Very High Speed in France & International BB Pl ans

1. Very High Speed in France &International BB Plans Gabrielle Gauthey – Executive Vice-President Global Government & Public Affairs Broadband Forum Poland, Warsaw November 24, 2010

2. Agenda • Very high speed broadband deployment: the French Case • The Role of the Law • The Role Regulation • The Role of Public Policy • Local Authorities • “Caisse des Depots” • “Grand Emprunt” • International Examples & Conclusion

3. Very high speed deployment: the French CaseHigh Speed Deployment in France – International Comparison • OECD Average

4. Very High Speed Deployment: The French CaseRegulation:Combination of LLU and Bitstream (1) Where do we come from in Broadband deployments? • Competition through active infrastructures has been the main driver behind the development of broadband: • Geographic extension of competition has encouraged France Telecom to equip all of its MDF (Main Distribution Frames) for ADSL • France has joined European leaders in terms of penetration… • …and is in good place for "triple play" • Three major drivers have made this increase in investments possible: • Dynamic operators, both incumbent and new entrants • Regulation : LLU first, bitstream as a complement • Local authorities intervention has been crucial in the expansion of broadband coverage

5. Growth of the broadband access base(March 2010) Very High Speed Deployment: The French CaseRegulation: a Combination of LLU and Bitstream (2) DSL coverage as of March 31 2010: 98% of the population 1999 … 2002 2003 2004 2005 2006 2007 2008/2009 1st fixed-mobile Convergent offer 1st TV/DSL offer 1st Very high speed FTTH offer 1st broadband/ DSL offer 1st telephony /DSL offer 512kb/s 100 Mb/s 24Mb/s 8Mb/s 1Mb/s ADSL ADSL2+ FTTH Evolution of broadband technologies and services

6. Very High Speed Deployment: The French CaseThe new FTTH: Three Public Policy Levers • Legislative Lever – „Loi de modernisation de l‘economie“ – August 2009 • Sharing of the fibre last drop through mandatory agreements between operators and landlords • „Right to Fiber“ • Mandatory fiber pre-cabling for new buildings • Regulatory Lever – Market 4 analysis of July2009 • Asymmetrical regulation (duct access) • Symmetrical regulation (last drop and in-house wiring) • Public Policy Lever • „Caisse des Dépôts“ mandate • „Grand Emprunt“ • Intervention of local authorites

7. Very High Speed Deployment: The French CaseLegislative Measures Adopted to Facilitate the Roll-Out of FTTH in the buildings • The LME (Loi de Modernisation de l‘Economie) adopted in August 2009 deals with the deployment of fiber and sharing of the last part of the local loop among operators: • A „right to fiber“ has been instituted in order to facilitate the roll-out of fiber networks inside the building • In return, any operator that rolls-out fiber within a building has to give access to this fiber network to other operators: point of sharing is located outside the private property • A contractual agreement necessary for the relations between property owners and operators – ARCEP issued a draft agreement • In new buildings, pre-equipment standards have evolved to include fiber • The LME sets the rule of symmetrical regulation, in anticipation of article 12 Framework Directive • The LME grants ARCEP the power to define the technical and tariff related terms of the shared access and guarantee operators respect them

8. Very High Speed Deployment: The French CaseRegulation FTTH Roll-Out in Very Dense Areas • ARCEP decision on FTTH deployments in very dense areas ( 5 Millions households) • After 2 years of consultations and field trials, ARCEP published its final decision on January 17th 2010; • Duct Reference Offer available; • Fiber flexibility point (« point de mutualisation », PM) is located in the public domain and by exception in the private domain for buildings with more than 12 flats; • Arcep encourages co-investment in the last drop (i.e. in the building): prior to installing fibers in a building, every operator must notify its plans to other operators who are entitled to request a dedicated fiber (and bear associated costs); • Last drop will be multifibre in case of co-investment and mono-fibre otherwise; • All operators have published their commercial reference offers.

9. ARCEP Ongoing Public Consultation Very High Speed Deployment: The French Case Regulation: FTTH roll-out in medium/low density areas • Medium density urban areas represent around 10 Millions households and low density 10 million households • Fibre Flexibility Points (FFPs) • Last drop is shared from the flexibilty point till the end user • First operator deploying in a given area builds the FFP • FFPs concentrate a minimum of 300 fibres (average 1 000) • Mono vs Multifibre • In very dense areas, multibre is required at operator’s request • In less dense areas, a single fibre is the general rule for the last drop • Active equipment installation in the FFP • Active equipment ( e.g. OLT, Ethernet switch) may be located at the FFP • In case of technical or economical impossibility, FFP owner is required to provide dark fiber backhauling

