Marie-Christine Levet: the battle between operators has
moved to value-added services
Michaël Boukobza: fibre to the home in premium areas,
but Iliad is building its own platform
Competition is clearly good for new broadband services. And
that's advanced, rigorous competition, driving down prices and
— more importantly — stimulating rival
operators to introduce more services onto their platform to
deliver to customers.
According to the European Competitive Telecoms Association,
the three most competitive markets across the European Union
are the UK, Denmark and France. All have been "pro-active in
driving pro-competitive reforms, have seen a wealth of telecoms
offers, growth and investment in the sector, and some of the
lowest retail prices in Europe", says ECTA in the latest
edition of its regulatory scorecard.
Down at the bottom are Germany, Greece and Poland, which "have
struggled in some areas to provide an environment in which
competition can flourish, which has a negative impact on both
consumers and businesses in those countries", says ECTA.
France is quite staggeringly competitive. The old days when
France Telecom — now rebranding itself in its home
market at Orange — ruled all have long gone.
Four or five operators are providing broadband services in
competition — including two owned by incumbents from
neighbouring countries: Telecom Italia promotes its service
under the brand Alice, which it also uses in Germany and Italy;
and Deutsche Telekom's T-Online operates the successful brand
Club Internet. In addition there are two French companies: Neuf
Cegetel, a sister company of mobile operator SFR, and Iliad,
which operates under the brand Free.
Why is the French market so competitive? We spoke to the CEOs
of two of those competitors, Marie-Christine Levet, who runs
T-Online and Club Internet, and Michaël Boukobza, CEO of
Iliad and Free.
Earlier in 2006 Club Internet became the first operator in
Europe — and one of the first in the world —
to use Microsoft's IPTV service delivery platform. It is
something of a test-bed for the Deutsche Telekom group, which
not only has its giant incumbent operation in Germany but also
has investments in eastern Europe and has launched an IPTV
service in Spain.
Iliad has also made the headlines, with an announcement in
mid-2006 that it plans to install fibre to the home across
Paris, in an investment valued at €1 billion. It clearly
has the confidence that there is going to be a significant
market in delivering broadband services to millions of homes
across the city.
Why is the French market so competitive and so advanced? "It
is very competitive," says Levet. "It is quite advanced. We
have a lot of players in the market and we have a regulator
that has stimulated competition. This competition has had a
strong impact on the growth of the sector."
There are 10 million broadband internet users across the whole
of France, she adds. "We have a very strong growth rate.
Everything started at the end of 2003, so that's happened in
just three to four years. I think it's an aggressive regulator
and also aggressive competition."
But what opened up the triple play market, she says, was her
rival, Free, "one of the first in Europe and maybe the
Her own company, Club Internet, was one of the first to open
the ADSL market. "At the beginning of 2002, we offered a modem
for free, and that opened up the ADSL market." Other companies
came into the business and then Free offered its free-of-charge
set-top box, delivering IPTV services.
"We were the originator that enticed all the other operators
into the market," she smiles. Between 2003 and 2004 the market
doubled to six million ADSL customers; then the market put on
another three million by the next year, "and this year we will
again have 33% growth", says Levet.
"So it's really intense competition, with a regulator that has
Aggressive price offers
Are all the operators in the market offering more or less the
same? "At the beginning there was a big, big price war," she
says. "Free was very aggressive on price and they offered a
reduced price compared with France Telecom."
As a result Orange, France Telecom, lost a lot of market
share. Now it seems that the war on price has been joined by a
war of speed: companies are competing with more bandwidth for a
lower price, she says.
"Now nearly everybody is offering 24 megabits and the price in
the market has stabilised at around €29.90 a month. The
price war is finished, and I think there's no way for operators
to get the price down lower, otherwise they will sell at a
Now, the battle is more on services, she says. "Value-added
services like TV, video on demand, security services," and also
the quality of the call centre and the customer-care
Is anyone making a profit, with prices having dropped so low?
