France confirms state aid for FTTH

OvumLast month the French prime minister, Francois Fillon, restated the government’s plan to provide €2 billion of funding to accelerate FTTH deployment in the less densely populated areas of France.
The plan gives continuity to the promotion of the shared network investment option chosen by ARCEP, and also follows the market failure remediation approach recommended by the EC’s guidelines on state aid for broadband infrastructure deployment. Taken together with ARCEP’s formal market analysis, by mid-2010 operators should have the regulatory clarity they need to invest in both the dense and less densely populated areas of France.
The French prime minister’s statement is part of a €4.5 billion funding initiative dedicated to the digital economy. The allocation of €2 billion to high-speed broadband infrastructure was first announced at the end of 2009. Last week’s announcement provides some additional detail – a final decision on how the state aid will actually be delivered until mid-2010.
For now, the Delegation for Territorial Planning and Regional Action (DATAR) and the General Directorate for Competition, Industry and Services (DGCIS) have launched a public consultation on the national program for high-speed broadband in order to prepare the state aid framework for less densely populated areas (that is, areas with fewer than 250,000 inhabitants and where less than 20% of buildings contain 12 or more apartments).
Shared investment
According to the DATAR-DGCIS consultation document, shared deployment projects will be favored and the state aid is limited to funding a maximum 33% of the investment.
Applicants should submit proposals consisting of a five-year regional project, and be located in areas outside ARCEP’s definition of very densely populated areas. Proof of funding is also required. The project selection process will consider coverage, network deployment timetable and contribution to the degree of competition at the national level.

The government is keen to point out that its objective is to leverage private investment and stimulate competition in less profitable regions where the market alone cannot deliver, rather than crowd out private sector investment. In this sense the approach taken in France is in line with the EC’s guidelines when using state aid for the deployment of broadband networks.
The state aid can also translate into an opportunity for wireless and satellite providers. Complementary radio or satellite projects targeting areas that are significantly less densely populated are expected to carry a favourable weighting during the selection process.
The allocation of new spectrum will certainly enable this possibility, with the 800MHz band expected to be allocated by 1 December 2011 and the process of licensing LTE in the 2.6GHz band expected to take place during 2010. With this forthcoming spectrum release on the horizon and the suitability of state aid for radio and satellite projects, we expect that wireless operators will certainly try to catch this opportunity.
What is also noticeable is that France is once more adopting measures to promote shared investment.
In the same week, ARCEP approved the regulatory framework for fiber deployment in very densely populated areas, mandating multi-fiber deployment and guaranteeing technology neutrality.
An operator deploying fiber in a building in a very densely populated area (which includes around 5.5 million households) is obliged to install an additional fiber to each building apartment if the requesting operator is willing to share the installation costs from the start.
It must also guarantee the installation of a distribution panel inside or in the proximity of the local connection point, allowing operators to choose either a point-to-multipoint or a point-to-point network architecture (for further details, see our forthcoming report The geographical differentiation of regulatory remedies).