All components combined (equipment, electronic communication services, digital content), the digital economy constitutes a sector that is fundamental to the economy: it accounts for over 6% of global GDP and, in France, generates revenue of more than 100 million euros and represents hundreds of thousands of jobs.
In a time of major economic crisis, we know that all sectors have to contend with tremendous difficulties. The electronic communications sector’s momentum nevertheless appears to be holding strong, sustained by the steady progress of broadband access over both fixed and mobile networks.
1 – Innovation, investment, competition: the goals of regulation
This momentum relies in particular on the success of the triptych of innovation, investment and competition: innovation and investment are stimulated by competition, which itself benefits the greatest possible number of users thanks to the introduction of innovative and affordable services.
Opening electronic communications markets up to competition, governed by the regulator’s actions, is a major step forward and benefits the consumer above all. Over the first seven year’s of the market’s liberalisation in France (1998-2005), we were able to estimate that prices decreased by over 30% on average, while consumption rose by a factor of close to 2.5 – which translated into gains for consumers of more than 10 billion euros during that period.
The broadband penetration rate in France illustrates the beneficial effect that the arrival of new players competing in the marketplace can have on innovation. Between 2000 and 2009, the ubiquity of Internet access offers grew thanks to unbundling. With offers that cost between €20 and €30 a month – among the lowest of any developed economy – and delivering ever-increasing access speeds, the services were gradually expanded to subscriptions that include Internet, telephony and television.
As electronic communications markets were liberalised, EC regulation provided for the implementation of a universal service that allowed all end users to enjoy a minimum set of services, regardless of where they lived, offering a set quality of service and an affordable price, with three objectives in mind: achieving nationwide solidarity, economic solidarity and accessibility, particular for people with disabilities.
As a result, as provided for in the European framework governing the electronic communications sector, the regulator works to ensure fair and effective competition that benefits the consumer, economic development and job creation and equal regional development. Achieving this balance remains relevant even in these times of crisis. So there will be no "holiday" for the regulator, especially not now.
2 - Regulation that stimulates investment and innovation to ensure long-term growth
Beyond the sector’s short-term development, Europe is on the threshold of a new investment cycle (as Asia already has a solid head-start in this area). The deployment of fixed and mobile ultra high-speed networks is a considerable undertaking, representing several dozen billion euros in France. These investments will also act as a lever to strengthen the competitiveness of our businesses and contribute to developing new innovative services that will enable the advent of the digital society.
This economic challenge is comparable, in its scope and the impact it can have on the economy, to the challenge of building the railroads in the late 19th century which sustained the growth momentum for close to twenty years, right up until the First World War, and to the deployment of electricity networks during and after the Great Depression.
Fixed ultra-fast broadband
The first goal is to enable the rollout of optical fibre networks to the home. The action taken by public authorities concerns three related areas:
- implement a legal framework that makes it possible to free up investments;
- facilitate private sector initiative to speed up deployments;
- and, lastly, to mobilise public monies to ensure that coverage be as broad and swift as possible.
This approach aims to achieve a balance between stimulating private operators’ investments to as great an extent as possible – which is key to competition and innovation – and public investments which are needed in areas where private initiative is lacking. Drafting the conceptual framework for fibre rollouts led to the definition of three zones:
- A first zone where the population is highly concentrated – which, in France, ARCEP estimates at around 5 million households, or 11 million inhabitants (1/6th of the population) – and where infrastructure-based competition is economically viable, i.e. the installation of several access networks as close to customer premises as possible. A draft legal framework is currently being produced. It is technology-neutral and maintains the co-existence of operators’ technical-economic choices, the goal being to stimulate competition and innovation. It also provides for the possibility of a multi-fibre architecture, if requested and pre-financed by the operators.
- In a second part of the country, where the population concentration is semi-dense, network economics do allow for privately-funded optical network rollouts, but only provided that a substantial portion of the infrastructure be shared. The goal for this zone, then, is to deploy a shared network – notably in the last drop to customer premises – and one that must be open to the different operators in a non-discriminatory fashion.
- Lastly, the most sparsely populated parts of the country are not profitable enough for a deployment funded solely by private sector operators. Public authority intervention in the form of subsidies therefore becomes necessary in this case – a system that has already proven successful in furthering broadband coverage – and which could be completed by a State aid. The government recently held a seminar on investing in the digital economy, as part of broader discussions over a large national loan to finance fundamental investments in the future.
Regulation is essential here, and involves two types of action:
- asymmetrical action, in other words obligations imposed on the SMP operator. This is a classic form of regulation, as provided for by the European regulatory framework. ARCEP thus introduced regulation governing France Telecom civil engineering back in mid-2008 as a result of its market analyses. This allows alternative operators to deploy their optical fibre networks under the same conditions as the incumbent carrier, which is a decisive factor given that civil engineering accounts for 50% to 80% of optical fibre local loop rollout costs;
- symmetrical regulatory action, in other words regulation that applies equally to all operators, which is critical for constructing a new local loop.
Ultra high-speed mobile
To provide the entire population with ultra high-speed services, all available technologies need to be put into play. This is particularly true for 4th generation mobile (LTE) whose deployment is made possible by the use of frequencies freed up by the switch-off of analogue TV broadcasting. Ultra high-speed mobile could provide a complement to fixed access, especially in the more sparsely populated areas that will not be covered by optical fibre until much later, or possibly never.
In France, these 800 MHz-band frequencies will be awarded in 2010, after the allocation of the remaining 3G spectrum. Beyond the allocation of what is referred to as the digital dividend, more than ever before the goal is to enable balanced digital regional development.
We therefore find ourselves at a crucial point in time, one where we need to rise to meet an immense challenge during a period of economic crisis.
As I said before, however, the current recession must in no way call into question the need for strong regulatory action which has proven its effectiveness through the tremendous growth of the electronic communications sector over the past several years.
Let us focus on achieving competition that will benefit consumers, stimulate investment and innovation, take account of the necessary social and regional needs of solidarity: these are, as they have always been, the central challenges of regulation.