Download - Arthur D. Little

“The Economics of Telecoms” Report
2013 edition
5 December 2013
Arthur D. Little for the Fédération Française des Télécoms
Arthur D. Little
51, rue François 1er
75008 Paris
France
Telephone + 33 1 55 74 29 00
Fax +33 1 55 74 28 03
www.adlittle.fr
RCS Paris B 432 722 072
Agenda
1
The telecom sector contributes to shaping the future of the French economy
2
Despite a difficult environment, telecom operators are sustaining their level of investment
3
The European approach needs to change to favor investments
4
Two issues to deal with as priorities
5
Conclusion: For a digital New Deal
2
1
Telecoms: shapers of the French economy’s future
Telecom operators are creating value for the French economy
Efficiency improvements for the economic players
Consumers
Business
Strong growth in telecom services
usage: mobile Internet usage has
multiplied by 200 since 2006
22% price decrease since 2006
15% gain in profitability for SMEs
thanks to the telecom sector
58% of employees use mobile
connected devices to do 3/4 of their
work
State
In 2012, telecom operators paid
87% of the digital ecosystem’s
taxes, while OTT players paid only
1%
Multiplier effect on the economy as a whole
Economy
Telecom operators injected
245 bn€ into the French economy
between 2006 and 2012
Amounts invested in
telecommunication networks
generate 6 times more wealth and 3
times more State revenues
Upgrading broadband speed
generates positive macroeconomic
effects such as:
– Time savings and productivity gains
– Emergence of new players (cloud,
catch-up TV, VOD…)
– Job creation
– Environmental gains
– Social welfare
Source: INSEE, ARCEP, SQW, Google, IDC , Arthur D. Little analysis
3
1
Telecoms: shapers of the French economy’s future
Usage of telecommunication services is soaring, while prices are falling down
Telecoms’ usage in strong growth
Telecom’s prices falling down
Mobile voice
SMS
Mobile data
Billions of minutes
+28%
Billions of SMS
x12
Billions of MB
x200
119.9
183.1
Base 100 in 2006,
consumer price index evolution
145
123
100.1
94.0
120
115
15.1
2006
2012
2006
0.5
2012
2006
110
2012
Fixed voice
Fixed Internet1
Catch-up TV
Billions of minutes
+5%
Millions of subscribers
X3.5
Millions of videos
105.4
110.8
144
24.0
120
118
117
111
109
105
Gas
+ 44%
Electricity
+ 23%
Transport
by rail
+ 20%
Postal
services
Tolls &
parking
+ 18%
Inflation
+ 11%
Financial
services
100
+ 17%
+ 9%
95
90
2.5
89
85
80
6,6
0.0
2006
2012
2006
2012
Source: INSEE, ARCEP, CNC, Arthur D. Little analysis
2006
Fixed and
78 mobile
75
2012
(1)
(2)
2006 2007 2008 2009 2010 2011 2012 20132
telecom
service
-22%
All Internet access with a minimal speed of 0.128Mb/s
Average on H1 2013
4
1
Telecoms: shapers of the French economy’s future
Business and administration productivity is supported by the telecom industry
Increase of productivity for businesses
and employees
gain for SMEs thanks to
+15% Profitability
telecoms:
+7% cost reduction (purchasing,
Savings for the French administration
€780m of savings and increase in revenues per year
with the new online tax system
In € millions
marketing)
+8% revenues increase
(new customer segments, increased
commercial reach)
-7%
Reduction of travel costs thanks to
telecommunication services (phone,
mail, conferences)
486
294
Increase in revenues
Savings
780
€1.5bn savings per year due to the e-health “Vitale”
card
Cost of processing a medical reimbursement, in €
-84%
58%
Of employees use mobile connected
