1.1. Background

Between 2004 and July 2006, the Authority held a call for candidates for regional wireless local loop licences in the 3.4-3.6 GHz frequency band in Metropolitan France and in the overseas regions of Guyana, Saint-Pierre and Miquelon and Mayotte.

Following the public consultation conducted by the Authority in 2004, whose purpose was to identify the market’s interest in the wireless local loop in the 3.4-3.8 GHz frequency band, the call for candidates for wireless frequency licences in the 3.4-3.6 GHz frequency band was launched in 6 August 2005 after publication by the Ministry of Economy, Finance and Industry of the order concerning the procedures and terms for awarding frequency licences defined in ARCEP Decisions nos. 05-0646 and 05-0647 of 7 July 2005.

The Authority began the selection procedure with a preparatory phase which included the submission of 175 letters of intent from the candidates on 14 October 2005. This stage was to allow those players interested in being awarded a licence to access the wireless local loop to explore the different possibilities for sharing the use of the frequencies.

Once this stage was completed, in early January the Authority established an inventory of the submissions to be able to assess the possible scarcity of frequencies on a region-by-region basis. The 45 submissions received led to a determination of scarcity on 10 January 2006 in 22 regions in Metropolitan France, in Guyana and Mayotte, where selection procedures had been officially launched. No scarcity of spectrum resources was determined for Saint-Pierre and Miquelon. There were ultimately 35 players selected as candidates.

Among these 35 candidates, 15 players were selected, including six conseils régionaux (regional councils), each with a 15MHz duplex. The selection procedure was based in equal part on the following selection criteria:

·         contribution to the national broadband development plan;

·         the project’s capacity to stimulate broadband market competition;

·         the sum of the fee that the candidate was willing to pay.

The selected candidates agreed to large-scale rollout commitments which were included as obligations in the terms of their licences.

The goal of the audit performed on 30 June 2008 was to assess the degree to which the licence-holders were meeting their commitments, particularly in terms of deployment objectives.

This audit also provided an opportunity to take an inventory of wireless local loop deployments and to get an updated view of the players’ plans with respect to ADSL dead zone coverage and the development of roaming services.

1.2. Licence holders as of 30 June 2008

The licences awarded by the Authority concern frequencies that can be traded in the secondary market. This system has been widely used by the original licence-holders. The transfers include not only a transfer of rights but also of the original licence-holder’s obligations. The following paragraph lists the licence-holders as of 30 June 2008 which were the subject of the audit.

In Metropolitan France

As of 30 June 2008, the number of licence-holders in Metropolitan France had practically doubled (19 licence-holders of which 14 local authorities and 5 operators) compared to the 10 original licence-holders (6 regional councils and 4 private operators).

The mechanisms of the secondary market have been employed chiefly by the regional councils to cede their rights to the conseils généraux (departmental councils). As a result, the number of local authorities involved has increased considerably following the transfers of frequency usage licences. 14 local authorities currently hold a frequency licence.

In Alsace, the Conseil régional transferred its licence to the Conseils généraux of the Haut-Rhin and the Bas- Rhin in their respective départements. In the same vein, in Aquitaine, the Conseil régional ceded its licence to the five Conseils généraux (Conseils généraux of the Gironde, the Dordogne, the Landes, the Lot-et- Garonne and the Pyrénées-Atlantiques). Le Conseil régional of Poitou-Charentes, which was initially a licence-holder for the entire region, transferred a portion of its licence in the Deux-Sèvres département to the firm, Altitude, and kept its licence to the Charente region’s three other départements. In Brittany, the Conseil régional ceded its licence to the Conseils généraux of the Côtes d’Armor, the Finistère and Ille-et-Vilaine in their respective départements, and to operator Nomotech in the Morbihan département. The Conseil régional of Burgundy transferred a portion of its licence to the NiverLAN joint union in the Nièvre département, keeping its licence to the rest of the region. And, finally, Corsica kept its original licence.

