting in front of Dell machines (running Ubuntu, of course) with 24-inch screens.

One of them runs me through their network – which is the real reason Free.fr is able to offer their more-for-one-flat-monthly-rate. And I am amazed to learn that the Free.fr network — 28,000 kilometers of fiber – runs off of two Cisco CRS-1 routers. That’s it. “With the exception of CRS-1 and some DWDM gear, much of our gear is designed by us,” says Niel, with the obvious pride of a builder, and not an accumulator.

Dave Burstein, who edits the influential newsletter DSL Prime once quipped that if Niel were in Chicago or Houston, AT&T would have a problem on its hands.

Free.fr has points of presence in pretty much every part of France, and peering points in several cities around the world, including London, Amsterdam, and Washington, D.C., that allow it to exchange traffic with other carriers. Free.fr started off with a network backbone that was made up of 1 gigabit-per-second links; today those links have ballooned to 80 gigabits per second. As we run through the live network traffic stats, I also learn that during peak load hours, Free.fr accounts for nearly half the traffic on the Amsterdam Internet Exchange.

xavierinthelab.gifThe two-hour walk-through ends with a session in the Free.fr living room lab. At his point my friend Rodrigo Sepulveda Schulz, who helped facilitate the meeting, tells me that this walk-around is a rarity for journalists.

I ask Niel why his model hasn’t been replicated elsewhere. Is it because French Internet traffic was primarily “on net” due to language issues? Or because of how his network was designed, built for broadband? Niel, who started France’s first ISP back in 1993, says it’s a bit of both, though he doesn’t see why others can’t copy his model.

For now he wants to talk about his two favorite projects – Free.fr’s foray into fiber-based broadband access and his plans to build a wireless network using the 900 MHz-band. (The U.S. equivalent is the hotly contested 700 MHz slice of spectrum that is going to be auctioned off in early 2008, and is expected to fetch many billions for the U.S. Treasury.)

The Wireless & Fiber Disruption Next

In his opinion, it’s a fair proposal, especially since the three large wireless players haven’t really paid the French Republic any monies for the 2G and 3G spectrum. Incumbents like Orange, however, are far from thrilled by it. But while he fights this battle, Niel is also busy building out his fiber-to-the-home network.

Free.fr plans to wire up the entire city of Paris with fiber. So far, 30 percent of the job is done, and the rest is progressing at a furious pace. Niel then plans to cover six other French cities with his fiber-to-the-home network, within three years. “This frees us from leasing lines from the incumbent,” he says. The cost of the build-out of such a network is huge, but Free.fr is growing. Parent company Iliad posted sales of 950 million euros for 2006, with a profit of 124 million euros. And they have another 300 million euros safely parked in the bank. Niel has also pledged a substantial portion of his own fortune to a foundation that would help bring broadband access to less-privileged areas of the country.

illiadfinancials.png

Photographs by Rodrigo Sepulveda Schulz Financial charts and financial data courtesy of boursorama.com

39 Comments

Pierre

Another good thing is that they use Linux and offer mirrors to major Linux distros. For technical users, IPv6 is great (you have 2^64 UNIQUE adresses you can use in your home or your office and you can forget NAT).

Plus the “timeshift” (pause and resume TV shows) feature, parental control, antivirus – things that Orange provide for a extra fee (Orange sucks !)

But the best feature is the reliability of the connection – I never had to call the tech hotline. And they gave me a 2 Mbps connection (in the countryside) even if they said it would be 512 Kbps. Generally it’s the other way round…

I wish we had that level of competition in other sectors – especially postal services !

thibaut

Hello from another “Freenaut” since many years. All of my family and quite a few friends switched to Free, not less for the formidable and solid TV related services. The very competent use of open source technologies and total commitment to end user would make Google a good comparison for the Free spirit, even if they are totally different businesses.

jasper

The “half of the amsterdam internet exchange” number is bullshit — their connectivity is only 2*10Gbps, whereas the minimum bandwidth consumed over the total amsix is more than 100 Gbps (and almost 400 Gbps at peak times: http://www.ams-ix.net/technical/stats/ ). You do the math ;)

Damien

Really good paper (hi Rodrigo, hope you are well !!)- hope too that VOD really develops to use Free’s bandwidth capacity ! VOD’s still the graal; enough of stupid TV shows !

Phil

I used free since october 2002 why ?
At this date It was cheaper than others. Since this date it is the same thing always 29.99Euros per month with telephone, tv, radio, fax(send and receive), voice mail, internet of course. No more than 29.99Euros, for all others you have to pay for example 3Euros more for the rent of the box. Since 2002 free gives the rate and all others align with this value (more or less).
Yes ! since 2002, I am happy with free.
Your blog is nice, thanks !

