France is Europe's leader in broadband internet

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SUBJECT: France is Europe's leader in broadband internet


1. Summary: In 2005, France became the biggest broadband
market in Europe, largely on the back of surging demand and
strong pro-competitive action from the regulator. France is
also one of Europe's most competitive markets, with prices
about half those in other countries, including Britain.
Rarely has France been so successful in promoting vigorous
free-market competition. End Summary.

France's broadband market: the largest in Europe
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2. France looks set to be the first country in Europe to
break through the seven million broadband user mark,
according to European Competitive Telecom provider
Association ECTA. In March 2005, France became the leading
broadband market in Europe with some 6.1 million ADSL lines
and over 24,848,000 Internet users, representing 41.2% of
the population. One household in four has high-speed
Internet access, 10.5% use mobile devices, and 5% have a
wireless connection (WiFi).


3. France has experienced a boom in broadband growth since
the middle of 2003. Broadband penetration increased from 4%
to 7% in the space of twelve months. Growth has centered on
the extension of DSL services, spurred by local loop
unbundling under the aegis of France's telecoms regulator
ART (Autorite de Regulation des Telecommunications). Today,
France has the second largest number of unbundled local
loops in Europe. In a recent study on behalf of the Prime
Minister's IT policy office (CSTI - Conseil Strategique des
Technologies de l'Information),consulting firm Analysys
pointed out that local loop unbundling had been "an
essential catalyst for innovation in the broadband market,"
especially in France where competition from alternative
infrastructure such as cable is limited. As a result, a
variety of Internet Service Providers (ISPs) have emerged
with differentiated offers, encouraging innovation and
competition.

France's major broadband players
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4. The champion of France's broadband boom in the retail
market is Iliad, a young telecoms firm that offers some of
the most advanced services in Europe. Under the "Free"
brand name, the company proposes a bundled triple play of
telephony, 100 channels of digital television and broadband
access for less than 30 euros a month. Free had 17.4% of
the ADSL market in France as of December 31, 2004. Free,
along with ISP market leader, France Telecom's Wanadoo,
plans a large scale roll out of ADSL 2 Plus with complete
coverage across France by the end of 2005.


5. Italian incumbent, Telecom Italia, the latest newcomer
on the French broadband market, recently acquired Tiscali's
French internet subsidiary, Tiscali France (formerly Liberty
Surf),poised to become the third largest broadband internet
provider in France. Tiscali's French business counts
344,000 high-speed Internet service customers.


6. To boost its base of 310,000 subscribers, France's loss-
making fixed line operator Cegetel launched a new high-speed
Internet connection and voice-over-internet service. The
company, which is reportedly losing 15 million euros a
month, plans to offer customers up to 20 megabits of
bandwidth, about 40 times faster than the entry-level
broadband offer -- matching offers from Wanadoo and Free.
Subscribers to the service, which will cost 14.90 euros a
month, will be offered unlimited local and national calls to
fixed-line numbers for another 10 euros a month using voice-
over-internet protocol (VoIP) technology.

7. Cegetel further intends to enter the market for triple-
play services -- pay-TV, Internet and VoIP -- in the fall,
with the launch of its new multi-media C-Box. Analysts say
pay-TV over the Internet is the new driver of revenues and
profits for high-speed Internet service providers.
According to statements made by Vivendi, one of the owners
of Cegetel, to French brokerage firm Kepler last week, they
hope this new strategy will to boost Cegetel's subscriber
base to put the company back on a solid profit-making path.

8. Bouygues Telecom, France's third mobile operator and the
rebel of the French Telecom market, is taking an alternative
approach to the explosive broadband market. CEO Martin
Bouygues recently said recently that it did not make
financial sense for his company to take part in the
consolidation of the ADSL market, because there are already
eight major Internet service providers in France. Instead,
Bouygues, which has more than seven million mobile
subscribers, is talking to a number of broadband service
providers about offering a fixed/mobile service combination.
The ambitious triple-play service provider Neuf Telecom, is
allegedly the favorite to hook up with Bouygues. Neuf
Telecom is in talks to become a mobile virtual network
operator (MVNO) on Bouygues's network, and such a deal could
see Bouygues resell Neuf's broadband services to its
customers.


9. As for the wholesale market, French regulator ART has
just launched a public consultation on both the wholesale
market for unbundled access and the wholesale market for
broadband access at the national level, which was notified
to the European Commission on April 13.

Comment
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10. With French ISP rates dropping to half of those in many
other European countries, French broadband consumers are
seeing the fruits of infrastructure investment combined with
successful regulatory unbundling and line sharing policies.
Rarely does France produce such a clear example of
flourishing economic growth from the promotion of free-
market competition. But the picture is not rosey from all
vantage points. France Telecom is clearly concerned about
losing market share to new entrants which can often be more
innovative and flexible than the old behemoth incumbent.
Some companies like Cegetel have been willing to absorb
losses to stay in the game, but cannot brush off concerns
from investors about being in the red year after year. And,
policymakers and politicians are concerned that growth and
competition in broadband are thriving in metropolitan areas
but leaving rural communities behind. So, two major
delegations of French regulators (December 2004) and local
government leaders (April 2005) recently visited the U.S. to
look for lessons and best practices to ensure that broadband
deployment reaches all communities, including rural and
isolated areas. End comment.
ROSENBLATT