Iliad S.A., the EuroNext quoted holding company which owns Free, the French alternative operator which pioneered triple-play services using its own flavour of ADSL2+, made a series of major announcements today, which deserve attention from a telecommunications regulatory perspective.
Free will build a Fibre-to-the-Home (FttH) network in the areas where the take-up of its ADSL2+ based services exceeds 15% of the addressable market (15% of the total number of fixed lines in the area), i.e. in Paris but also elsewhere in France (periphery of Paris and other cities).
The investment earmarked for this project is €1bn in the period from now to 2012. Financing will rely on the company's existing financial reserves and free cash flow from its operations. Services will be launched in the first half of 2007.
Free promises the migation/replacement of the ADSL2+ terminal equipment with FttH terminal equipment at no charge to the subscriber, and the monthly fee will remain the same as it is today for Free's triple-play package, i.e. €29.99/month VAT included.
In terms of services, Free promises an evolution of its existing offer, in the form of 50 Mbit/s Internet connectivity, free of charge calls to French fixed lines and also to fixed lines in numerous other countries, and high-definition television (HDTV), plus various optional and premium services.
The city of Paris has granted rights-of-way for the construction of the network, and Iliad emphasised that its project is developed in the context of the « Paris, Ville Numérique» initiative.
T-REGS Note: Earlier this year, the city of Paris reduced the fees for occupation of the public domain to facilitate the development of FttH infrastructure. Operators such as Citéfibre, Erenis and France Télécom (commercial trial) have already launched FttH networks/services, although the end-user tariffs are considerably higher than those announced today by Iliad/Free.
Two aspects of today's announcements are particularly noteworthy:
a) Free's FttH network infrastructure will be available to other operators. As soon as the network becomes operational, Free will open discussions with other operators with a view to enabling them to lease fibres to reach end-users. Iliad indicates that the wholesale charge will enable other operators to replicate Free's retail services. Iliad's press release mentions the following in this respect:
"Whereas all of Europe's traditional operators have expressed reservations about making any future optical fibre networks available, Free is demonstrating its commitment to unfettered competition by proposing a wholesale offering. In areas where Free has not planned to deploy FTTH, local authorities interested to have a fibre network will be able to deploy a fibre network which will be opened up to all operators"
b) 'Fondation Free' will offer, on every premise that is served by
Free's FttH infrastructure, a free of charge optical terminal, a
telephone line which enables to receive calls and to make emergency calls
and calls to social services, low speed Internet access (e-mail and
web), and digital TV consisting of the channels that are broadcast free of
charge over digital terrestrial TV. No conditions of eligibility are
attached to this offer. This so-called 'universal service' package will be
provided by the Fondation Free, which will be funded by Xavier Niel's
own means (Xavier Niel is Free's founder).
Iliad's 4 press releases, all dated 11 Sep 2006, can be accessed by clicking on the links hereafter ( in French and in English).
For a discussion of the regulatory implications of these important developments, please contact
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.
T-REGS Note: The effect of these announcements on share prices is worth tracking. Update 11 Sep 2006 after Paris stock market closure: Iliad's shares closed 11.47% down for the day, whereas France Télécom's shares were up 3.54% for the day.
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