devices for 3 quarters of their tasks
1.70€
0.30€
Regular Post Electronic
processing processing
Source: Cisco, Google, IDC, Arthur D. Little analysis
Source: Sénat, Cour des Comptes, INSEE, Arthur D. Little analysis
5
1
Telecoms: shapers of the French economy’s future
In the French digital ecosystem, telecommunication operators account for 90% of
investments and 61% of revenues
Revenues, jobs, investments and taxes 2012
of 5 major players by sub-sector in France
Revenues1,2:
€69 bn
Investments3:
€8.3 bn
Nr of direct jobs:
170,000
3%
10%
3%
1%
3%
2%
12%
14%
12%
1%
7%
Taxes and licenses4:
€6.7 bn
10%
1%
1%
1%
61%
4%
76%
87%
90%
5 telecom
operators
Orange, SFR,
Bouygues Telecom,
iliad, numericable
Source: ARCEP, Diane, Reuters, annual
reports, Arthur D. Little analysis
5 equipment
vendors
NokiaSiemensNetwork,
Ericsson, AlcatelLucent, Cisco, Huawei
5 device
manufacturers
Samsung, Nokia,
LG, Apple, RIM
(1) Revenue declared or published in the press
(2) Data adapted to take into account the estimated effective
revenues of Internet players in France
5 content
players
France Télévisions,
TF1, Canal+, Radio
France, M6
5 Internet
OTT players
Google, Amazon,
Yahoo, Facebook,
Microsoft
(3) Excluding licenses; if data unavailable, estimation based on the number of
jobs located in France
(4) Taxes on businesses, other taxes and assimilated payments excluding
VAT and licenses
6
1
Telecoms: shapers of the French economy’s future
The contribution of telecom operators to the economy is more important than the
contribution of other players in the digital ecosystem, despite decreasing revenues
Evolution of revenues compared to 2011 ̶ Jobs, investments and taxes for 1bn€ of revenues 2012
of 5 major players by sub-sector in France
Nr of jobs for each
1€bn of revenues 1,2 :
Revenues 1,2:
Revenue evolution 2012 vs 2011
4,809
€m invested3 for each
1 €bn of revenues 1,2:
€m of taxes4 for each
1 €bn of revenues 1,2:
180
139
26%
3,109
14%
17%
67
2,166
38
753
1%
-4%
5 telecom
operators
Orange, SFR,
Bouygues Telecom,
iliad, numericable
Source: ARCEP, Diane, Reuters, annual
reports, Arthur D. Little analysis
28 29 27
26
7
255
5 equipment
vendors
NokiaSiemensNetwork,
Ericsson, AlcatelLucent, Cisco, Huawei
5 device
manufacturers
Samsung, Nokia,
LG, Apple, RIM
(1) Revenue declared or published in the press
(2) Data adapted to take into account the estimated effective
revenues of Internet players in France
5 content
players
France Télévisions,
TF1, Canal+, Radio
France, M6
10
5 Internet
OTT players
Google, Amazon,
Yahoo, Facebook,
Microsoft
(3) Excluding licenses; if data unavailable, estimation based on the number of
jobs located in France
(4) Taxes on businesses, other taxes and assimilated payments excluding
VAT and licenses
7
1
Telecoms: shapers of the French economy’s future
Telecom operators contribute heavily to France’s GDP growth, unlike the “GAFAM1”
Value injected by telecom operators
into the economy between 2006 and 2012
Share of the added value realized in France
accounted3 in the national GDP4 – 2012
In billion euros
245 bn€
10%
100%
24 bn€ to private shareholders
30 bn€ to the French State through
12%
taxes (excl. VAT), licenses and
dividends
19%
49 bn€ in the roll out, upgrade and
22%
23%
maintenance of telecom networks
Orange
SFR
Bouygues
Telecom
iliad
numericable
56 bn€ in other expenditures
(marketing, distribution)
92 bn€ in direct and indirect
37%
salaries2 and benefits