The private operators that are licence-holders are HDRR France, Altitude Wireless, Bolloré Télécom, SHD and Nomotech SHD. HDRR France (formerly HDRR multi-regions and HDDR Centre Est) has licences in 11 regions (Lower Normandy, Centre, Champagne-Ardenne, Upper Normandy, Languedoc-Roussillon, Limousin, Lorraine, Nord-Pas-de-Calais, Pays de la Loire, Picardie, Poitou-Charentes). The company acquired all of the wireless local loop frequency licences from its wholly-owned subsidiaries, HDRR Multi Regions and HDRR Centre- Est, on 30 November 2006. Altitude Wireless has a licence in 13 regions (Alsace, Auvergne, Lower Normandy, Burgundy, Centre, Champagne-Ardenne, Franche-Comté, Upper Normandy, Lorraine, Midi-Pyrénées, Nord-Pas-de-Calais, Pays de la Loire, Rhône-Alpes) and Altitude Télécom has a licence in the Deux Sèvres département. The company, Altistream (renamed Altitude Wireless), a wholly-owned Altitude subsidiary, acquired all of its wireless local loop frequency licences from the firm Maxtel, of which Altitude controls 50%, on 7 June 2007 for 11 regions, and on 16 October 2007 for the two remaining regions: Franche-Comté and Rhône-Alpes. Bolloré Télécom holds licences in 12 regions (Aquitaine, Auvergne, Brittany, Corse, Franche-Comté, Ile-de- France, Upper Normandy, Limousin, Midi-Pyrénées, Picardie, Provence-Alpes-Côte d’Azur, Rhône-Alpes) and SHD (Neuf and SFR subsidiary) in 2 regions (Ile-de-France, Provence-Alpes-Côte d’Azur). And, finally, the firm Nomotech SAS has acquired a licence for the Morbihan département.

After the 30 June 2008, ARCEP approved the HDRR France plans to transfer licences to Bolloré Télécom in 8 regions. At the outcome of this transfer, HDRR France still held licences in three regions (Picardie, Languedoc-Roussillon and Limousin) and Bolloré Télécom became the licence-holder in 20 of the 22 regions in Metropolitan France (all except Alsace and Burgundy).

These transactions illustrate two trends: first, operators’ restructuring which has enabled the emergence of a virtually nationwide operator and, second, a fragmentation at the departmental level created by local authorities.

Lastly, operator IFW, which holds a national licence whose deployment deadline is later than the rest (December 2008), will be audited at a later time.

Licence-holders’ use of wireless local loop frequencies in the 3.5GHz band as of 30 June 2008

Outside Metropolitan France

In 2006, licences were also awarded in the geographical zones outside Metropolitan France. The following licence holders were thus also subject to the audit:

·         France Telecom (Saint-Pierre and Miquelon, Guyana and Mayotte)

·         Guetali (Mayotte)

·         Guyacom (Guyana)

·         Omtel SPM (Saint-Pierre and Miquelon)

·         STOI (Mayotte)

·         Mediaserv (Saint-Pierre and Miquelon)

In Metropolitan France

A total 526 sites have been deployed, of which 512 are operational with a commercial offering either available or scheduled to launch in the last quarter of 2008. HDRR France and Altitude Wireless are reporting several thousand customers connected (business and residential).

Three licence-holders have met their obligations in terms of the number of sites to be deployed: the Conseil général of the Haut-Rhin, the NiverLAN joint union (Nièvre) and the firm Nomotech SAS (Morbihan).

Half of the local authorities that have WLL licences are involved in a large-scale WiMAX rollout for which they have appointed a technical partner and mobilised substantial financing, even if no site has yet to be deployed. In many cases, the objectives for these projects exceed those contained in their licence (in number of sites and breadth of coverage).

