FTTH in France : a case study

Vianney Hennes23 March 2009, WIK - Challenges for FTTB/H in Europe

2 The French case

Agenda

Part 1 FTTH competition : from the idea to the implementation

Part 2 Strategy confirmed

Part 3 Current debates and impacts

3 The French case

1

2

the vision…

It is not about competition at retail level…

– Will be delivered in any case, either as a consequence of network competition or through access regulation

It is about network competition

– FTTH represent an opportunity for more competitionat network level

– Delicate balance for NRAs on NGAs– Strong bias in favour of access would deliver a

new network monopoly– Technology + regulation could produce “pure

reselling” in the end

4 The French case

The French Regulatory Framework

Access to ducts– First offer end of 2007– Experimental contracts in

2008– First commercial contract e.o.

2008– Market Analysis and

obligation in July 2008

But FTTH is also rolled-out in non-telco ducts

– Paris, Hauts-de-Seine, Montpellier,…

– Cable

Law (“LME”) to impose symmetrical obligations in buildings

– Making easier for operators to install fibre on private property

– Mutualisation under the control of ARCEP

– Pre-equipment in new buildings

?

5 The French case

1

2

….the method

A well functioning broadband market:

- DSL : 98% pop/55% pen

- LLU: 75% pop, 3P: 50%

Effective, non-discriminatory access to existing ducts

Symmetrical sharing of intra-building wiring

Customer connection

Service duct

Optical connection cabinetTowards SP

Pb

PRI

3rd party

3rd party

37mm74/224/6

Opérateur 1 ?

Opérateur 3 ?

Opérateur 2 ?

Câble réseau existant 30% d'occupationAlvéole 75/80mm

3

6 The French case

First results

2006 : Pilot

2007-2008 : pre-deployment

December 2008

– 21,600 customers out of over 500,000 connectable households at end 2008

2009: pre-deployment continues Roll-out slowed down due regulatory uncertainty on the location of the point of mutualisation and other measures – no more extensions of coverage

Metz

Lille

Nantes

Poitiers

Bordeaux

Lyon

Grenoble

Nice

Marseille

Toulouse

Paris

HDS

7 The French case

PON allow operators to re-use existing ducts

Other advantages of PONBroad but selective deploymentIndependent of habitation structure (Indiv. housing, MDUs)Scalable (coverage, take-up)Future-proof (active, passive)

Duct-sharing works in practiceMultiple cases already with several operators, in several large cities and in several Paris suburbsAlmost no saturationWhen availability is confirmed, implementation is common sensePON delivers: less fibres, less handling, less consumption

P2P

28 cables 720f f ∅ 18 mm

For 20 000 clients

∅ 80 mm duct

(transport)

1 cmGPON (÷64)

3 cables 144 f ∅12 mm

P2P

8 The French case

4 players so far, 2 debates

4 Players investing in fibre today

– 2 players rolling out PON – FFTH– 1 player rolling out P2P – FTTH – Numéricable already upgraded its network to FTTB

Technical choices

– Deployment, Servicing– Churn– Costs…

Network competition

– Requires a point of flexibility close to the subscriber, preferably in the building

– Law stipulates PM should be in the street in principle Experimentation

9 The French case

Debate N°1 : “mono-fibre” vs. “multi-fibre”, a case for “efficient investment”

As many fibres/sockets as potential operators installed in every flat:

– “do it yourself” approach in principle

– but:– acceptable to

customers?– Substantial additional

costs (30 to 40%)– Does not eliminate

intervention at the point of mutualisation

– Costs will increase with the distance to the point of mutualisation

One fibre per flat

– Customers want 1 socket– Is totally compatible with

competition due to the existence of the Point of Mutualisation

– Entirely neutral vs fibre architecture (PON or P2P)

– Makes churn easy at less cost than multi-fibre

+ 30-40%

10 The French case

Debate n°2: the location of the point of mutualisation, another case of “efficient investment”

– Additional investment costs (cable, cabinets, “rugged” components)

– Additional service costs (public domain)

- Complex process of coordination and planning

- Unclear frontiers of responsibility

Up to x10

PM will be outside of the building in most of the cases. Above 10/12 units it is much more economical to locate the PM inside.

11 The French case

12 The French case

FTTH competition is sustainable in France

Ducts capacity is constrained but not scarce

– 3 FTTH can be rolled-out in parallel to the existing copper networkDifferent strategies, different economies

– For Orange : it is about innovation and future revenues & services– For competitors, FTTH represent an alternative to Full LLU. Savings

would entail a 10€/access/month gross margin increase in major cities

Market penetration (3-4 players)

– In 50% of the market, a full “copper to FTTH” migration on 20 years would result in little change in the value of access

– Additional 20% are realistic (learning curve, technology, change in demand)

– 30% may not justify network competition ; de facto monopoly (or no network)

13 The French case

Technical progress and infrastructure competition

Technology of FTTH rollout progresses rapidly

– Smaller sharing points– Smaller connecting

points

And justifies infrastructure competition

– “dynamic gains” larger than “static extra-costs”

Thanks