3/4 of the added value realized in France by the “GAFAM1”
are not accounted for in the French GDP growth
2006 - 2012
Source: Diane, annual reports, press, Arthur D. Little analysis
Google
Apple
Facebook
Amazon
Microsoft
(1)
(2)
(3)
(4)
Google, Apple, Facebook, Amazon, Microsoft
Including wages and social charges
Declared added value compared to estimated added value
GDP = sum of declared added value in France
8
1
Telecoms: shapers of the French economy’s future
Telecoms have a multiplier effect on the economy, as telecom investment yields 6
times the amount invested for the French economy
Multiplier effect of telecom investment on the economy and income generation for the French State
2013-2022
In € billions
French GDP in 2022:
Examples of induced
effects on the economy
46% of compulsory levy
on GDP
+1pts to +1.3pts
Time and productivity
gains for enterprises
112 - 144
52 - 67
20 - 25
Telecom operators’
investment in broadband
networks (fixed and mobile)
Cumulative creation of
added value (GDP) in France
Taxes and
levies
Time savings and
customer experience
improvement
Emergence of new
sectors of activities
and new players
∑(2013 – 2022)
1 euro invested in broadband networks creates 6 euros of GDP, which represents 3 euros of revenue for the State
Source: INSEE, IDATE, ARCEP broadband observatory, Arthur D. Little Ericsson Chalmers university of technology “Socioeconomic effects of broadband
speeds”, French State finance law project 2013 report on compulsory levy and their evolution, Arthur D. Little analysis
9
1
Telecoms: shapers of the French economy’s future
The existence of reliable infrastructures fosters the emergence of innovative
players, leaders in their markets
Sectors
Payment
Transport
Animation
Computer-aided
design
Leaders
GEMALTO:
Global leader of
smart cards
Oberthur
Ingenico:
Technologies: Global leader of
2nd player of smart
EPT1
cards worldwide
MAC
GUFF
Inforad
European leader
of events sales
Global leader of 3D
conception
discount.com
2nd e-commerce
website in France
Source: FEVAD, Companies, press, Arthur D. Little analysis
Leaders
Deezer
Leader of online music listening
services2 in France
Dailymotion
Video
Folimage
Les
Autochenille
Armateurs
World’s 3rd in animation industry
Dassault
Systemes
Music
Wikango
Coyote:
Leader of driving assistance
systems in France
vente-privee.com
E-commerce
Sectors
2nd biggest video platform
in the world
Ubisoft
Video games
Dating sites
Professional
social networks
(1)
(2)
VLC
Most downloaded
software in France
Gameloft
European leader of
video games
French leader
of mobile gaming
Meetic
European leader
of dating sites
Viadeo
French leader of
professional social
networks
EPT: Electronic payment terminals
Ranking in number of paying users for streaming services or
podcasts, excluding direct download
10
Agenda
1
The telecom sector contributes to shape the future of the French economy
2
Despite a difficult environment, telecom operators are sustaining their level of investment
3
The European approach needs to change to favor investments
4
Two issues to deal with as priorities
5
Conclusion: For a digital New Deal
11
2
Sustaining investment level in a difficult environment
Despite lower revenues and margins, telecom operators continue to invest
significantly
Evolution of revenue, EBITDA, CAPEX and cash flows
- telecom operators in France1 In billion euros
In percentage of revenue
44.7
37.4
35%
23%
12%
2006
46.6
46.4
45.9
44.8
Revenue
40.0
37%
34%