The first commercial offers are available. They are aimed at both residential users (including services running at 2 Mbps downstream, 512 kbps upstream or 1 Mbps downstream, 128 kbps upstream) and businesses (including services delivering 4 Mbps downstream, 1 Mbps downstream and 8 Mbps symmetrical), providing broadband internet access at the same price as ASDL services, along with unmetered voice services for residential users for an additional €10 euros a month. Several thousand customers, both residential and business, already subscribe to these offers.

A regional inventory of rollouts reveals that of the 22 regions in Metropolitan France, 16 are equipped with their first sites and commercial offerings – the first rollouts having been achieved by private sector licence-holders in 13 regions and by public authorities in the other three. Pioneer deployments have taken place in a large percentage of the country, albeit in a disparate fashion.

Figures on the rollouts are presented in the tables below, which reveal, among other things that:

·         SHD has achieved significant deployments in its two regions. Commercial launch is scheduled for September 2008 (Numéo), and the wholesale offering has been available since March 2007;

·         Altitude Wireless has installed 212 sites in 7 regions and markets a commercial offer in four of its 13 regions;

·         HDRR France has transferred its licence in 8 regions. The company has met its obligations in terms of number of sites to be deployed in three of these regions (Upper Normandy, Pays de la Loire and Poitou-Charentes) and performed rollouts (63 sites) in the other regions, with the exception of Lower Normandy. In the three regions where HDRR France has kept its licence, significant rollouts have taken place in the Limousin where a commercial service is available (Numéo);

·         Bolloré Télécom is testing its equipment and has deployed trial sites in one of its 12 regions;

·         Nomotech SAS has deployed two sites in accordance with its obligations as of 30 June 2008, and the commercial launch of its services was scheduled for summer 2008.

The following tables provide a summary, by licence-holder and by region, of the extent to which licence-holders’ obligations had been met as of 30 June 2008 in terms of:

·         scale of deployment (number of sites);

·         proper use of frequencies. This obligation translates into the presence of at least one operational site and the availability of a commercial offering in each département.

Recap of licence-holder rollouts as of 30 June 2008

¹ CR: Conseil régional (Regional Council), CG: Conseil général (Departmental Council), OC: Overseas collectivity

Following the HDRR France transfer of 8 licences to Bolloré Télécom:

HDRR France and Bolloré Télécom rollouts following transfers

The information supplied by the licence-holders also made it possible to assess deployments in each region:

9/19

Altitude Wireless HDRR France Bolloré Télécom

10/19

SHD Local authorities and Nomotech SAS

11/19

The situation from one operator to the next is very disparate, with some licence-holders having not yet begun their deployments while others are altering their strategies, such as HDRR France which, although it had deployed sites, transferred 8 of its 11 licences to Bolloré Télécom which is continuing its trials and waiting for terminal equipment to be available in large volumes before undertaking its rollouts. SHD has completed around half of its planned deployments, and has been marketing a wholesale offer since March 2007.

And, lastly, Altitude Wireless is continuing its rollouts but only as part of projects financed by local authorities (whose role in the development of the wireless local loop is addressed in section 2.3.5).

Some local authorities, notably the Conseil général of the Dordogne and the overseas collectivity of Corsica, have opted for another broadband access technology – namely dead zone subscriber connection points or NRA-ZO (Nœuds de Raccordement Abonnés Zones d’Ombre).

Outside Metropolitan France

Deployments in Guyana have been achieved chiefly by Guyacom (5 operational sites and some 15 businesses connected) and France Telecom (2 sites installed but not operational). In Mayotte, Guetali has met its obligations and has a base of around 100 business customers. In Saint-Pierre and Miquelon, two France Telecom sites are operational.

2.1. Technological maturity and high volume availability

The technologies currently employed to develop the wireless local loop in the 3.4-3.6 GHz frequency band belong to the 802.16 family of standards defined by the IEEE and referred to commonly as WiMAX (Worldwide Interoperability for Microwave Access). Only the two latest versions (d and e) are currently being used.

