The most interesting thing about the recent publication in France of responses to the public consultation on the planned issue of 2100MHz spectrum was the continued objections raised by the three incumbent operators to the emergence of a new player.

September 29, 2008

4 Min Read
Incumbent protests will not prevent France edging towards a fourth mobile operator

By Gavin Patterson

The most interesting thing about the recent publication in France of responses to the public consultation on the planned issue of 2100MHz spectrum was the continued objections raised by the three incumbent operators to the emergence of a new player.

A total of 23 contributions were received by telecoms regulator ARCEP and can be broadly summarised as those in favour of bringing in new competition to help stimulate the moribund wholesale market and benefit consumers (20) and those against (3).

Contributions were made by two local authorities, two user associations, one individual, four equipment vendors and 14 operators comprising the incumbents and Altitude Telecom, Bollore Telecom, Coriolis Telecom, Iliad, Inquam Broadband, Kertel, Numericable, Omer Telecom, Tele2 Mobile, Transatel and XG Stream.

“According to all of the contributors, with the exception of existing mobile operators, the main issue inherent in the allocation of FDD frequencies in the 2.1GHz band is stimulating competition for the benefit of consumers,” ARCEP stated. The allocation of these frequencies is particularly significant for a new entrant, as it also includes access to the 900MHz band at a time when low-band frequencies are scarce.

Most respondents believed the entrance of a fourth operator would not only have a positive effect on the retail market, particularly in terms of pricing and service innovations, but also on the wholesale market, by improving conditions under which MVNOs are hosted, according to ARCEP.

“For most contributors, the development of virtual network operators is an adjunct to the arrival of a fourth MNO into the market – and does not contradict or replace such an eventuality,” said ARCEP. “In this respect, the existence of a fourth network operator is likely to have a positive effect on the hosting solutions offered to MVNOs.”

Not surprisingly, this view was not shared by Orange, SFR and Bouygues, which consider the current terms and conditions of MVNO hosting to be “relatively” satisfactory. They said the entry of a fourth mobile operator would actually have a detrimental effect on both the mobile sector and the economy, arguing that they could make more efficient use of the available frequencies than a new entrant.

However, Orange et al. stopped short of recommending that the new frequencies be issued only to incumbent operators, perhaps recognising the howls of derision that would follow, and joined the consensus that favoured giving a new entrant priority access to all – or some – of the 2x15MHz of 2.1GHz spectrum on offer. Can you guess which respondents wanted to grant priority access to only “some” of the frequencies? Two systems were proposed for awarding the spectrum: one reserving all the frequencies for a new entrant, the other reserving just 2x10MHz.

ARCEP said a procedure similar to the one employed October last year, when Iliad’s Free Mobile unit bid unsuccessfully for the 3G licence, would offer several advantages, including the deployment of a cost-efficient network, the ability to compete fully with existing operators by delivering innovative offers in the retail market and an increased ability to stimulate the wholesale market.

ARCEP rejected the bid by Free Mobile, the sole bidder for the licence, after it failed to agree to settle the ?619 million fee in one payment, as stated in the licence conditions.

However, Iliad remains interested providing the government puts in place “the conditions” allowing the emergence of a fourth mobile operator. “We are still interested in this licence,” finance director Thomas Reynaud said at the time. “There is a strategic and an industrial rationale to enter the mobile market, and we have all the assets to enter that market.”

Iliad requested a change in the financial terms of the fourth licence that would allow it to pay the fee in instalments.

Many responses to the latest consultation agreed that the financial terms should be different from those applied previously, and ARCEP agreed that since last year market conditions seem to have evolved sufficiently to justify a review of the terms.

“One possibility mentioned by certain contributors would involve decreasing the fixed fee of ?619 million [US$903.5 million] established in 2001 and/or spreading out its payment over a reasonable portion of the licence’s lifespan, with interest,” ARCEP stated. “Another possibility cited would involve an annual fee calculated in accordance with the scale provided for in the Opinion from the Ministry of the Economy, Finance and Employment, dated 16 January, 2008, concerning payment of the fees for use of spectrum in the 900MHz and 1800MHz frequency bands.”

ARCEP will open a tender for the new frequencies by year-end, once the government sets the financial terms following a parliamentary debate. One way or another, the incumbents should prepare for tougher times ahead.

Read more about:

Discussion

You May Also Like