34%
33%
35%
24%
28.3%
25%
11%
12%
2007
2008
EBITDA
23%
11%
19%
13%
14%
14.5% CAPEX
13.8% EBITDA - CAPEX
2009
Source: ARCEP, Diane, annual reports, operators’ communication,
Arthur D. Little analysis
21%
2010
(1)
2011
2012
Atos Worldline, Bouygues Telecom, Breizh mobile, BT, Casino Mobile, CIC Mobile, Cofidis Mobile,
Colt France, Crédit Mutuel Mobile, DartyBox, Hub Telecom, Iliad, La Poste Mobile, M6 Mobile,
Naxos, Numericable, NRJ Mobile, Orange-France Télécom, Prosodie, SFR, Télé 2 mobile,
12
Universal Mobile, Verizon Business, Virgin Mobile, Wifirst
2
Sustaining investment level in a difficult environment
Telecom’s investment level in France reached a new record in 2012, far above that of
other private infrastructure networks
Telecom’s investment in France – 2006-2012
Excluding mobile
license fees
In billion euros
7.0
6.2
Mobile 3.2
2.4
6.5
6.8
7.0
2.4
2.4
7.3
Investment in privately owned
infrastructures in France
Yearly average, 2006 - 2012, in billion euros1
6.8
5.9
2.4
4.0
19 bn€
2.2
3.7
Fixed 3.8
3.8
4.1
3.7
4.4
4.6
3.5
1.8
3.3
28 bn€
Telecom3
2006 2007 2008 2009 2010 2011 2012
Source: “Association des Sociétés Françaises d’Autoroutes“ (ASFA),
RFF, RTE, ERDF, ARCEP, Diane, Reuters, annual
reports, Arthur D. Little analysis
(1)
(2)
(3)
Electricity: Rail network Highways
transport &
distribution2
Telecoms: Orange, SFR, Bouygues Telecom, Iliad, Numéricâble; Electricité: RTE et ERDF; Réseau Ferré
de France: statut d’EPIC; Autoroutes: ASFA (Sanef, SAPN, ASF….)
Average for 2008–2012
Excluding mobile license fees
13
2
Sustaining investment level in a difficult environment
Telecom operators have rolled out high-quality networks and are now investing at a
steady pace in tomorrow’s networks
Present networks
Tomorrow’s networks
3G coverage in population percentage
75%
58%
Mobile
99.7%
89%
4G coverage in population percentage and
antennas number
11345
63%
25%
0
0%
2002
2004
2006
2008
2010
2012
2014
DSL(1) coverage in population percentage
82%
Fixed
LW1
2010
0
558
2011
2012
10%
FttH coverage in percentage of households
99.3%
96% 97% 98%
9%
62%
25%
6%
3%
2000 2002 2004 2006 2008 2010 2012 2014 2010
Source: ARCEP, ANFR, operators’ communication, Arthur D Little analysis
2013
(1)
4%
2011
2012
2013
Digital Subscriber Line
14
Slide 14
LW1
Can't edit this chart - the number 11345 needs a comma added after the 11.
Lindsay Wilson; 04.01.2015
2
Sustaining investment level in a difficult environment
Operators are offering growing broadband speeds and widening their content offers
Strong growth in
broadband speed
Wider content offers
Average speed, Mbps1
1,54
x 20
LW2
Up to 130 TV channels included
Premium applications including
Deezer, Napster, iCoyote,
Cinédays…
Creation of new services
“Connected household” services
(Security, home automation, smart
meter)
Mobile
0,08
Cloud storage services
2007
2012
Average speed, Mbps
+177%
8.8
Transformation of the box in the
household’s media center
Integrated hard
TV: up to 500
channels (70 HD) drive (320Go)
Fixed
3.2
2007
Music
S1 2013
Photos
Multi-SIM offers with several
complementary SIM cards for
tablets included in the contract
Home signal amplifier (femtocell)
Replay offer: TV on demand,
simultaneous recordings
Source: Opérateurs, ARCEP, Akamai, Degrouptest, Arthur D Little analysis
(1)
Download speed reached for 90% of the measures on the best-sold
smartphones
15
Slide 15
LW2
Can't edit this chart - the commas in the numbers need changing to decimals.