• 802.16d version of WiMAX enabled connection of the first customers in rural areas

Version 802.16d has proven itself as a technology that works for delivering a fixed WLL service. It had the advantage of being mature and available. This technology was used for pioneer fixed rollouts back in 2006 and later by local operators developing their own equipment based on this standard.

• …but the market worldwide shifted to the more promising 802.16e standard

Market players around the globe, both equipment manufacturers and operators, have switched to the next version of WiMAX technology, namely 802.16e. Introduced later than anticipated, this technology – which enables roaming and announces better performance along with economies of scale at the global level – proved persuasive for most market players, including those wanting to provide a fixed service.

Mobile equipment manufacturers in particular began developing 802.16e-based products, and the entire market is now centred around the technology.

Meanwhile, version 802.16d is currently the focus of developments by only a handful of local players and by manufacturers offering hybrid 802.16d and 802.16e products that enable current installations to make the transition.

Operators in France thus elected to follow the same path as the global market.

• First 802.16e-based deployments are underway …

With the exception of a few local operators, current deployments are all being performed using the 802.16e norm, including those by operators whose first rollouts were based on 802.16d.

As it stands, a great many manufacturers are able to supply a large volume of base stations and terminals for fixed usage (with rooftop antenna).

The terminal equipment needed to enable roaming usage (PCMCIA cards) are just now becoming available.

• … but 802.16e technology does not yet deliver the announced level of performance…

According to operators, the performances by currently available equipment are below forecasts. In particular, coverage is 10% to 20% lower for an equivalent number of base stations, and indoor use is highly compromised by the equipment’s lack of maturity. Rollout budget forecasts were thus revised as a higher

13/19 number of base stations is needed to achieve the same coverage as what was stated in the licence-holders’ submissions.

In addition, according to one operator, the equipment’s current state of maturity still makes it impossible to provide a high quality telephony service using 802.16e.

• …and the equipment is not interoperable

One major obstacle cited by the WLL frequency licence-holders is the lack of interoperability between the terminals and the base stations employed for fixed usage, and no doubt for roaming as well. This lack of interoperability forces the players to perform more costly rollouts using a single supplier, added to which investments made to date may well be undermined if future equipment upgrades are needed.

WiMAX Forum certification of technical solutions has fallen behind schedule, with the timetable set in July 2006 indicating certification of the first equipment by the end of that year. This first wave of certification for equipment operating in the 2.6 GHz frequency band did not, in fact, occur until June 2008, and certification of 3.5 GHz-band equipment is now scheduled for late 2008 or early 2009.

This roadmap illustrates not only delays in manufacturing but also the fact that the development of equipment operating in the 3.4-3.6 GHz frequency band is closely bound up with the development of analoguous equipment operating in the 2.6 GHz band.

The future of this technology goes beyond just France, of course, and will be decided at the global level according to the leading manufacturers’ and operators’ commitments to large-scale projects in the 2.6 GHz and 3.5 GHz frequency bands.

2.2. Business models and windows of opportunity

When the WLL licences were delivered, two types of project had been identified for use of the 3.4-3.6 GHz band:

·         contribution to developing broadband coverage nationwide, particularly in those zones not covered by ADSL;

·         innovative endeavours in the area of roaming between fixed and mobile broadband, particularly in densely populated areas.

Both types of project are still on the table. Current wireless local loop deployments are focused on fixed usage, with pioneer rollouts and the launch of commercial services having been supported by public-initiative networks, for projects in sparsely populated areas, as a complement to zones covered by ADSL. WiMAX technology is, however, having to compete with new technological solutions such as the NRA-ZO (dead zone subscriber connection points) as well as proven technologies such as satellite and Wi-Fi.

In densely populated zones, as a solution for delivering broadband wireless roaming, WiMAX provides the market with innovative services between fixed and mobile broadband. But the below-par performances of the equipment thus far, the lack of suitable terminals and the lack of interoperability have all contributed to delaying rollouts.

These points are examined below.