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UNCLAS SECTION 01 OF 03 PARIS 002910 
 
SIPDIS 
 
STATE FOR EB/CIP AND INR/B 
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: 
-- France Telecom's debt on the rise (para 2) 
-- GOF technology and information society office merged with 
regional and small business administration (para 3) 
-- France's antitrust watchdog wants more open mobile market 
(para 4) 
-- Tele2 France to launch mobile offering (para 5) 
-- FT's Orange EDGEs way to business community (para 6) 
-- Cegetel resumes merger talks with Neuf Telecom (para 7) 
-- Alcatel tests WiMax in France (para 8) 
-- ART launches public consultations on professional mobile 
networks (para 9) 
-- FT to select single global advertising firm (para 10) 
-- French resistance to (what they see as a) "hyperpuissant" 
(over-dominant) Google (para 11) 
 
¶2.  France Telecom's debt on the rise:  France Telecom (FT) 
has seen its debt rise by 6 billion Euros to 49.9 billion 
Euros (one euro equals 0.77 dollars), as it conforms to new 
International Financial Reporting Standards (IFRS) 
accounting rules.  The aim of the new rules is to harmonize 
the global presentation of financial results, making it 
easier to compare companies across borders.  Under the new 
IFRS rules, FT's 2004 operating profit has been reduced to 
9.3 billion Euros from 10.8 billion Euros previously.  FT 
said the move to International Financial Reporting Standards 
would not impact its ongoing operating performance.  FT is 
in the third and final year of a recovery plan to reduce its 
debts to less than 40 billion Euros by 2006.  The firm built 
up its vast debts due to an ambitious expansion plan in the 
late 1990s.  Its debt peaked at nearly 70 billion euros in 
¶2002. 
 
¶3.  GOF technology and information society office merged 
with regional and small business administration:  A 
Government order published earlier this year provided 
details on the on-going reorganization of the French 
Ministry of Economy, Finance and Industry.  As part of that 
effort, the familiar DIGITIP ("Direction General de 
l'Industrie des Technologies de l'Information et des Posts") 
and its Office of Technology and Information Society 
("Service des Technologies et de la Societe de 
l'Information" - STSI) have been merged with the office for 
regional business and small and medium-sized industrial 
enterprises.  Since the merger, the new entity is called the 
General Enterprise Directorate ("Direction General des 
Entreprises") in charge of business policy, information and 
advocacy of innovation and entrepreneurship.  STSI is still 
responsible for electronic components, electronics, computer 
and audiovisual equipment, electronic communications, 
information society and space.  Also, the organization of 
STSI remains the same with four separate bureaus or "sub- 
directorates": 1) networks, multimedia and on-line 
communications; 2) components, software and professional 
electronics; 3) regulation of electronic communications and 
forecast and analysis; 4) institutional relations.  STSI is 
not located within the main Ministerial offices, but as 
before in a close by annex. 
 
¶4.  France's antitrust watchdog wants more open mobile 
market:  Arguing that France's mobile phone market remained 
dominated by three companies (France Telecom's Orange, 
SFR/Cegetel, and Bouygues Telecom), France's competition 
watchdog, the Competition Council, in early April called on 
French telecoms regulator ART to intervene.  The Competition 
Council reportedly sees elements of collusion by the three 
mobile phone operators, particularly in the wholesale 
market.  In an effort to break this collective dominant 
position, ART has examined giving more space to mobile 
virtual network operators (MVNOs). These operators have no 
mobile networks of their own, but they rent minutes 
wholesale from the network operators and sell them to 
consumers at a lower cost, undercutting the incumbents' 
offer on the market.  This opens up the possibility of 
further liberalization of the French mobile phone market, 
lowering costs for consumers but eroding the profit margin 
of operators. 
 
¶5.  Tele2 France to launch mobile telephony offering: 
Telephone operator Tele2 France announced in early April 
that it had signed a mobile virtual network operator 
agreement of the enhanced service provider type with Orange 
France.  No financial details were disclosed.  Tele2 France 
will launch the mobile telephony offering before the end of 
¶2005. 
 