Lindsay Wilson; 04.01.2015
2
Sustaining investment level in a difficult environment
Thanks to investment in broadband networks, telecom operators improve the
customer experience and support the development of the usage of telecom services
Case of Palaiseau FttH(1) connected city
4G impact on customers’ comfort
90% of households are eligible for a FttH(1)
100Mbps connection
Gain in time in everyday life:
Percentage of users in France saying that 4G helps them
save time
Strong growth in the use of services
– x3 on the volume of downloaded data
85%
Usage increase
Percentage of users in France using video conference
services
56%
– x3 on the consumption of video on demand
– x3 on customers subscribing to paying TV
31%
– x7 on the consumption of catch-up TV
Stronger interactivity
New services
– x8 on the volume of uploaded data
– Reduction of the asymmetry between upload
and download
Source: TNS, operators, press (zdnet, clubic), Arthur D. Little analysis
Mobile
HD TV
(1)
before 4G
HD
Video call
4G
Instant
navigation
Augmented
reality
Fiber to the Home
16
Agenda
1
The telecom sector contributes to shape the future of the French economy
2
Despite a difficult environment, telecom operators are sustaining their level of investment
3
The European approach needs to change to favor investments
4
Two issues to deal with as priorities
5
Conclusion: For a digital New Deal
17
3
Favoring investment through a different European approach
The European approach towards the digital sector has contributed to the industrial
decline of the continent
Ambitious goals but a short-term regulation focused on
competition and development of demand
Framework for network rollout
Access to affordable
communication
infrastructure
of best-in-class quality
Infrastructure-based competition
State help in lower-density areas
Decline of the European ecosystem
Operators
Revenue share of European
operators in the world top 30
30%
2006
2012
Device manufacturers
Framework in favor of consumers
Market share of European
device manufacturers in the
global market
47%
2000
Regulated tariffs of certain services
18%
2012
Equipment
2000
Lisbon’s strategy
“The most competitive
and dynamic knowledge
economy in the world”
42%
Market share of European
mobile equipment
manufacturers1 in the global
market
Lack of initiatives supporting
innovation and investment
The 2013 regulation project of the European Commission
heads in the same short-term consumer-oriented direction
Internet players
Share of European businesses
with Internet players
(capitalization exceeding
1.5M$)
98%
2000
62%
2012
2%
Source: European council communication regarding Lisbon’s initiative March 23rd, IDC, CGSP, BoA-Merrill Lynch, Thomson Reuters, equipment manufacturers’
annual reports, Arthur D. Little analysis
(1) Businesses considered: 2000: Alcatel, Ericsson, Lucent, Motorola, Nokia Networks, Nortel, Siemens Networks; 2012: Nokia, Ericsson, Alcatel-Lucent, Huawei, Motorola, NSN, ZTE 18
3
Favoring investment through a different European approach
The growth in other geographical areas shows that Europe’s decline is not a fatality
Revenue evolution of the top 30 players of each sub-sector of the digital ecosystem by nationality1
In billion dollars
2007–2012 Growth
+35%
2,962
20
978
3,190
24
3,181
20
1,122
1,175
3,452
21
3,760
27
1,441
4,008
26
+28%
Oceania
1,560
+59%
Asia
+101%
South America
North America
1,317
66
70
85
42
37
45
1,200
1,295
1,266
1,382
1,559
1,676
+40%
722
712
673
666
664
662
-8%
2007
2008
2009
2010
2011
2012
Source: Thomson Reuters, Arthur D. Little analysis
Europe
(1) Top-30 players according to their revenue in each sub-sector:
Content, software, network equipment, Internet players, telecom operators
Players are classified according to the nationality of their head office 19
3
Favoring investment through a different European approach
Unlike in other regions, European telecom operators have hardly grown in 6 years,
which resulted in a sharp drop in value
Revenue of the top 30 telecom operators
by region 1
Basis 100 in 2006
Market cap of the top 30 telecom operators
by region 1
Basis 100 in 2006
185
Asia
+85%
North America
+65%
165
+18%
118
150
World
Asia
+50%
100
102
96
North America
+2%
World
-4%
68
Europe
109
Europe
100
