US embassy cable - 05PARIS8153

UNCLAS SECTION 01 OF 03 PARIS 008153 
 
SIPDIS 
 
STATE FOR EB/CIP 
USDOC FOR NTIA AND ITA 
FCC FOR INTERNATIONAL 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, FR 
SUBJECT: France: Telecom and Information Technology Update 
 
NOT FOR INTERNET DISTRIBUTION 
 
1. This is another in a series of periodic updates on the 
French telecommunications and information technology 
sectors, including internet and e-commerce. 
 
Contents: 
-- 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 
8) 
-- 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. 
 
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 
responsible. 
 
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. 
 
Stapleton