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Cablegate: France: Telecom and Information Technology Update

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A
SUBJECT: France: Telecom and Information Technology Update


1. This is another in a series of periodic updates on the
French telecommunications and information technology
sectors, including internet and e-commerce.

-- Record fine for France Telecom (para 2);
-- Hefty fines for French mobile phone operators (para 3);
-- France Telecom fined for "negative" ad campaign (para 4);
-- Eutelsat relaunches IPO (para 5);
-- A new Google AdWord campaign for Sarkozy's UMP Party
(para 6);
-- Crackdown on internet bloggers (para 7)
-- Digital television spreading faster than expected (para
-- Orange offers first EDGE-enabled BlackBerry in Europe
(para 9).

2. Record Fine for France Telecom: The French Competition
Council (Conseil de la Concurrence) imposed on November 7 an
80 million Euro fine on France Telecom (FT), the highest
fine ever imposed in its history. This amount comes on top
of another 40 million Euro fine already imposed on FT for
failure to respect the interim measures imposed by the
Council in this same case. FT was found guilty of abusing
its dominant position on the wholesale market for high-speed
Internet access by preventing other telecoms operators from
having access to the local loop. FT Chairman Didier Lombard
hit back during the recent International Conference of
French Telecoms and Internet consultancy IDATE on November
27. Lombard called the fine "disproportionate" and blamed
the "two organizations that depend on the State" (i.e. the
competition Council and the telecoms regulator ARCEP) for
"legal instability" that in turn destabilized FT. He
underscored that FT's approach was a key factor in the
development of the broadband market in France, which has
become the leading European country both in terms of ADSL
lines and number of unbundled lines.

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3. Hefty fines for French mobile phone operators: On
December 1, three French mobile phone operators, FT Orange,
Bouygues Telecom and SFR, have been found guilty of market
collusion by the French Competition Council and ordered to
pay 530 million Euros in fines. Orange has been fined 256
million Euros while SFR and Bouygues have been handed 220
million and 58 million fines respectively. Orange and SFR
have both already said that they would appeal the
Competition Council decision. This fine is the largest
single penalty ever levied by the French competition
watchdog, which found that the three mobile operators had
exchanged confidential commercial information during the
period from 1997 to 2003. The information, shared on a
monthly basis, included details of the number of new
subscriptions sold during the month, as well as the number
of customers that had cancelled their subscriptions. The
Council said that the practices had done "significant
damage" to the economy. The Competition Council began its
investigation into market collusion began after the French
consumer association UFC-Que Choisir lodged a complaint.
UFC-Que Choisir said that it planned to sue the three
companies for damages. The Council said that while the
exchanges between the three operators had not related to the
price decisions they planned to take, the sharing of
information was of the kind that reduced the intensity of
competition in the mobile market.

4. France Telecom fined for "negative" ad campaign: FT was
fined six million Euros by the Paris Court on November 27
for a 2004 advertising campaign that was found to harm
competing telecom provider Free. The fine includes five
million Euros for material harm and one million Euros for
harm to Free's image. The doomed campaign underlined that
all providers, including Free, were using FT's network.
Free, a unit of Illiad Group, launched its first DSL service
in 2002, using wholesale lines from FT. Three years later,
the upstart has succeeded in installing its own gear in
hundreds of FT switching centers. Some 69 percent of its
customers are now on Illiad's own network.

5. Eutelsat relaunches IPO: Eutelsat Communications, the
holding company of Europe's largest satellite operator
Eutelsat, announced on November 28 that it relaunched an
initial public offering of shares in the company, one month
after abandoning its first attempt because of difficult
market conditions. The company aims to raise 860 million
Euros from the sale of new shares, and it confirmed that
existing shareholders, including investment firms Eurazeo,
Texas Pacific Group and Cinven, will not sell any of their
holdings as part of the IPO. The sale process will close on
December 1, although the company may close the order book
early in case of strong demand. Eutelsat had originally
hoped to raise 1.2 billion Euros from the sale of shares to
the public, before reducing its ambitions to 860 million
Euros last month in the face of market volatility and
analyst claims that the issue was overpriced. The satellite
operator also confirmed its target of 2 percent sales growth
for the full year to June 2006.