2006
2007
2008
2009
2010
2011
2012
European telecom revenue growth is 7 to 9
lower than that in Asia and North America
-32%
+9%
2006 2007 2008 2009 2010 2011 2012
times
Source: Thomson Reuters, Banque mondiale, Arthur D. Little analysis
European telecom value shrank by 32% between 2006
and 2012
(1)
Top 30 players according to their revenues
Players are classified according to the nationality of their head offices; revenue growth
of Australian and South American players are respectively 52% and 162%
20
3
Favoring investment through a different European approach
In their core markets, OTT players enjoy strong positions while facing numerous
operators
Market share – Europe 2012
Search engines
Numerous European operators
Social networks
48%
150m connected households…
92%
Google
Online video
58%
YouTube
Facebook
Music
63%
Apple iTunes1
Source: Comscore, NPD Group, Nielsen, analyse Arthur D. Little
Note: 1)Market share in number of users except music(revenues)
…shared between more than 100 operators
(1) Market share worldwide
21
3
Favoring investment through a different European approach
Europe has seen only a few leading companies emerge in digital services
Market
Top 31
Nationality
Samsung
Smartphones
Market
Video on
demand3
Apple
Huawei
Skype
fring
Social
networks
Yahoo
Music4
VoIP2
Viper
Search
engines
Video
platforms
Google
Top 31
Nationality
Netflix
hulu
iTunes
Facebook
Twitter
Weibo
iTunes
Baidu
Spotify
Soundcloud
iCloud
YouTube
Dailymotion
Cloud solutions
dropbox
SkyDrive
metacafe
Apart from a few notable exceptions (Dailymotion, Spotify), the majority of companies in digital services stem from
America or Asia
Source: Strategy Analytics, Netmarketshare, Alexa, eBizMBA,
Cloud services Review, Soundcloud, Analysys
Mason, Techcrunch, Arthur D. Little analysis
(1)
(2)
(3)
(4)
Ranking according to the number of users
Voice over Internet Protocol
Legal downloading platform (iTunes) or paying services (ex: Netflix, Hulu)
Ranking according to the number of paying users for web radio or streaming services
22
Agenda
1
The telecom sector contributes to shape the future of the French economy
2
Despite a difficult environment, telecom operators are sustaining their level of investment
3
The European approach needs to change to favor investments
4
Two issues to deal with as priorities
5
Conclusion: For a digital New Deal
23
4
Two issues to deal with as priorities
1
No long-term strategic vision
in favor of investment
2
Loss of leadership of Europe and France
in the digital ecosystem
24
4
1
Two issues to deal with as priorities
The telecom sector bears heavy and long-term investment requirements
Return on investment timeframe for various business sectors(2) –
20 largest CAC40 companies, 2013
Estimated minimal period for return on investment (1 / ROCE(1)), in years
26 years
Utilities and environmental services
23 years
Telecoms
20 years
Health
19 years
Consumer goods
18 years
Construction
13 years
Industry
11 years
Food and agriculture
11 years
Luxury goods
Oil
Source: Thomson Reuters, Arthur D. Little analysis
7 years
(1) ROCE: return on capital employed is the ratio between income and invested capitals, (EBIT/capital employed)
(2) Utilities: EDF, Veolia, GDF-Suez ; Construction: Saint Gobain, Vinci ; Telecoms: Orange, Vivendi, Bouygues ; Consumer goods: Carrefour, Casino; Health:
Sanofi; Industry: Renault, Michelin, Schneider Electric; Luxury goods: LVMH, Dior, L'Oréal; Food and agriculture: Danone; Oil: Total
25
4
1
Two issues to deal with as priorities
Legal and regulatory cycles are not in line with the long cycles of telecom
investment
Unbalanced situation between investment, technological, regulation and tax cycle
Investment
cycles
>20 years
Technological
cycles
~10 years
European
regulation cycles
French
tax cycles
~5 years
~1 year
Source: operators, ARCEP, European commission,
Journal Officiel, infinancials, FFT
Thomson Reuters, Arthur D. Little analysis
Around 1991: 2G
Around 2001: 3G
Around 2013: 4G
2002: 1st telecom regulatory package
2007: Roaming I, amended in 2009
2007: 2nd regulatory package
2012: Roaming II
2013: CE regulation project
2014: 3rd regulatory package
French legal cycles ~1year
2002: “LOPPSI 1”
2004: “LCEN”
2006: “DADVSI”
2008: “Loi Chatel”