Levet laughs: "No. That's why the price war is finished. It's
€29.90 for the triple-play offer." There are variations:
some companies charge more for the modem, but essentially
they're all the same.
Where they're looking to make money is on extra services that
they can deliver using the rival platforms: video-on-demand,
premium TV channels, a personal video recorder.
For that €29.90 Club Internet offers 24 megabits plus
free telephone calls — an extraordinary bundle of free
phone calls, not just local and national but also to 40
"That's the price from the alternative operators," says Levet.
"France Telecom charges a higher price. Orange is more around
€39.90." How do they justify that? "They have lost a lot
of market share, because they were at 80% and it has fallen to
50%." Orange has disguised its higher prices with a series of
€29.90 special promotions "for the first three months, or
for internet and TV without telephony, for with triple lay but
internet limited to one megabit".
It allows Orange to get the €29.90 price in front of the
public, "but the real price is €39.90, and they justify
that by the quality of Orange", and the fact it has shops that
people can visit.
Is there any difference in the quality? "That's what they
would tell you," says Levet, who is clearly not a neutral
observer. "We position ourselves really as an alternative to
them, providing the same quality of service at a less expensive
price. We are sure we can compete on that."
Services are available throughout France, but "we have
different offers and prices", depending on whether it uses its
own network or not. "The TV offer that we have built with
Microsoft, we are only offering that on our own network. We
need a high bandwidth and a network capacity to do such an
Top 200 cities
Club Internet's own network covers many of the cities in
France. "We cover about 50% of the entire population —
including all the top 200 cities." It does not have network in
low-population areas, such as central France. "There we resell
France Telecom lines. We have a different offer — TV
is the main difference, but we have voice over IP and internet
all over France."
Club Internet was set up as an ISP in October 1995 by the
French media group Lagardère. After five years Deutsche
Telekom's T-Online International bought it. Since the
reorganisation of the German incumbent earlier in 2006 the
company — which still operates under the dual brand
Club Internet/T-Online France — is a direct subsidiary
of Deutsche Telekom in Bonn.
For the first four years after Deutsche Telekom's purchase the
Paris operation was focussed on making itself profitable, says
Levet. She worked at Accenture, Disney and PepsiCo before
launching the ISP Lycos for German media group Bertelsmann in
1997. She was recruited to run Club Internet in December
"At the end of 2004, beginning of 2005 we put together a
growth plan to Deutsche Telekom, which had decided to invest in
France and Spain."
The plan was to invest €1 billion in the two countries in
new network. "We opened our network one year ago, in November
2005, and we are still growing our network," says Levet. "We
are opening new cities every day."
That €1 billion covered not just network "but also
equipment and aggressive offers", she adds. "We are right now
in the middle of our investment."
The Spanish operation, Ya.com, has a similar development path,
though Deutsche Telekom acquired a local network operator "and
they will launch triple play with TV at the end of the year or
the beginning of next year", she says, "but the Spanish market
is a bit less advanced than the French market".
Pilot for Deutsche Telekom group
The French and Spanish operations, and other parts of the
group "are all working with Microsoft TV platform", says Levet.
"Microsoft TV has signed a deal with Deutsche Telekom
— it was one of the biggest deals that Microsoft
signed with an operator. France was the pilot, the first one
inside Deutsche Telekom to launch the MSTV solution."
It was "probably the first in the world": in the US the
commercial launch, with AT&T, appears limited to a
relatively few homes around San Antonio, Texas.
In addition, Club Internet and Ya.com have the same set-top
box and are also working together with Deutsche Telekom's head
office on content deals: "Germany's handling most of the
negotiations with the American majors, to be able to distribute
them in the three countries."
As well as a wide selection of conventional TV channels and
premium channels — from the Canal Plus network
— the company is offering a range of VOD services,
says Levet. Customers can buy individual movies, but can also
buy packages of themed programmes — 50 hours of
children's programmes for €4.90, for example. "It's a very
successful package." There are also packages of channels in
Italian, Arabic, German and other languages.
