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UNCLAS SECTION 01 OF 02 PARIS 000116 
 
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: 
-- Phone rates in France may soon be going up (para 2) 
-- French Telecom Regulator Board Gets New Member (para 3) 
-- Videophone service soon to be deployed in France (para 4) 
-- Care to purchase a (loss-making) Franco-Italian ISP? 
(paras 5 and 6) 
-- France Telecom signs agreement for its North American 
optical network (para 7) 
-- A Bit of Old News - France Telecom and SFR Cegetel fined 
for anti-competitive pricing (para 8) 
 
¶2.  Phone rates in France may soon be going up: France 
Telecom is reportedly negotiating with the French government 
and with telecom regulator ART to increase subscription 
rates by 20 percent over the next three years according to 
reports in French newspapers La Tribune and Le Figaro, AFX 
News reported from Paris. The company is offering a five 
percent reduction in local calls rates to offset the 
increase, La Tribune said. 
 
¶3.  French Telecom Regulator Board Gets New Member:  French 
equivalents of FCC Commissioners are called ART college 
members and France got a new one when Dominique Roux's term 
expired recently.  On January 4, Edouard Bridoux was named 
by President Chirac to become the newest ART college member. 
Born in 1945, Bridoux has been a university full professor 
since 1975.  He began his career in 1972 as conference 
coordinator ("maitre des conferences") at the University of 
Valenciennes in northeastern France, where he became 
University President in 1978.  The following year, Bridoux 
rejoined the office of the Minister for higher education, 
where he became Chief of Staff for the Minister in 1980. 
From 1986 to 1990, Bridoux was rector of the Academy of 
Amiens, then Director of the National Superior School of 
Engineering and Mechanical Energy of Valenciennes from 1992 
to 1993, before becoming rector of the Academy of Reims from 
1993 to 1995.  Bridoux was technical advisor for higher 
education and research in the Prime Minister's office from 
1995 to 1997 and then Director General of the National 
Institute for Transportation Research and Security (INRETS) 
from 1997 to 2000.  Since 2000, Bridoux has served as 
technical advisor for higher education and research in the 
Prime Minister's office.  ART college members serve 
nonrenewable six-year terms.  Three of the five members are 
named by the President; the other two are named by the 
President of the National Assembly and the President of the 
Senate respectively. 
 
¶4.  Videophone service soon to be deployed in France:  IP 
and video technology firm Leadtek Research and telecom 
services provider France Telecom have unveiled what the two 
firms describe as the world's first large scale deployment 
of video telephony, "MaLigne visio."  Jointly developed by 
the two companies, MaLigne visio is an IP-based videophone 
service that lets users see each other during phone 
conversations. The service utilizes QoS monitoring to 
achieve real-time video chat, video messaging, video 
streaming, and information on demand.  The service uses 
Leadtek 8882 videophones with integrated cameras and 
screens, which subscribers connect to a custom broadband 
modem and a standard telephone jack.  Calls begin without 
the video, which users activate or deactivate with the press 
of a button.  The videophones receive calls from any type of 
fixed or wireless phones for regular voice calls, just like 
a standard phone.  MaLigne visio provides customers with a 
free voice and video messaging service that allows users to 
retrieve voice and video messages from any other location. 
Users can also share and discuss photos and video by 
connecting a digital camera or camcorder to the videophone. 
According to recent press releases, at launch MaLigne visio 
will be available to about 75% of the French population. 
 