Phil

Velvetu

hello,

I’m a free.fr user too, and… I love this ISP :D
(and pleas forgive my poor english :)

some points :

  • just to give an order : I am at 1300 meters to the DSLAM and I have 17.5Mb/s down – 1 Mb/s up connection (this is theoric, but I really touch the theorical rates of my connection)

  • other fonctionnalities not mentionned : The Box has a 40GB HD and is a ftp server (in my LAN) ==> if the TV channel permit, I can Record and transfert to my PC / I cant upload Divx to the box and read it.
    compatibility with freeplayer and open sourcecode for the PC side : a lot of softwares allow to hear/view/surf/control PC through my TV

  • a huge list of free TV channels (for us French who had for a long time only 5 free hertzian TV channels, and recently 15 it is amazing not to pay for a set of channels through cable or satellite), and a huge list of pay channels, and some VOD channels

  • Free.fr gives a free http / ftp site with SQL (I have to admit his time response is not so great for big sites) and up to 5GB space

  • with dl.free.fr I can upload files up to 5GB and send the link to download it to anyone (and a site is in test to organize the sharing

  • free has a friend : deezer.fr who provides free music (streaming only) : the biggest Ipod I know ;) And we hope some day it’ll be on our TV through the box

I am sure I forgot a lot of features ;)

Velvetu

Exosud

Hello! I’m Claude from France…..
Sure free.fr is truly a pioneer !

I’m a happy Free.fr user :)

Guillaume R.

Thanks to Xavier Niel, we have an affordable DSL offer in France.

I am one of the first 10000 Free.fr dsl customers.

Ok, the six last years were not a huge dream on a technical point of view, my dsl line is 3800 meters long so my line is slow, but Free’s teams are skilled and available to solve the issues : I am now able to watch IP TV without flaw.

Even if the product is cheap, Free has solved all my issues quickly.

The Free added value : we have an improving offer, let’s say every 6 months, we get an extra feature for no extra cost. And the Free’s challengers offer the same feature with 6 months late.

I really hope Mr Niel is going to keep up “our” french Free success story. I hope the French government will support Niel to wake up the mobile phone market which is so expensive with a dying technical offer : nothing new since 1999.

Greg

Hi,
I’m also in the free community since years now. And I think that the most important in the success of free is the pionner spirit of his leaders, that has to remain in the futur if they want to keep their customer.
I mean, I don’t think it’s natural to be proud being a customer of a telco, but free make this difference, that all his customer will recommand it to friends, familly, because it is a pionner, and is now the reason why internet is cheaper and more performant, and widespread in france.

Greg
(who paid once 45€ for a 512/64 kb years ago…)

Jess

Well!

I am a Free customer for one year now and I must add a thing : Freebox and all Free backbones ( as for all other ISP anyway ) run Linux and are fully compatible witn Windows, MacOS and Linux computers. Even Freeplayer !

Thank you Free ! :)

Frédéric

And we get also a 40 Go hard drive on the tv modem we can use a FTP protocol to get back on the computer all the vidéo, we also get a “multipostes” tv that’s mean on the home tv a High and HD tv, and on each computer in the same time you can see another chanel with a soft like ADSL TV( for me, 4 children, often, 5 différents channel in the same time), and a fantastic thing: freeplayer: a soft that allow me to see on tv all the content of my computer (photos, movies, …) and I live in a small town in teh south east of France near Marseille. An Happy customer :-))))

Neeeko

If Free didn’t exist we would still pay around 45€ for a 512/128 Kbits/s DSL connection today…remember Wanadoo ?

testman

Hi all,

Well, obrowny, you forgot my favorite features :

  • Fully customizable reverse DNS (those trying to host a SMTP server at home knows)
  • IPv6 enable (your get your own /64)
  • Personal certificate to use your SIP account on any Freebox (free’s setop box) in France : this means, once you get close to any freebox, you can call to any of the 64 country using you own account for free (ie. unlimited call included in the 30EUR rate) ! Thanks to the certificat any non-included call is simply put on your bill ;-) This one is realy an impressive feature.
jmdesp

I’d like to give a little more precision on the 28 Mbit rate. First Samoth is confused about the difference between “megabits” and “megabytes”. 28 Mbits/s mean actually 3.5 Mbytes/s.

