Operator agreements catalyze FTTH builds in France’s low-density areas

After implementing a policy for fiber installation and network sharing in urban apartment buildings, France has embarked on a plan to bring fiber access networks to the country’s lower-density areas. This strategy for low-density areas is part of France’s plan to provide broadband access to 70 percent of the country by 2015 and 100 percent by 2025.

France wants to stimulate FTTH construction and avoid building duplicate networks. In major cities, under current policy, the operator who is selected by apartment owners to install a building’s fiber network has to lease fiber capacity to other operators seeking to offer services.

In less dense areas, operators will build fiber access networks in zones designated by the government. There will be one network per zone. The network builder and owner will lease fiber capacity under wholesale agreements to competitors. And in very low density areas, where operators do not build private networks, the central government will provide funding to local authorities who will work out agreements with operators for the construction of networks.

Orange has already signed agreements with its main competitors – Free and SFR – for the low-density zones. In July 2011, Orange signed a wholesale agreement with Free. Free has contracted for access to Orange fiber that will serve approximately 1,300 municipalities, comprising 5 million homes, by 2020. And in November 2011, Orange and SFR announced an agreement for low-density areas spread across 3,440 municipalities that have total of 11 million households. Orange will pass 1.2 million homes for its own operations and 7.5 million homes for its own use and leasing to SFR. SFR will pass 2.3 million homes for its own use and leasing to Orange. The two operators have agreed to start building the networks between 2012 and 2015, and complete them by 2020.

“We focused on dense areas in the beginning. Now thanks to these agreements we can go to less-dense areas,” said Yves Parfait, who heads Orange’s fiber projects. “Our agreements with Free and SFR, and hopefully with Bouygues, will reinforce what we are doing and allow us to build the networks in an open way.”

In 2010, France Telecom Orange announced it would invest 2 billion euros through 2015 to pass 40 percent of French homes (10 million homes) with FTTH by the end of 2012 and to be present in every département by 2015. (Metropolitan France is divided into 95 départements.) The operator’s long-term goal is to have a total of 15 million homes passed (60 percent of French homes) by 2020.

But do customers care?
But with FTTH take rates hovering around 10 percent in France’s major markets, the big question now is how subscribers will respond when France Telecom Orange and its competitors begin fiber build outs in the less dense areas this year.

The low take rate in major cities has left some industry analysts less optimistic about FTTH growth in France. However, Orange is confident that customer response will be better to FTTH service offers in the less dense areas identified by the government as lacking broadband access.

Orange, which began commercial FTTH deployments in 2010, had 1 million homes passed at the end of 2011. As of September 2011, Orange said it had 82,000 FTTH subscribers.

Parfait concedes that competition from DSL has been a problem. “In the 20 major cities where we have fiber, there is also very good DSL,” he says. “In less dense areas where DSL service is poorer there will be a greater appetite for fiber.”

Parfait is also optimistic about take rates rising in urban areas. Using Japan as a benchmark, he said, “This [10 percent] is similar to the situation in Japan around three years ago. Now they have more FTTH than DSL….Rolling out fiber is a long-term process.”

Convincing subscribers in France’s major cities to switch to FTTH has been made harder by the syndics de copropriété, which manage the operations of apartment buildings for apartment owners. The syndics and apartment owners meet once a year to vote on building issues such as renovations and repairs. So listening to operators vying for syndic approval and debating FTTH versus DSL is often a low priority on their agendas.

“Now that there is clear cooperation among operators there is less confusion when talking to sydics,” asserts Parfait “But you still have to explain what fiber is and why it is different. You have to evangelize. We do this and other operators do this.”

Roland Montagne, an analyst who tracks FTTH for consultancy IDATE, agrees that the syndics are a big obstacle, but thinks Orange and other FTTH providers would be more convincing if they had more innovative services. “They need to fine tune their marketing strategies,” he said.

“The high level of competition DSL competition in urban areas and no ‘killer application’ has kept take rates low and driven FTTH prices down in France, says Stefaan Vanhastel, marketing director for wireline fixed access at Alcatel-Lucent. “It’s hard to convince subs to switch to fiber if there is no clear vision to make the switch. So, you have to lower prices.”

But Parfait argues that the services and applications needed to drive fiber demand are here today. “The market is being driven by demand. A year ago it was the contrary,” he says. “People have more multiple devices, more and more connected devices.…There is more and more demand for upstream bandwidth. If you want to send 20 digital pictures it will take 20 minutes with the best DSL. It’s instantaneous with fiber. There are also online games, webcam uploads, and 3-D TV. These are the main reasons why we are committed to fiber.”

While France has picked fiber and is skipping for now new DSL technologies, other countries including Belgium see DSL as a viable interim technology (see "Belgacom Alcatel-Lucent’s first VDSL2 vectoring customer").

Citing cost concerns, Mr. Vanhastel said there has been a renewed interest in copper in areas where copper is good. “It’s an attractive alternative,” he explained. “Not as future proof as fiber but faster to roll out….You don’t have to dig up the street. Belgacom, which started VDSL rollouts the same time as Orange began FTTH, has passed 78.9 percent of Belgium households with fiber to the cabinet and VDSL2. This delivers 30 Mbps downstream and 10 Mbps upstream.”