(As prepared for delivery)
Ladies and Gentlemen,
Thank you for your welcome. It is an honour for me to address such a competent gathering. It is in my capacity as a European that I would like to talk about the changes taking place on our market. The European market is certainly different from the American market. And although Europe may seem a long way away, in the era of the Net-economy it has never been so close.
Therefore, let me give you some idea of the momentum and importance of the European market and, within it, the French market.
1. France: an open market contributing to the momentum in europe
The telecommunications services market
The European Union is one of the world’s two biggest markets, with the United States. It totalled 192 billion dollars in 1999, compared with 247 billion dollars for the United States.
Competition in Europe is fierce. The European Commission listed 557 authorised operators on the long-distance market in mid-1999, within the 15 EU member countries. This is no more a monopoly ; this is not even an a oligopoly ; this is real competition.
Many international players, notably US firms, are present on the market, and a number of pan-European network operators, such as AT&T, MCI-World Com, Level 3, Global Crossing and GTS have obtained licenses in France.
European operators are naturally a driving force on this market. They include all the incumbent operators and of course France Telecom, whose efficient transformation is illustrated by its recent results and strong presence on the European mobile market. Also present are a number of new entrants, brought in by recent alliances. One example is the venture set up by Vivendi and Vodafone. who aim to set up a portal potentially covering 80 million consumers in Europe and so pave the way for the arrival of the Internet on mobile phones.
In this way, Europe has thrown open its market to a host of new operators, many of whom are North American. This situation has created an imbalance, which will only be corrected when European operators are able to gain a firm footing in sustainable conditions on the North American market.
The European market combines significant growth with strong potential for development. As a result of deregulation, the market grew by 5.6% in 1998. And the figure for 1999 is expected to be higher. This growth undoubtedly illustrates the importance of 1 January 1998, the day the European market opened its doors, in the history of European telecommunications.
Considerable progress has been made over the past two years by the European market, notably by France, which is opening up to widespread competition and enjoying strong growth. For example :
- At the end of 1999, 91 licensed operators were present on the fixed and mobile communications markets. 2/3 have full or partial links with the US economy.
- The French telecommunications services market grew by 10.5% in nominal terms in 1999.
The two main sources of growth on the European and French markets are mobile phones and the Internet.
The mobile telephony market
The European mobile service market has seen spectacular growth over the past five years on a scale that nobody had foreseen. And the pace is unflagging. The average mobile penetration rate in Europe at the beginning of this year was 44%. The number of mobile phones in Europe today can be estimated at more than 150 million, compared with about 80 million in the United States.
According to data published by the European Commission, the mobile market accounted for 22% of the European telecommunications services market in 1999.
To a great extent, this success should not be explained by any difference in economic systems ; it must be attributed to the introduction of a single standard – GSM – for the second generation. Far from hampering technological innovation, the common standard actually encouraged it. Today, Europe is getting ready for the third mobile generation and confidently expects this technological edge to further stimulate the pace of development. International players and investors have already acknowledged this fact. Open any daily paper and you will realise the major issue at stake : within 12 months, European countries will deliver about 60 licenses for the third generation.
In France, the mobiles market totalled 22 million customers at the end of January 2000. In the space of five years, the customer base has increased from 1.5 million to 20 million, which means that it virtually doubled every year. This growth can be expected to continue on an average basis of one million per month: more than 35 million French people will have a mobile phone by the end of the year, that’s the same number of subscribers as for fixed telephones.
The Internet is also one of the main driving forces behind the development of the European market. For example, Internet access traffic is expected to account for more than 15% of France Telecom’s total telephone traffic in 2000, and could rise to 50% of local traffic within the next three years. The USA has played a fundamental role in the birth and the extraordinary expansion of this new form of communication. Europe got off to a late start with respect to the USA, a fact that can be explained notably by the many different languages used across the continent, but this situation gives it considerable potential for growth on the different markets: long-distance infrastructure, access, services and content.
Moreover, the characteristics of the Internet economy are not the same in Europe as in the USA. In Europe, most of the value created within the Internet value chain is in the network access market, and notably in the market for Internet access calls. In the USA, by contrast, value is concentrated in the content sector. So the basic approach is different but, ultimately, priority will be given to diversity of service. Competition should exist not only for networks but also for services. This is a constant source of concern for the French regulator. As the Internet develops it is probable – and desirable – that a new balance should be struck between the different continents for the creation of content.