2008: “LME”
2009: “Hadopi”
2009: “Loi Pintat”
2010: “Loi jeux en ligne”
2011: “Loppsi 2”
2013: “PJL
consommation”
2007: Creation of the TSTD1
2009: Creation of the “Taxe Télécom”2
2010: Creation of the IFER
2011: VAT increase on multiplay offers
2013: New scale for the private copying levy
2014: Increase of the corporate tax on benefits
(1) Tax on television services
(2) Tax based on operators’ revenues financing French public television
NB: For technological cycles, licenses' attribution in France
26
4
1
Two issues to deal with as priorities
Telecom investment constitutes a powerful lever for the economy and for State
revenues
Effect of an additional investment of 2 bn€ in broadband networks
In billion euros
122-155
8-11
56-72
4-5
112-144
+€2 bn
over 10 years
of additional
investment in superfast broadband…
52-67
22-27
2
20-25
Investment in superfast broadband
Cumulated GDP
growth in France
∑(2013–2022)
…would generate
+€5 bn in taxes, of
which +€3 bn before
2017
Taxes and levies
NB: Non-discounted amounts
Source: INSEE, IDATE, ARCEP broadband observatory, Arthur D. Little Ericsson Chalmers university of technology ”Socioeconomic effects of broadband
speeds” ,State finance law project 2013 report on compulsory levy and their evolution, Arthur D. Little analysis
27
4
2
Two issues to deal with as priorities
Regulation is focusing on players that contribute the most to national wealth
Players’ regulation
Income tax in France
2012, in percentage of revenues1
Regulation of French telecom operators
ARCEP
CSA
4.49%
European
Commission
Competition
Authority
French telecom
operators
DGCCRF
CNIL
0.42%
Regulation tools are inefficient and not adapted to apply
competition rules to OTTs’ market, i.e.:
– 1995 general framework doesn’t apply to operators based
outside of the EU
– Private copy directive applies only to telecom operators
Source: comScore, ARCEP, Diane, annual reports, press, Arthur D. Little analysis
French telecom
operators
(1)
"GAFAM"
(Google, Apple, Facebook,
Amazon, Microsoft)
Revenues estimates for the “GAFAM”
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4
2
Two issues to deal with as priorities
The outburst of services located outside of the European Union requires creation of
a strong trust relationship between users and the networks
French population survey
46% of the revenues of the data center market
is located in North America
48%
of French people fear the consultation
of their personal data by a third party
92% of French people wish to impose
a time limit for the conservation of their
personal data
66% of French people do not trust websites with safeguarding their personal
data; for example, social networks such as Facebook or e-commerce websites
“Regarding the use of Internet means for economic intelligence, our country and our businesses are
not sufficiently aware of the dangers that Internet represents. This is one of tomorrow’s biggest
challenges” – Patrick Calvar, National director of the French counter-intelligence agency
Source: Caisse des dépôts, IFOP, IDATE, Gartner, Institut BVA, Arthur D. Little analysis
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4
2
Two issues to deal with as priorities
Development of future digital businesses depends on the existence of efficient
networks and telecommunication services
Future
businesses
Big Data
Leaders
& potential leaders
Software & embedded
systems
Digital hospital
E-learning
ingensi
talend
Cloudwait
OHV.com
NUMERGY
Dassault
Systemes
Leaders
& potential leaders
coorpacademy
Criteo
Cloud computing
Future
businesses
Sopra
Telecom sovereignty
Alcatel-Lucent
Connected objects
netatmo
Thales
Orange
EyeTechCare
ingenico
Augmented reality
gemalto
Buyster
Contactless services
Oberthur Technologies
Linky
Denko
Schneider
Electric
gemalto
Oberthur Technologies
Withings
Parrot
AUGMENT
Total Immersion
Santech
Smart grids
OpenClassrooms
EDUNAO
denyall
Cyber security
Auto-piloted vehicles Renault
inwebo
Peugeot
Bull
Valeo
Source: French government press release 12th September 2013 (34 industries), Alcatel-Lucent (white paper ”Smart Choices for the Smart Grid”),
campustechnology.com, CIO.com, (“Fast broadband critical to future of education: teachers”), Arthur D. Little analysis
