Hidden Potential: France Telecom
How do major telcos respond to the challenges of Telco 2.0? France Telecom's experience offers some answers.
FT is perhaps the archetypal traditional PTT; still part-nationalised, with a dominant position in fixed-line, ISP, and mobile markets at home. During the .com boom, the carrier expanded heavily and ran into debt (it didn't help that the government hit it up for some cash to meet the requirements of joining the Euro). Meanwhile, the fixed-line voice market began a steady slide as the first alt.telcos, VoIP, and fixed-mobile substitution began to bite. Although the French government was slower than some to take regulatory action, eventually the new regulator ARCEP began to hammer at the de facto monopoly.
So, what did they do about it?
FT's acquisitions turned out to be better deals than they looked in the smouldering aftermath. Among other things, they had given the company one of the strongest brands in the industry, Orange, a strong ISP in France (Wanadoo), and stakes in global cable backbones and other world-wide presence that permitted them to build strong businesses in bulk IP networking (Opentransit) and enterprise VPNs (Equant). More recently, the company has decided to go all the way, rolling the entire consumer side into Orange.
In terms of a business model, F Tel/Orange is very keen on bundling. As an integrated full-service carrier, it can offer quad-play in France. Interestingly, it's trying to take advantage of industry horizontalisation to expand this vertically integrated model elsewhere; in the UK, Orange Broadband is providing PSTN and DSL service over Openreach's wires through local-loop unbundling, and selling GSM/UMTS mobile service along with it as part of a "free broadband" offer. Telco 2.0 readers are of course well aware that "free broadband" really means "compulsory old technology".
This is an important issue; if it is true that integration means greater market power, there is a lot of money waiting for anyone who can successfully lash disparate elements of the Telco 2.0 world into a virtual carrier. But so far, fancy MVNOs are a notable failure - if you read this blog, you know what we think about Blyk, and Amp'd Mobile just crashed and burned, as did ESPN Mobile and Easymobile before them.
The UK's structural separation model, permitting LLU, means that Orange UK has become an integrated carrier without needing to spend all that money; perhaps not the result Ofcom was aiming for. At the same time, other FT divisions are using the metro-Ethernet lines Orange UK has installed to backhaul its high-traffic cells to serve corporate customers, from behind the Orange name as "Orange Business Services".
In France, meanwhile, FT is offering IPTV and carrier-VoIP over its DSL network, in a bid to replace the vanishing economic rents from its PSTN business with new service revenues. The key to this effort is the Livebox, the WLAN router/modem/set-top box that is distributed to all subscribers. And we'll hear more of that in part 2.