ART published yesterday a study

27 January 2003

Autorité de régulation des télécommunications (ART) presents today a study on the cable economy in France ordered from JLM Conseil.

The study report includes a summary, the study itself (volume 1) as well as a monograph of major cable operators in France (volume 2).

On several occasions, ART has declared that cable networks play a major role in the development of high speed Internet in France and constitute an alternate access technology, which might help facilitate competition on the local loop in the telecommunications sector.

In 1997, ART received two requests for dispute resolution from operators Lyonnaise Cable and CGV versus France Telecom, which owned the networks they operated. At the time, ART set the technical and financial conditions for operating Internet and telephone on cable networks. These decisions were confirmed by two orders from the Paris Court of Appeal in April 1998. During the same year, on request from Paris TV Cable and Lyonnaise Communications, ART rendered a new decision establishing the conditions for providing telephone service on cable networks, in Paris in particular. At Paris TV Cable’s request, it also set a clear timetable for opening Internet access on the cable network in Paris.

The study:

- presents the current situation of cable in the French telecommunications and broadcasting markets: household equipment rate for pay television, Internet access, economic weight of cable distribution and its major operators.

In particular, it underlines the weak penetration of cable, on both the telecommunications and broadcasting markets: just 13% of French households subscribe to a cable network; at 30 June 2002, there were 233,000 Internet on cable subscribers compared with 650,000 ADSL subscribers.

With global sales of close to €700 million in 2001, cable represents just 2% of global sales for the telecommunications services market in France and less than 4% for the broadcasting and television sector (cable, satellite, conventional televisions, specialty and local channels).

- calls attention to the position of cable in Europe and the United States by highlighting the profit drivers in this sector and the problems it faces.

. The study notes the importance of cable in the United States (almost 70% of households subscribe to cable, for sales of about €44 billion) and identifies two major market organisation models in Europe according to cable does and does not appear as the prime vector for television broadcasting.
. It identifies the sources of the difficulties currently experienced by European cable: intensified competition from satellite and digital terrestrial television (DTT), the extensive investments required to switch to digital cable and to permit the provision of high-speed Internet services, sector concentration under less-than-optimum conditions, primarily because the Internet bubble has burst.

- reviews the conditions of operating cable in France by examining its historic handicaps, analysing the disadvantages of current regulations (threshold of 8 million people, public service concession system, control of the service plan by municipalities), and by assessing the economic difficulties experienced;

- indicates current changes to the competition and legislative context, and in particular, the consequences of launching digital terrestrial television and the impact of the new European directives on the electronic communication networks and services, which are currently being transposed into French law;

- also proposes three scenarios for the future of cable in France:

. consolidation: rationalisation of networks through area exchanges; consolidation of current cable players, following the elimination of legislative barriers to mergers; grouping of existing players around a new entrant providing fresh capital

. separation of infrastructures and services, with the takeover of all physical cable infrastructures by a single operator in order to offer service providers unified access to all 8.5 million connectable households in France

. the status quo and the technological erosion of cable, which might lead to decreasing interest in this medium

- Fair and technologically neutral legal treatment of networks
In its annual reports, as well as in its contribution to the Government’s public consultation on the evolution of French electronic communications law, ART has emphasized on numerous occasions that the current situation of cable networks prevents the fair and technologically neutral legal treatment of networks.
This situation could hurt the development of the information society, both because dynamic development wins from cable and other access forms such as ADSL emulating one another (stimulating the market) and because cable networks must be used to develop on-line communications services, and high speed in particular.

- Harmonisation of systems of law made necessary by convergence
In a logic of network convergence, ART also feels that the system of law applicable to cable networks must be aligned to that of telecommunications networks. This harmonisation has been made necessary by new directives on electronic communications networks and services, which apply to "electronic communications" infrastructures regardless of their use (broadcasting and/or telecoms), whereas the content of services provided on these networks is subject to separate systems of law.

In conclusion, ART hopes that this report will help public authorities and all market players determine the most appropriate changes which will allow France and its consumers to benefit from the contribution that the cable technology might offer in developing competition between networks to provide diversified services and expand access to the information society.

NB: ART cannot be held liable for this study, established under the sole responsibility of JLM Conseil.