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Agenda
1
The telecom sector contributes to shape the future of the French economy
2
Despite a difficult environment, telecom operators are sustaining their level of investment
3
The European approach needs to change to favor investments
4
Two issues to deal with as priorities
5
Conclusion: For a digital New Deal
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5
For a digital New Deal
Given the strong growth in telecom services usage and the economic context, it is
critical to support the investment effort of telecommunication operators
Usage of telecom services is growing
strongly
x 200
Mobile Internet usage since 2006
The European approach has had
negative consequences
-32%
Decline of market capitalization of
European telecom operators between
2006 and 2012
Operators have nonetheless
maintained their investment level in
an uncertain environment
14.5%
Of operators’ revenues were invested
in 2012
>100 bn€
Of cumulated GDP will be created
between 2013 and 2022 by operators’
investment in super-fast broadband
networks
The telecom sector has a major
boosting effect on the French
economy
Source: Fédération Française des Télécoms, Arthur D. Little
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5
For a digital New Deal
For a digital New Deal that will foster telecommunication investment (1/3)
Develop a strategic long-term vision to foster a
productive investment
Restore European and French leadership in the digital
industry
Source: Fédération Française des Télécoms, Arthur D. Little
33
5
For a digital New Deal
For a digital New Deal that will foster telecommunication investment (2/3)
1
Guarantee predictability and stability of the regulatory
environment to ensure the necessary visibility for investment
– Prepare the new telecom regulatory package within the context of a strategic vision for
the industry
– Shift from a microeconomic to a macroeconomic regulatory system designed to foster
the development of European players
Develop a
strategic longterm vision to
foster a
productive
investment
– Carry out detailed impact studies before any change in regulation
– Ensure consistent management of the radio spectrum with an industrial logic
– Implement the European roaming framework adopted in 2012
2
Implement tax incentives and financial mechanisms to foster
investment in the telecommunication sector
– Reduce the over-taxation of telecommunication operators
– Release €2 billion over 10 years to accelerate private investments in accordance with
the plan “France high-speed broadband”
Source: Fédération Française des Télécoms, Arthur D. Little
34
5
For a digital New Deal
For a digital New Deal that will foster telecommunication investment (3/3)
3
Establish a tax and regulatory playing field among all players of
the digital ecosystem
– Apply the principle of ”same rules for competing businesses”
– Terminate the possibility given to OTT players to massively reduce their European taxes,
with a new international tax regime
– Widen the taxation base of OTT players to specific sector charges
– Spread widely in Europe the concept of “restrictive practice” in order to apply it to global
OTT players
Restore
European and
French
leadership in the
digital industry
Reinforce confidence in networks in the digital era
4
5
– Carry out the digital identity project based on SIM cards (requires a strong political
leadership of the State and/or Europe)
– Set up and promote a European certification for data storage
– Certify software and critical equipment distributed in Europe
Stimulate the development of future digital businesses through
public authorities initiation
– Ensure the exemplary role of the State to foster the usage of digital services without
excluding alternative European solutions (secured public cloud, NFC in public transport,
extension of the MOOC1 objectives especially for professional training, usage of
telecenter among civil servants, invoice and administrative exchange digitization)
– Support innovative and future digital systems (big data, cloud, contactless application,
M2M, smart home, smart city)
Source: Fédération Française des Télécoms, Arthur D. Little
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