Publication of a report on ultra-fast broadband: new services, new applications and their impact on the value chain.

Paris, 1st March 2012

France's General directorate for competition, industry and services (DGCIS), the General directorate for media and cultural industries (DGMIC), the Electronic Communications and Postal Regulatory Authority (ARCEP), the French Broadcasting Authority (CSA), the HADOPI online copyright enforcement authority and the National Centre for cinematography and the moving image (CNC) together commissioned Analysys Mason to produce a report on future applications and services, particularly in the realm of audiovisual media, on fixed ultra-fast (1) broadband (UFB) networks , and what impact the rollout of these networks will have on users' consumption of existing services.

This report provides forward-looking analysis by exploring the current state of the French market, comparisons with representative foreign markets in the realm of superfast access - namely Japan, the United States, Sweden, Australia and the UK - along with an analysis of what advantages ultra-fast broadband access provides compared to regular broadband.

Here are the main conclusions that Analysys Mason drew from the research it performed from February to July 2011.

Paradoxically, the advantages of broadband access could well limit French users' adoption of ultra-fast services in the short term.

The good quality of France's legacy copper network, combined with very affordable broadband products, have resulted in the development of one of the world's most competitive markets. In the short term, these assets could prove to be obstacles to the development of ultra-fast broadband. Especially worth noting is that users in France do not see any clear incentives to switch to a faster service.

Today, the advantages of UFB depend chiefly on how heavy a user's internet consumption is.

Despite the fact that UFB is technologically superior to broadband, at this point its advantages in terms of new services and applications appear rather limited, and the ultra-fast products currently marketed by providers offer very few additional services over existing high-end broadband products.

As a result, at a time when information and communication technologies are playing an increasing role in all sectors of the economy, and in people's daily lives, the advantages of UFB depend on chiefly on the scale of consumption. Consumption is rising swiftly, not least due to the development of (time-shifted) video services, to the increasingly high quality of video formats and to simultaneous usage which generates a strong demand for bandwidth. Ultra-fast broadband makes for easier consumption and enables the development of a number of existing services, including:

UFB therefore allows today's consumers to enjoy a much more fluid user experience on existing services than ordinary broadband

Further down the road, new ubiquitous solutions will no doubt emerge in the consumer market and which take full advantage of UFB's performance: residential video calling, telemedicine and optimised care, telecommuting and teletraining, new educational services based on interactive digital tools, social computing, making use of pooled IT resources, etc.

The UFB value chain is undergoing profound changes. The development of over-the-top service models is threatening classic models

The development of OTT services, and the massive adoption of internet-ready televisions inside the home will no doubt be beneficial to consumers, but could well undermine operators' outlook for additional revenue thanks to UFB. As a result, access providers could be reduced to the role of mere content delivery pipes, cut out of the loop by OTT. In the same vein, financing mechanisms for media production, which rely on TV networks and distributors, could be affected by the arrival of new competitors on their device of choice, namely the TV.

Given that there are currently very few services that are specific to UFB for which users are willing to pay, it is hard to get an accurate measure of the incremental revenue that will be generated by UFB, and which would make it possible to finance ultra-fast broadband networks. New business models are being created between content and access providers, and only the future will decide which ones are viable over the long term.

Interventionist policies enabling the rise of UFB in overseas markets

Comparisons with the situation in other markets helped reveal that those countries wanting to enable the emergence of ultra-fast broadband have adopted interventionist policies (incentives, government investment or co-investment with local authorities) or regulatory frameworks in support of UFB and competition.

The report also underscored the fact that ultra-fast broadband is often correlated with a difference in quality compared to existing broadband solutions, even though its intrinsic value does not lie solely in having a faster connection. Indeed, access to services such as VoIP and IPTV, which are not necessarily available on broadband networks in overseas markets, represent real benefits for new UFB users. The report did not, however, identify any new service or application tied specifically to superfast access, and there are as yet no significant differences in users' behaviour when it comes to content consumption.