6. A new Google AdWord campaign for Sarkozy's UMP Party:
France's center-right UMP Party recently enlisted the help
of Google's AdWords to rally support for the policies of its
interior minister, Nicolas Sarkozy, concerning the recent
suburban unrest in France. In early November, by entering a
number of words associated with France's social unrest into
a Google search, an ad pointing to a UMP petition would
appear. The ad, which has now been discontinued, read:
Suburban violence. Support Nicolas Sarkozy's policy to re-
establish order. Arnaud Dassier, of the UMP's new media
department, acknowledges that the party bought AdWords for
three different themes related to the unrest (political
keywords, and keywords related to Sarkozy and the suburbs).
Dassier asserts that despite the criticism the party has
received, he sees no ethical problem with using the AdWords
service to attract more traffic to the UMP website. A
reported 3000 people have signed the UMP petition in favor
of Sarkozy. Each click on an AdWord cost the UMP money. As
a result, anti-Sarkozy bloggers called upon people to raise
the UMP's bill by clicking on as many UMP bought AdWords as
possible. It is the first time that a government or party
in France has used the services of a widely used website to
promote its policies in a time of crisis.

7. Crackdown on internet bloggers: The GOF had to police the
internet as well as the streets during unrest in early
November, as websites, chatrooms and blogs were put to use
to encourage and justify the violence. French prosecutors
shut down several blogs and arrested three bloggers
suspected of inciting violence during the recent urban
unrest that rocked France for more than ten days. The
bloggers allegedly posted messages that violated French
criminal statutes governing violent speech. The blogs in
question were hosted on a French site called Skyblog, a unit
of French radio station Skyrock. During the unrest, the
rapid flow of news reports and communication via cellphone
(including SMS), email, and blogs, seemed to literally fuel
the fires to the point that reporters refrained from
releasing some information out of concern that reports on
the number of cars burned the night before and photos of
burning cars were being viewed as trophies by those

8. Digital television spreading faster than expected:
Digital Terrestrial TV (DTT) may be received in over 1.035
million French homes, amounting to a penetration of 9.5
percent in currently covered areas. On average 40,000
adapters are being sold every week and sales increased by 85
percent during September and October, according to a recent
study by market research institute GFK. A report on
accelerating the launch of DTT services has also been
released by France's Broadcasting Authority CSA. The report
highlights the conditions and requirements necessary to
ensure that 85 percent of French residents can access DTT
services by March 2007.

9. Orange offers first EDGE-enabled BlackBerry in Europe: On
November 28, France Telecom subsidiary Orange announced the
launch of the BlackBerry 8700f in France, the first
BlackBerry handheld that is compatible with Orange's EDGE
network. Customers will be attracted by the fact that it
leverages the advantages of Orange's high-speed mobile
network, the newly optimized BlackBerry handheld platform,
as well as a powerful Intel processor to provide exceptional
performance for features such as email, phone, text
messaging, Internet, organizer and corporate data
applications. The BlackBerry 8700f is expected to be
available for Orange's corporate customers in France on
December 15, with retail availability planned for January.
It will be available in other Orange markets across Europe
in a phased rollout during 2006. Jean Marie Culpin, Vice
President Business Solutions for Orange France said that
"The EDGE-enabled BlackBerry 8700f from Orange is an
excellent choice for our customers who want an unrivalled
data and voice experience to keep them connected and
productive while they are away from their desk." Rivals
SFR, whose profits declined by 14 percent in 2004, and
Bouyges Telecom, which has the smallest market share but saw
a 60% increase in its 2004 profits, are sure to feel the
pressure to launch a similar high-end offer.


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