Growth of free Internet in France has been threatened after the regulatory body ruled that France Telecom need only refund a tiny sum to rival telecommunications companies involved in the routing of Internet communications.
The Autorité de Regulation des Telecommunications' (ART) ruling is the culmination of an 18 month battle that has taken place since deregulation between the State owned operator, which controls all local "loop" infrastructure, and its rivals.
ART ruled, in a case brought by Cegetel, the number two telco, that France Telecom need only refund 3.8 centimes (about 0.4 pence) a minute on Internet connections involving others. Cegetel had asked for three times that amount.
The minuscule sum leaves private telecoms providers with next to nothing to share with the dozen ISPs offering free access to the Internet. France Telecom dominates the French Internet market with 600,000 paid subscribers. In opposition, a dozen free access operations have been launched in recent months.
The latest at the weekend was computer manufacturer Gateway, offering the same service as it does to customers in the UK, but the chances of French ISPs striking favourable deals with partner telcos is now seriously limited following the ART ruling.
Larger ISPs, now in the "free access" scramble for business, can survive on refunds to them of one to two centimes because some have the backing of big groups. For example, World Online is backed by World Online International, Bouygues Telecom, and TF1, the leading TV channel. Libertysurf is backed by Kingfisher, the stores group through its Darty French subsidiary and by Bernard Arnault, the luxury goods tycoon.
Libertysurf spokeswoman, Carole Liscia, said: "The small ISPs will be in trouble,but our business plan does not depend on these tiny refunds from France Telecom. We are looking to e commerce and advertising for our income. Bernard Arnault is investing massively in content for the site," she commented. Libertysurf is estimated to have attracted 130,000 subscribers since May.
The French ecommerce market is not very developed, with estimated annual sales of only $100 million, but, besides Darty, Arnault's LVMH group and Gateway, other Internet operators now include the FNAC record stores - owned by stores magnate Francois Pinault-Dell, banks and, soon, Sega, the video games giant.
As yet, there is nothing equaling the size and success of Dixon's Freeserve in Britain.
Petra Gartzen, senior analyst at research company Dataquest, commented: "The French decision makes the business model for Free Internet much more difficult. Across Europe, ISPs offering free access are receiving very small revenues from local calls." "Energis in Britain is looking for between 20 per cent and 25 per cent of local calls, but France with less than 15 per cent will make life hard for the small ISPs not the large retailers," she said.
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