Second there’s a bit of cheating here because the 28 Mbyte are an “ATM” rate, which is 25% higher than the real “IP” rate.
So that’s only 21Mbit/s when expressed in IP rate (so 2,625 Mbyte/s). But the IP rate itself doesn’t tell how fast you can really download, because the IP headers will always make you lose a little. This all explains that the real max actually achievable download rate is around 2.5 Mbyte/s.

This is still 20% higher than the maximal rate officially possible with ADLS2+ (wich is 24Mbit/s), because the equipements, 100% based on broadcom chipsets, activate the broadcom proprietary “nitro” mode which does ADSL header compresion and gives that 20% gain.

Also the 28 Mbit ATM can be achieved only an extremely short line (maybe at most 200 meters), it will be quite less than that for most people. Myself with a reasonably short line of 906 meters, I get 24232 Mbit/s ATM, so around 2 Mbyte/s download.

Well anyway few internet servers will be fast enough to really make use of that, but don’t forget the line’s also used for IPTV, so the debit is convenient to watch a channel on the TV, record a second on the integrated HDD, and watch a third on the computer (choosed amongst the channels that allow forwarding their MP2/MP4 flux to the computer).

obrowny

I am french and I belong to the free community. To give an idea of what we get for 30 € a month check the list below.

Set top box : The dsl module is plugged on your phone line and the tv module on your TV set (they communicate with wifi mimo, router, wifi, switch, printing server, coaxial, hdmi usb…

Phone : free calls over 70 countries, ring back tone, sip account (I use it with my computer or my nokia E65), send a fax in pdf

DSL : up to 28 mbps, newsgroups, web page, send files in ftp up to 10 giga to anybody, reverse dns, ipv6.

TV radio : 100 tv channels dozens of radio channels, video on demand, live control, 40 giga recorder (can upgrade with usb and a hard drive,)watch and record tv on your computer. personal tv with your camcorder in live or recorded, watch photos, videos(divx,dvd)and listen to mp3 from your computer to the tv in streaming with your remote controler…
and in few months we will be able to play games with the remote which is designed like a former nintendo controller.

I may forget few things. Sorry for my english and my french accent :-)

Bernard LAISNEY

I have been a Free.fr user for over a year and a half and must insist on the fact that this broadband service provider has compelled other French such companies to tremendously lower their rates down to keep competitive… but I am wondering: what would be the cheapest price for equivalent services in the US ? [img]http://freelog.chez-alice.fr/emoticon/Confus/Confus_18.gif[/img]

bernard.laisney@free.fr

Samoth

Hello there,

I’m french and I’m one of Free’s subscribers. I could even say I’m a “Free Fan” because I really like my ISP. In your article, you write 28 megabites per second. That’s wrong. My english is not technical engouh to explain but 28Mega is the offer, but you really have around 2,5Mo/s when you download (7min for a movie, 35Min for a full DVD thanks to newsgroups that Free let opened unlike the others ISPs). I know that’s already awesome. I do agree.

I could write the list of every thing we have for free with this ISP but it would be a bit long (and I just wake up :p) but if someone is interested in that, I’ll do it.

very interesting article anyway,

Bye,

Samoth

Libran Lover

Thanks for removing the page breaks. Don’t worry about the post being long. This was a great post.

Signed,
A fan of your long posts

Om Malik

Cyclepromo,

I agree. The problem is that most ISPs are run be telcos and they have a “metered mindset” and cannot overcome it.

After a visit to his company, i wish he was running the ISP in my neighborhood.

cyclepromo

That was a wicked article. It should be forwarded to all ISP companies. More service for the same price will win the customer wars in the long term.

Martin

Hi Om,

thanks for the post, very interesting! Xavier seems to be the Robin Hood of French broadband. Hope he can do the same for wireless as prices compared to the rest of the world especially for mobile Internet access are very high.

Cheers,
Martin

Ajay

The only reason to split it up into multiple pages it to plaster more ads, which is obviously a decision for you to make. I prefer one long page and don’t know why anyone would prefer the page splits. I love the feature-length post and wish you’d write more. Any idiots out there who tell you blog posts should not be long don’t know what they’re talking about (these are the same idiots who’ll tell you bloggers should post everyday just to keep their frequency up, disregarding the inevitable loss of quality). btw, a preview button for commenters would be nice.

Om Malik

Guys it is 1800 words. I didn’t know what to do – it be one massive page – don’t you think it is too long for a single page? I know I know… don’t write long. This was more of a feature length post I wanted to do.

Okay I removed the page breaks!

Comments are closed.