Yesterday was a momentous day for fiber to the home watchers in France (and there are many more than fiber subscribers, let me tell you...) as French regulator ARCEP finally expressed a position as to its preferred solution for sharing the vertical portion of in-building cabling.
The context, if you didn't follow this particular episode is the following:
- Orange was pushing for a single fiber solution from the building concentration point to each home which would be leased by the fiber deployer to the service provider.
- Free pushed for a multi-fiber model similar to what is shaping up in Switzerland with the idea that each service provider could then have access to its own end-to-end fiber.
- SFR had first signed a protocol with Orange and seemed to defend the incumbent's position for the sake of expediency, but recent articles in the press suggest they might have converted to Free's way of looking at the world.
In classic regulatory fashion, ARCEP cut the pear in half as we say in French although their position ultimately seems closer to that of Free in the short term. The proposed solution announced yesterday is as follows:
- ARCEP defines the notion of "dense" areas. Dense areas cover 5 million homes, half of them in Paris and suburbs and half outside of the Parisian region. ARCEP assumes that in these dense areas, more than one network is likely to be deployed to buildings. As a consequence in these areas, a service provider deploying a vertical network in a building will have to inform his competitors, and the competitors will have the opportunity to share the deployment cost and lay their own parallel fiber.
- Outside of dense areas, there is no such obligation. Note that this still means that the service provider deploying the vertical has to share/lease the single fiber deployed should the end-customer want to connect to a competitor who has popped the building. But there is no obligation to allow competitors to deploy parallel fiber.
On the face of it, it's an elegant solution. In the long term, it's a relatively even move, in the short term, it creates a sensible framework for competition in dense areas and particularly in Paris.
What I find interesting though are the implications of the decision on the regulatory framework as a whole:
- by creating the notion of "dense areas", ARCEP is effectively creating a precedent of geographically differentiated regulation. This is something that many players, particularly incumbents, have been clamouring for in Europe, and I'm curious to see if incumbents elsewhere (and other regulators) look at the French precedent as a validation to go down that route.
- there is an implicit admission in the ruling that service delivery outside of dense areas will be done in a monopoly situation. Let's be clear, it's not explicitely stated! What is, however, is the idea that outside of dense areas you don't need multi-fiber in building because the likelihood of more than one network popping a given building is extremely low.
In an interview with Les Echos entitled L'Intérêt général ce n'est pas l'intérêt d'un seul opérateur (Common interest is not the interest of a single telco), new head of ARCEP Jean-Ludovic Silicani denies that the extra cost of the investment from multi-fiber is 40% as France Telecom CEO Didier Lombard recently declared and estimates it instead at 5%. He then goes on to say:
Note that again there's a hidden admission in there that a single fiber in-building infrastructure leads to a monopoly situation.
Ultimately, I have recently come to the conclusion that Orange's heavy-handed tactics on this particular issue was mostly posturing. Regulation is a game of double-blind for incumbents, and putting up a fight on one issue might be misdirection to avoid another issue being brought up. I believe (and let me stress that this does not in any way come from an Orange source!) that what Orange wanted to avoid at all costs is any questioning about the way they deploy their PON infrastructure. They wanted to avoid any form of unbundling at high aggregation levels in the network. And they seem to have gotten what they wanted on that count. In fact, in the same interview Silicani admits that there will not be any passive solutions in fiber:
While I don't believe this to be technically true, the fact is that the way France Telecom is deploying its PON ensures that it will not be possible to unbundle it down the line.
So now that everyone got what they really wanted (France Telecom a network sharing no higher up than at the bottom of the building and Free/SFR a multi-fiber model in the areas where they are likely to deploy alongside FT) I'm hoping we will see an actual pick-up of subscribers. It's about time!
