Telecom

They want to cut Orange in two!

It is an everlasting dilemma! Old as telecoms!
How could we guarantee a liberal telecom market while asking the main MNOs to bear the cost of infrastructure development? How can we avoid monopolies while relying on private investments?

Lately, the question arose again in Europe, in France, where 45 operators are demanding justice!

These 45 independent operators have gathered under the “AOTA” banner (for “Alternative Telecom Operators Association”) and they are going after Orange, the French historical operator, for building a future monopoly on the optical fiber market.

“A monopoly in the making”, says AOTA.

As a matter of fact, Orange has greatly invested to equip France with a dense optical fiber network. Since 2015, the operator invested 3 billion euros in the deployment of 20 million kilometers of fiber. And its influence is even growing. In 2018, Orange represented 70% of the fiber constructions. During this last year, Orange reached a new milestone as its development strategy started to shift from dense regions to less dense regions. Consequently, the operator’s investment indeed jumped of 40% in these low-density regions.

You can now understand why some operators fear to be left behind. In this case, these 45 telecom actors are mainly of small size and are targeting the off-grid or low-density regions. This explains why they are demanding equal access to the optical fiber network. They even brought the topic to the French competition authority, stating that it is impossible for them to provide an offer merely as competitive as Orange’s current commercial prices.

What do they suggest? Cutting Orange in two.

They brought the topic to the competition authority and questioned the possibility of splitting the historical operator between an infrastructure-focused entity and a service-focused one. The idea behind this would obviously be to avoid any collusion between both entities and give equal access to other actors.

Orange sliced operator

A worldwide dilemma

This question is not limited to France. In the UK, BT already isolated its infrastructure services for more than 10 years. In 2006, OfCom pushed the British operator to create a new branch called Openreach. This activity unbundling was motivated by a will to liberalize the telecom market.

On the contrary, in Italy, Agcom (the Italian regulatory body) did not support the project of demerging Telecom Italia, despite the lobby of the Elliot hedge fund.
All in all, this dilemma has been haunting the telecom industry for decades. How could we ask private investors to fund infrastructure improvements, while denying them to freely exploit its commercial potential? If they must bear the cost of it, why wouldn’t they get all the benefits…

Well, the answer obviously lies in the enormous stakes at risk. First, any state must guarantee a competitive price and a certain quality of service to its consumers. As mentioned above, both are put at risk in a situation of monopoly. However, on the longer run, there is a second facet to the problem. It is also involving the innovation model of each country, its progress machine. How can any country finance infrastructure innovation (and therefore progress) while enabling any company to unlock its potential? For instance, in a digitalized world, the potential of 5G will have to be available to any innovator, at the best cost possible.

It goes way beyond fiber. This dilemma involves the whole telecom scope (fiber, fixed telephony, mobile telephony) and the debate will have to involve everyone in our industry.

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