France Télécom’s strategy: The end of the “grand project” model?
Although segments of the telecommunications market (notably, mobile telephone, and value added services) have been open to competition, France Télécom is by far the dominant actor on the telecommunications sphere. In 1994, its total revenues amounted to 130 billion FF, its net profit to 4,8 billion FF16 and its investments to 35,7 billion FF. Yet, the public operator has dramatically changed over the last years.
In many respects, France Télécom is no longer the powerful actor than it used to be. Following its transformation into a public corporation in January 1991, France Télécom has gone through a complex process of re-grading its employees in order to separate grades and actual functions. This created a climate of suspicion within the organization which hampered its dynamics. The separation of the operating and of the regulatory functions has also affected France Télécom. Although it has kept closed links with public authorities (and especially the Ministry of PTT), France Télécom is less influential in the design of French telecommunications policy.
More importantly, France Télécom does not seem to have a clear strategy for the future, or more exactly, there is an hesitation between different strategies. On the one hand France Télécom is tempted to get into the competition, to look for new markets in France or abroad, to be a "real enterprise". On the other hand, France Télécom is still marked by its public service and monopoly traditions. France Télécom's top managers do not know how to make the conflicting choice between the exciting, motivating, but uncertain and unstable, promises of new markets and the old, well-known, but outmoded, routines. Some people within the organization points out that France Télécom only works well when it has a grand projet as the catch-up telephone plan of 1975, the Minitel program of 1978 and the cable plan of 1982 were. But, while former heads of the public operator, such as Gérard Théry, could be portrayed as capitaines d'industrie fascinated by technical excellence, present top managers are more concerned with profit margins, cash flow, and other financial indicators17.
France Télécom's reaction to the Théry report has been rather negative, although not officially. The public operator refused to be imposed binding, costly and unrealistic provisions such as quantitative objectives or deadlines -as it was the case with the cable plan of 1982. It also disagreed on most of the options of the Théry report:
· the necessity to provide fiber to the home. According to France Télécom, the cost of an FTTH option would be too costly for residential users, at least until 2005 (Guieysse et al., 1995). The best option would be FTTC or FFTB depending on areas.
· the voluntarist approach. France Télécom officials think that the market for information services is narrow and mostly professional. Only some users will be able to afford IS. The approach should be market-driven. France Télécom is here quite in line with the Breton report according to which information services will develop slowly and will concern primarily businesses.
· the model for information provision. France Télécom wants to get rid of the Minitel model. In the opinion of the operator's officials, the impossibility to select and control information providers resulted in an overall poor quality of the system and a deteriorated image due to a few controversial services. It also created additional costs without no corresponding benefits.
Clearly enough, the preferred strategy of France Télécom for IS is to focus on specific applications and groups of users (vs. an universal approach) and to develop closed partnerships with selected service providers18. This move is already apparent in a number of projects that France Télécom has undertaken through its subsidiary France Télécom Multimédia (see table 4). Such a strategy may create an unprecedented problem for regulatory authorities. Since France Télécom will remain in the near future the dominant carrier, it will be necessary to ensure that other service providers have a fair access to the public operator's network and enjoy the same conditions than its partners.
[Insert Table 4 here.]
Cable operators’ strategies
Almost 15 years after the launch of the cable plan and an overall investment of 35 billion FF, France has no more than 1,6 million cable subscribers at the end of 1995 (see table 5). Cable operators are enduring big losses (estimated at 2 billion FF in 1994). In February 1995, the French major cable operator - a subsidiary of the Caisse des Dépôts - gave up business and its systems were taken over by the Compagnie Générale de Vidéocommunication and France Télécom Câble.
These bad results can be attributed to several factors. The technology initially chosen for cable systems (star architecture and fiber optic) has proven to be costly and cumbersome19. The programming offered at first on cable was not attractive: the major cable operators, which are subsidiaries of public utilities companies, tended to consider cable TV as another public utility and did not do any marketing effort. It is only when investments in specific programs for cable channels were made that consumers' interest for cable TV grew. Finally, numerous and heavy regulatory constraints apply to cable. For example, channels on cable have to be licensed. Since cable operators failed to get such licenses for Arabic channels, they lost many subscribers among the French Muslim population (which has turned to satellite reception).
[Insert Table 5 here.]
Cable operators have welcomed the governmental move to IS. They see it as an unique opportunity to get some fresh air by providing new services. They are especially interested in the regulatory changes that the IS policy could bring about in the domain of telephony, from which the are currently excluded. Trials projects from cable operators, including video-on-demand, access to on-line information services and the Internet as well as telephone service have been accepted by the government. However, the two-way capacities of current cable systems are questionable. To enable real interactivity, structural modifications and an upgrading of systems will be required. One can wonder how this investment will be financed given the situation of cable operators. The costs of the technology and the low penetration suggest that the introduction of new services on cable will proceed slowly, and likely in areas in which business users are concentrated.
The entry of cable operators in telecommunications services is backed by local authorities. In France, the building up of cable systems is authorized by cities. This responsibility allows local authorities to barter with cable operators the development of services which are useful to local communities or to the management of their own equipment (Dupuis, 1995). However, since cable has appeared in France, cities have not been very active in using cable systems. At best, local officials have tried to foster the development of city channels with the idea to exert influence on their constituencies. The use of cable systems for other purposes (access to administrative information, social services, educational channels, etc.) has been marginal. The move toward IS might change this situation. Some local officials have realized that the governmental initiative creates the conditions for a new assessment of the role, impact and regulation of telecommunications networks in cities. In this prospect, a number of local authorities has decided to engage in the IS trials to be launched