¶5.  Care to purchase a loss-making Franco-Italian ISP?: 
Tiscali recently said it had received several takeover 
offers for LibertySurf, its French internet service 
provider, but the Italian group denied planning to sell the 
company it acquired four years ago for 650 million Euros 
($864 million).  LibertySurf had 386,000 ADSL internet 
subscribers or 5.5% share of the French market in September. 
It is the fourth largest operator in the French broadband 
market, and generated nearly 200 million euros in 2003 
revenues.  Speculation about the potential sale underlines 
Tiscali's urgent need for cash.  Tiscali was forced to sell 
smaller subsidiaries in Europe and South Africa to raise 
money for the repayment of a 250 million Euro bond due in 
July 2005.  Industry reports have said that Paris investment 
bank Rothschild was hired by Tiscali to gauge interest among 
European rivals for its loss-making French subsidiary, 
valued by analysts at about 250 million Euros. A Tiscali 
spokeswoman said: "For the last two months there have been 
rising rumors that the refinancing Tiscali must do would 
force it to sell one of its core operations. These rumors 
and the dynamic growth of the French market encouraged some 
operators to make expressions of interest for Tiscali 
France. But Tiscali intends to maintain its presence in 
France." 
 
¶6.  Someone close to the talks reportedly said that Neuf 
Telecom, the French internet and telecommunications group 
controlled by the Louis Dreyfus family, submitted a bid for 
LibertySurf last month.  Neuf Telecom has declined to 
comment, but, tellingly, documents about Tiscali's French 
subsidiary were reportedly sent to several of its biggest 
competitors, including Deutsche Telecom, which owns Club 
Internet in France, and Iliad, which owns Free, France's 
second-biggest ADSL provider.  Interestingly, the head of 
LibertySurf quit in August, a month before Tiscali announced 
the resignation of Renato Soru, its founder and chairman, 
who left to pursue a political career in his native 
Sardinia. Any sale of LibertySurf could be complicated by a 
30 million euro loan it extended to Tiscali in June 2003. 
The Italian parent group said it had repaid 18 million euros 
of the loan with rest to be repaid in the first quarter. 
 
¶7.  France Telecom signs agreement for its North American 
optical network:  The operating subsidiary of U.S.-firm 
Level 3 Communications Inc. has signed a multi-year 
agreement to provide transmission and co-location services 
to France Telecom.  Under the terms of the agreement, Level 
3 will become FT's primary provider of lit broadband 
transport and co-location services in North America.  Level 
3 will supply identified private-line and wavelength 
circuits across its 19,400-mile optical network in the U.S., 
which the FT Group will use as a platform to support its 
customers.  "This agreement stands as proof of the strength 
of our longstanding customer relationship with France 
Telecom," said Level 3's president and chief operating 
officer, Kevin O'Hara.  "We're pleased that France Telecom 
will continue to rely on Level 3 as its principal network 
partner in North America, and we look forward to providing 
them with the highest quality communications services in the 
coming years."  The new agreement replaces and terminates an 
earlier, 20-year dark fiber contract signed by the two 
companies in October 2000.  Under the prior agreement, FT 
acquired a nationwide dark fiber network from Level 3, along 
with ongoing maintenance and co-location services.  The 
fiber strands leased to FT in the initial transaction will 
revert to Level 3.  The transaction is expected to be 
completed in the first quarter of 2005. 
 
¶8.  A Bit of Old News - France Telecom and SFR Cegetel fined 
for anti-competitive pricing:  In October 2004, France's 
competition authority fined France Telecom 18 million euros 
and its competitor SFR Cegetel 2 million euros, after 
concluding that both groups practiced anti-competitive 
pricing tactics toward business customers between 1999 and 
¶2001.  The regulator found that the two telecom operators 
took advantage of their combined mobile and fixed telephony 
businesses to offer below-cost pricing on calls within their 
own networks, while charging high prices for other fixed- 
line operators to call their mobile networks. Through the 
practice, SFR Cegetel sustained a 65% negative margin from 
fixed-mobile calls within its own network.  For its part, 
France Telecom sustained a negative margin of 70%, but 
realized a profit of 244 million euros from billing other 
fixed-line operators for calls to its mobile network, of 
which it returned 114 million euros to its business 
customers.  A fixed-line operator would have registered 
trading losses of 126 million euros over the same period if 
it had offered the same prices to customers, said the 
regulator.  France Telecom has responded that wholesale 
prices were fixed by regulator ART and that it plans to file 
an appeal against the fine. 
 
LEACH