¶6.  FT's Orange EDGEs way to business community:  France 
Telecom subsidiary Orange will invest 200 million Euros in 
France to shift its lower quality, mobile network 
capabilities to high-speed data technology known as EDGE 
(Enhanced Data for Global Evolution).  The two-year 
investment plan, which makes Orange the first French mobile 
operator to sell EDGE technology, is aimed at expanding 
Orange's offering of high-speed data services, such as 
Internet access and television programming via internet, to 
90% of businesses with over 50 employees, and 85% of 
individual subscribers.  EDGE does not carry as much data as 
third generation, or 3G, technology can, but it costs 
operators less and provides data at a speed close to that of 
3G quality.  The launch of EDGE will reduce Orange's 
dependency on 3G mobile technology.  It also brings the 
number of Orange customers using Orange high-speed services 
(via EDGE, 3G and WiFi technologies) to a total of two 
million. 
 
¶7.  Cegetel resumes merger talks with Neuf Telecom:  French 
fixed telecom operator Cegetel, has resumed merger 
negotiations with rival Neuf Telecom.  Talks originally fell 
through last year over price and management issues.  (See 
our April 2004 edition for more details.)  If successful, 
the merger would signal further consolidation in the French 
telecoms market, as telecom operators seek to boost their 
broadband offerings.  In mid-April 2005, Italian incumbent 
Telecom Italia acquired Tiscali's French internet subsidiary 
Liberty Surf, which exceeds both Cegetel and Neuf Telecom in 
its number of ADSL subscribers.  The merged company would 
become the largest broadband internet provider after the 
market leader, France Telecom's Wanadoo.  With a high demand 
for broadband services, competition for new customers has 
been intense and operators have been slashing prices. 
 
¶8.  Alcatel tests WiMax in France:  In early April, French 
telecoms equipment manufacturer Alcatel signed a partnership 
agreement with Paris airports service provider ADP Telecom 
for a trial of WiMAX technology.  ADP is to manage the pilot 
networks, which will be deployed across a number of airports 
in France.  ADP said it would use the fixed and nomadic 
aspects of WiMAX as a complementary technology to its 
existing WiFi offerings, and as a method of delivering 
mobile applications across a greater distance.  The news 
follows an announcement last month that French telecoms 
regulator ART has been preparing the means of allocating new 
frequencies in the 3.4-3.8GHz band for the deployment of WLL 
networks to allow for the development of WiMAX technologies. 
The regulator said that the auctioning of such spectrum was 
one possible option, although the authority has not yet set 
a date for the tender of the licenses. 
 
¶9.  ART launches public consultations on professional mobile 
networks:  On April 12, France's telecoms regulator ART 
launched consultations on the introduction of broadband 
terrestrial mobile service networks, with specific features, 
such as independent Private Mobile Radio or PMR networks, 
which include alternating voice services (push to talk), 
group calls, voice and data services in packet mode; and 
Public Access Mobile Radio or PAMR networks, which are open 
to the public and carry PMR functions.  This consultation is 
part of the move to shift mobility to high speeds.  Although 
it covers both independent PMR and  PAMR networks, the 
question of whether to introduce open to the public PAMR 
networks (in the 450-470 MHz band) is the primary subject of 
the consultations.  Based on responses, ART will be able to 
establish the method and means of allocating available 
frequencies for broadband PMR/PAMR networks in autumn 2005, 
and launch an allocation procedure by wintertime. 
 
¶10.  FT to select single global advertising firm:  France 
Telecom will soon appoint a single advertising agency to 
globally market all of its communications brands, including 
Orange and Wanadoo.  Company executives have said that they 
will meet with some 30 contenders in Paris, and the winner 
will be announced this summer.  The successful agency will 
develop a global ad strategy that sources have described as 
"France Telecom's grand plan" and could involve a 
rebranding.  There is ongoing speculation that Orange and 
Wanadoo are considering merging their businesses in the UK 
following talks that began in 2004. 
 
¶11.  French resistance to (what they see as a ) 
"hyperpuissant" (over-dominant) Google:  In a replay of his 
stillborn efforts two years ago to create a French version 
of CNN, President Chirac called on his Culture Minister and 
on the Head of France's National Library to create a 
homegrown effort to scan and digitize French texts so that 
they can be viewed on the Internet.  This move follows 
Google's announcement last December to scan millions of 
books and periodicals into its search engine over the next 
few years.  In an unrelated development, Google recently met 
with another type of French resistance, this time from two 
travel companies, Luteciel and Viaticum.  The two companies 
successfully challenged Google's practice of selling 
Internet advertising from rivals designed to appear with Web 
searches for the trademarked Web site name "Bourse des 
Vols," or flight exchange.  In March, A French Court of 
Appeals found Google guilty of "trade counterfeiting."  This 
is an important precedent in a country where 15 similar 
cases are still pending. 
 
WOLFF