10. Very High Speed Deployment: The French CaseRegulation: NGA - Active Infrastructure Competition Model Very dense areas : • Fiber flexibility point at building basement by exception (if MDU has more than 12 DUs) • Multi-fibre in the terminating segment (in-house wiring) in case of co-investment • Duct access Less dense areas : • Fiber flexibility point at cabinet level ( min 300 fibers) • Shared mono-fibre in terminating segment and in-house wiring • Duct access

11. Very High Speed Deployment: The French CaseLocating the Fibre Flexibility Point (FFP) Accomodates both Technologies “There are technology-agnostic architectures” “Positioning of the Fiber Distribution Point” Optical Network Terminals from operator Big Buildings Fiber Distribution Point Suburbs Optical patch panel (Passive) Operator 1 Operator 2 Rural areas Operator 1 stream Operator 2 stream

12. Very High Speed Deployment: The French CaseNGA Roll-out in France – FTTH and FTTB deployments

13. Very High Speed Deployment: The French Case NGA Roll-out in France – ARCEP Figures as of June 31 2010 • ARCEP estimates that, as of June 31, 2010 more than 4.5 million homes were located in an area where fiber has been rolled out in the access network. • A total of 40 000 buildings – accounting for 980 000 homes) - are equipped with optical fibers and connected to the network of at least one operator. • Of which 83 000 via fiber sharing agreement

14. Very High Speed Deployment: The French CaseLocal Authorities Interventions in Telecom Infrastructures in the Past 10 years • Legal form • Mainly DSP (« concessions »); • Choice by local authorities of one operator/delegator; • Wholesale offers negociated with local authorities; • Coverage imposed by local authorities; • Maximum 70% subsidy (=> operational risk left to the private delegator); • Network remains local authority’s property. • Operating mode • Graduation of intervention according to the density and the presence or absence of operators • Passive infrastructures in denser areas (mainly open fiber backhauls) with the objective to connect a maximum of NRF’s and wireless BTS • Equipement of business parks; • Activated whosesale offers in the less dense areas; • In some rural areas : retail operators

15. Other Selected TopicsOpen Wireline Backhaul key for both Mobile and Fixed Traffic Growth • Typical telecommunications network architecture Role of backhaul networks: • Cost effective coverage of medium and low density areas; • Stimulate competition and innovation; • Anticipate bandwidth demand increase for all access technologies (fibre, LTE, Wimax,…); • Future proof investment for public initiatives particularly for local authorities; • Enhanced connectivity for public services (schools, hospitals, universities,…) and business parks

16. Very High Speed Deployment: The French CaseLocal Authorities have Played a Crucial Role in Broadband Coverage • In recent years, local authorities have played a key role in the digital development of their regions in partnership with operators • Arcep first impact assessment: • 86 projects – 60 of which are running • 2.7 billion € invested (approx.50% public funds) • Major consequences : • Less expensive coverage of rural areas • Expansion of LLU, and wireless coverage • Fostering of local operators development • Preparation of the future of FTTx

17. Very High Speed Deployment: The French CaseRole of Local Authorities - Private Companies Operating Public Networks

18. NGA roll-out : role of local authorities Their role could be decisive : • Encourage the sharing of ducts when granting rights of way • Lay ducts and rent them to operators • Avoid inefficient duplication of basic infrastructure (ducts and even dark fibre) on reduced geographical areas which can be shared among operators • Have a lever effect on private investments • Promote the choice of a common optical loop topography by operators • Ensure a fait opening of the new optical loop • 29 registered local authorities engaged in FTTH roll-out

19. Very High Speed Deployments: French case study Policy lever : Precautions for local authorities intervention Precautions taken to avoid concerns and risks mentioned in the recent US GAO Governmement accountability Office) report Competition distortion : Maps, agreements with existing networks, … long term investment sustainability : privately run networks handle networks interoperability : few wholesale providers, common standards implemented

20. Public broadband infrastructure projectsTypical project structure The Roleof „Caisse des Dépôts“ Local authority Other local authorities / subsidies Subsidies Public Contract Equity • Caisse des Dépôts 30% • Project sponsors 70% Shareholders Special Purpose Vehicle Telco Client Design & Build Operation & Maintenance Sponsor 2 Sponsor 1

21. Very high speed deployment: the French CaseGovernment Role • Investment mandate to the “Caisse des Dépôts” • French state loan: • 2 B€ for very high speed networks • Long terms loans in medium dense areas • Subsidies for rural areas • 2,5 B€ for content, application and services (Web2.0, e-health, e-government, gaming software, …) applications development