All channels, including the regular broadcast channels, are
distributed through the network, says Levet: "Our network is
quite brand-new. It's ADSL 2+ and 24 megabits so we have plenty
capacity. We don't have a problem with capacity."
Fibre through Paris
If his plans work out, Boukobza and his Iliad/Free company
will have an even newer network. The company plans to start in
2007 rolling out fibre through Paris using ducts owned by the
local authority. It will be a case of ADSL 2+ and local loop
unbundling versus fibre to the home.
"We think — we strongly believe — that fibre
to the home, directly to the subscriber, is the future of the
fixed telecom industry," says Boukobza. "We have decided to
target some areas, to replace ADSL and unbundling with
But Boukobza is clear not to say that ADSL is finished, he
emphasises. "We never said that we are going to fibre all the
country. What we have said is that only in very targeted areas
we will replace ADSL with fibre.
Which areas? "The areas where Free has more than 15% of market
share." But, be careful, he warns: "Not the market share of the
broadband market, but the share of the total wireline
connections in the area."
By 2012 the company expects to be available across an area of
four million households in France, "that is, between 18% and
20% of the French population", he says. "In this area, where we
have more than 15% of subscribers, around 700,000, at the end
of 2012 those subscribers that are today ADSL Freebox
subscribers will be fibre Freebox subscribers."
That means the deployment — in Paris, suburbs of
Paris and some other cities — "will be like a leopard
skin", says Boukobza. "Some areas will be transformed to fibre
and the rest of the country will continue with DSL." If you
live on one of the leopard's spots, where landline penetration
is more than 15%, you'll be fibred. Otherwise it will be
The tariff will continue at €29.99, and it will be
offered to other potential subscribers, says Boukobza.
But where Free does build out fibre networks, it will offer
the capacity on a wholesale basis to other operators "that want
to rent dark fibre", he adds.
What is the basis of that 15% cut-off? "Because we are going
to replace ADSL by fibre, in those areas we will save the
rental fee we pay to France Telecom for unbundling the local
loop. We will replace an opex by a capex."
That capex is going to be €1 billion "from today to
2012", he adds. "This €1 billion is for equipping all
those areas, representing four million households, and
migrating the 700,000 subscribers I mentioned. Yes, we will
spend €1 billion, but not tomorrow morning. At the end of
the €1 billion programme, we will have a footprint of four
million households in France, and we will have equipped 700,000
of our existing subscribers with an optical Freebox."
The investment should give Free "a better market share", says
Boukobza. "We have an elasticity to improve the 15% after we
have fibred the area."
But Free will also have considerably more capacity for
services. "We will have dedicated fibre from the subscriber to
the optical central office that we will build, so we have the
ability to have huge amounts of bandwidth."
With fully symmetry, Free will be able to offer customers the
ability to create and deliver their own high-definition
programmes. Boukobza points to the success of MySpace and
YouTube: "Internet users want to send to the network more
content," he says. Fibre is the only technology that will allow
them to start delivering this content in high-definition.
Iliad has already started the civil engineering in the suburbs
of Paris. "We will have the first subscriber equipped with
fibre before the end of the first half of 2007," he says.
Free is unusual in that it designs its own set-top boxes
— and it plans to do the same with the fibre version
of the Freebox. It also designs its own DSLAMs.
"We have had an R&D team of 20 people since the beginning
of 2001. At the time there was no pure-IP triple-play set-top
boxes on the market. We want to continue to keep the
technological know-how and the best subscriber/capex ratio in
How can Iliad produce its own platform, without the scale
efficiencies of a major manufacturer? "What we have is a team
that is fully dedicated to our services. We are very focussed
on what we are doing. We write 100% of the software." Though
the actual physical manufacture is subcontracted.