Interconnection charges for 2000, recently approved, are down 11.2% after having fallen 14% in 1999. In consequence, France ranks among the leaders on the European market, before Germany but naturally behind the United Kingdom, which has opened its market fourteen years ago. The charge structure favours the Internet, since interconnection charges for Internet access calls have fallen by 19%.
The price of Internet access calls is no longer an issue in France. As a result of the decisions taken by ART in 1999, charges are now among the lowest in Europe.
Last, retail charges have fallen continuously over the past three years. For example, France Telecom’s average charge to households for national calls fell by more than 26% since January 1999, but the decrease is far greater for new entrants, sometimes as much as 50%.
I would also like to mention universal service, a concept of particular importance for both our countries. A debate is currently under way in France on whether this concept should include certain Internet access services or mobile telephony services. I would like to point out how important this debate is with respect to the issues raised by the information society.
2. the priorities
Looking beyond the figures, I would like to stress that the French market has removed barriers and that the same barriers must be brought down in people’s minds on both sides of the Atlantic Ocean. There should be no doubt about that. With 90 new entrants, more than half of them being Us operators, let me say, friendly, but clearly, that I cannot share any statement relative to substantial barriers to entry in France.
Our main priorities for the year 2000 :
The wireless local loop: the wireless local loop will be in place by summer 2000, opening new possibilities in the supply of high-speed services for business and residential customers. Internet access is naturally the first item on the list. This choice reflects a joint decision made for the French market. The procedure for attributing licenses is well under way. At total of 54 licences will be issued:
- two national licenses ;
- forty-four regional licenses (2 by region) ;
- eight licenses for overseas departments and territories.
We have received applications from twenty-eight companies, and the process of examination will be completed by next summer. This technology has aroused considerable interest among operators. Its arrival marks an important stage in the opening of the local loop and the development of the Internet in France.
High-speed Internet access: The development of high-speed Internet access is also tied to the expansion of ADSL. This technology is already up and running in France. The problem facing the regulator today concerns competition. It is important to make sure that this major technological advantage is available to all operators seeking to establish themselves on the market.
More broadly, as part of a process that we set up some eighteen months ago through a public consultation, we expect to complete the conditions for unbundling France Telecom's local loop by the end of 2000. A clear agreement has been reached with respect to the programme and schedule. By way of comparison, the UK calendar leads to mid-2001.
I would also like to mention cable networks, which are another possible avenue for the development of high-speed technology. A number of industrial and commercial initiatives have been set up recently in France, with a view to supplying Internet access by cable. These initiatives transpose the decisions and recommendations set out in 1997 by ART.
Internet on mobile phones
Combining mobile telephony and the Internet is another priority for France, within the European market. We shall see two complementary processes emerging in 2000:
- the arrival of new networks and services technologies making it possible to adapt the supply of Internet services to the GSM environment. Here, I am thinking in particular of GPRS (General Packet Radio Services) and the WAP protocol, which are now implemented. In this transition period, which should last a few years, the arrival of the EDGE technology is also expected.
- The definition of procedures for the introduction of third-generation mobile phones. The fact that Europe has put in place a common schedule to coordinate introduction of the third generation is certainly a major decision. In 2000, almost all European Union countries plan to define and publish the terms of licence attribution. In this way, the first commercial offerings will be put in place at the start of 2002, in line with the schedule. Most European countries, except the United Kingdom, Germany, the Netherlands, have chosen to set up a beauty contest for this purpose. France will deliver four licenses.
To conclude, I would like to stress the importance of diversity and complementarity in both economic and social models. Diversity of language is a source of wealth. This is true for the Internet and also for other media. I hope to have shown you today that our economies are different; their strengths and weaknesses are not the same. They are complementary.
Nevertheless, and this is what struck me in the discussions I had with William Kennard on his recent visit to Paris, our approaches and objectives are similar, because we are often faced with similar questions. We share, for example, the same approach to the Internet. The objective is not to add further regulations but to make sure that existing rules are implemented so that the market can develop. In this way, we meet the requirements expressed every day by operators.
Let me summarize; our goal is efficiency:
- Efficiency in allocation of resources,
- Efficiency for a better productivity,
- Efficiency for a dynamic attitude towards innovation.
We work to bring to consumers better services at a better price.
We work to give the industry opportunities in investment and profits.
Thank you for your attention.