22. Worldwide Trends and Conclusion • Active infrastructure based competition prevails, favoring operator’s vertical integration – passive infrastructure sharing encouraged - bit stream wholesale being considered as a second best except in UK (VULA) • EU Digital Agenda : universal bb coverage, bandwidth increase, national BB strategies required • State Aid scope has been broadened for fiber networks in suburban and remote areas – may accelerate fibre PPPs EMEA AMERICAS • US : Stimulus funds allocated through RUS focus on unserved and underserved areas – mainly for middle-mile projects ( interstate backhaul networks) • CALA : Broadband plans are heating up, focus on mobile open access and open backbones APAC • Functional separation (i.e. “shared access”) combined with bitstream wholesale and heavy regulation are leading network transformation (Singapore, Australia, NZ) aka NBNs – Open backbones in India. • Testbed for next generation bitstream wholesale and virtual unbundling

24. Public driven InitiativesA global trend Europe’s Digital Agenda • EU countries to adopt national VHS broadband strategies • 100% BB coverage in 2013 • 30 MBs connections for all in 2020 with 50% of EU citizens connected at 100 MBs China’s recovery plan • 4 Trillion RMB 09-10 • ICT included in pillar industries program India National Backbone • 4,5 B fiber backbone • 90% of population bb coverage by 2013 Australian National Broadband Network • 100 MB/s to 90% of subscribers • 43 B A$ ( 23 B€) New Zealand “Broadband Investment Initiative” • 1.5 B NZ$ investment plan announced in March 09 Connecting America Broadband Plan • Foster competition, innovation and investments • Ensure Spectrum availability • Universal broadband service • Develop broadbadn based services (e-health, e-education,...) Brazilian “Plano Nacional de Banda Larga” • Connectivity for 50% of urban hh and 15% of rural hh • 60 M mobile access • 41 M $ capex (1/3 public, 2/3 private) French digital plan • 2 B € for very high speed BB roll-out in grey and white areas • 2,5 b € for services/applications • FTTH roll-out regulation (geographic segmentation) • Digital dividend release Digital Britain • 2 Mb/s universal broadband access service in 2012 • 200 M£ NGA fund German Broadband Plan • 100% bb coverage by end 2010 • 75% of hh access at 50 Mb/s by end 2014 • Spectrum allocation for LTE + Draft bradband plans in Greece, Italy, Poland, Russia,...

25. 21,2 M households 988 CO unbunling : local community bakchaul network 4,3 M households 773 CO unbundlig : alternative carriers backhaul networks + France Telecom dark fiber rental 2,4 M households 913 CO unbundling : alternative carriers backhaul networks 14,4 M households Number of unbundled CO’s according to backhaul network ownership Impact on unbundling 40 % of French central offices are unbundled through Local Communities backhaul networks by end 2009

26. Broadband Penetration by Technology

27. Very high speed deployment: the French CaseRural Deployments in France • Despite the homogeneous need of telecommunication services in rural and dense areas, there is a mismatch in BB deployment (PC penetration in rural zones is higher as PC penetration in intermediary zones): • In rural zones Orange is clearly the dominant operator (market share of Orange inversly proportional to the size of the agglomeration), namely: • 64% of the communities with less than 5‘000 inhabitants • 34% in bigger communities • 32% in Paris and Paris region Source: ARCEP 2010

28. Very high speed deployment: the French CaseBroadband Access Market Growth and Competition • Situation July 2010: 20 M broadband connections (residential and professional services) of which more than 19 M in ADSL • 10.3 M access lines commercialized by alternative operators, 7.14 millions total unbundling • 80% of the competitive offers take advantage of full unbundling

29. Selected Examples of Deployments in France (1)Fiber Backhauling Availability in Moselle Department • France Telecom’s dark fiber offer (not regulated) is not available everywhere ( red : not available, black : available) • Public Initiative backhauling network connect most of incumbent’s central offices to enable copper unbundling • France Telecom dark fiber offer is commercially driven. It’s tariffs do not reflect a territorial digital policy. It’s architecture serves FT’s internal needs (central offices interconnexion) • Public Initiative backhauling networks may connect business parks, business districts, company offices, public buildings, poles and masts where base stations require backhaul facilities ( 3G, LTE,…)

30. Selected Examples of Deployments in France (2)Manche Numérique • Backbone network (1200 km) managed as « affermage »/public concession by LD Collectivités (private company) • Total cost: 79 M€, of which: • 24 M€ public sector (16 M€ from the Department) • 2008 : FTTh extension to Saint Lô and Cherbourg : 12 M€ 100% private funding. • Results : • 40 business districts connected to fibre backhaul • Unbundling of all incumbent’s central offices (6 competing operators cover 35% of the population; 2 competing opérators in all rural central offices) • White zones wireless coverage: 4 M€ (210 WiFi spots) • 26 000 FttH homes passed • National operators presence : Neuf Cégétel, Colt, Complétel; Free • Local operators : Nomotech, RMI Adista, Idylle Télécom