Currently there are only three network operators in France but the launch of the fourth network operator ‘Free’ is imminent. Perhaps Free will be the last startup mobile network operator to launch in Europe with a network from scratch for the next decades as the trend in most other European countries is for network operators to merge. As Free is definitely all but an incumbent mobile network operator and had a significant impact on the French DSL market with its low prices and new services it is going to be interesting to see what kind of strategy they will be using to win over customers from other network operators. Just doing the same but a bit cheaper might not do the trick and it would be very much unlike the fixed net ‘Free’.
So here’s my wish list and thoughts of what they could do differently, keeping in mind the following resources that they have at their disposal:
- 5 MHz of UMTS spectrum in the 2.1 GHz range
- No GSM spectrum for the moment, but they do have a roaming agreement for 2G and 3G with Orange. They'll get 5 MHz in the 900 MHz band starting 2013, however, and that's not that far away. For details see the French Wikipedia entry on UMTS.
- 20 MHz of LTE spectrum in 2.6 GHz
- No LTE 800 MHz spectrum, but the right to use SFR as a host network for LTE in the 800 MHz band for deep indoor and rural coverage.
The Prepaid Voice and SMS Market
The first thing that comes to mind is the voice and SMS prepaid market in France, which, compared to other countries in Europe is totally underdeveloped. Prepaid prices are sky high with per minute charges ranging anywhere between 25 to 50 cents. Compare that to the 6.8 cents a minute in Austria or 8 to 9 cents a minute in Germany. Another really annoying thing is the credit validity time. Even a 35 Euro recharge extends the validity time by only three months. In other words, even on prepaid, a subscriber has to spend a minimum of 12.5 Euros a month or loose all credit still on the SIM card after three months. Prehaps Free can be different?
The Prepaid Mobile Internet Market
Free grew up in the French DSL market so their pitch to get to the customer was to offer high speed Internet access with a voice telephony flatrate to fixed line destinations put on top (replacing the POTS telephone of France Telecom). While the arrival of the iPhone and the iPad has triggered the emergence of prepaid data SIMs in France it’s by no means as cheap and ubiquitously available as in other countries, i.e. you pick up a SIM in a supermarket and start using it. Another untapped opportunity in France and I’d be one of the first customers picking up one of their prepaid data SIMs for my netbook and occasional visits in France in a French supermarket if prices in combination with the amount of data would be acceptable. Here’s a hint: In Germany you can buy prepaid SIM cards for Internet access for 3 euros a day with a limit of 1 GB, 10 euros a month for 500 MB or 20 euros for 5GB. And compared to Austrian prices that’s not even particularly cheap.
Free’s LTE Strategy
It’s going to be interesting to observe what Free will do with their LTE spectrum in the 2.6 GHz range. For launching their service, the 5 MHz slot in the 2.1 GHZ range for UMTS will suffice to offer good service for a while. But should customers decide to go for Free, a single 5 MHz channel won’t last for long, and most network operators have reacted in the meantime and are now using at least two 5 MHz channels in cities. Free will be able to do that too starting from 2013 as they will get a 5 MHz channel in the 900 MHz band. Here, they have an advantage over the incumbents as they can use it for UTMS straight away instead of going for GSM first, or having to free the channel of GSM first. The incumbents can use HSPA+ dual carrier in the 2.1 GHz band though, which gives them an advantage when it comes to maximum transmission speeds per user. So Free might be a bit releaxed when it comes to LTE. Once they want to go for it, however, it might be easier than launching their UMTS network in the first place since they have their 3G equipment in place now so they don’t have to find any additional sites, which is the main overhead in terms of costs and delay. Their equipment is likely to be multi-RAT capable so adding some more processing capacity and an additional radio module for the 2.6 GHz band will likely do the trick. If they were smart, the antennas installed over the past months are already 900 MHz and 2.6 GHz capable, making hardware modifications on top of a mast unnecessary. That would be quite an advantage to the other incumbent network operators who likely have to retrofit their base station sites with new antennas and perhaps also new base stations, or put additional LTE base stations next to their installed equipment. Actually it might even be a good idea to start with LTE as quickly as possible and sell 3G/LTE USB dongles as soon as possible so they can move the heavy users with notebooks and netbooks to LTE as soon as possible to reduce the load on their UMTS network to keep the quality of experience for their smartphone users.
IMS, Even Trickier With National Roaming
So what about voice over LTE? Here, Free is in a more difficult position than the already difficult situation incumbent mobile network operators are in. CS fallback is even more tricky because of national roaming. Falling back to your own network is already no fun and increases call setup time. Falling back to a network of a competitor due to the use of national roaming would be even more tricky. National roaming would also make VoLTE with handover to a circuit switched GSM channel (Single Radio Voice Call Continuity, SRVCC) to a competing network a huge challenge because two core networks of two companies would be involved. So I think both are not even a remote option for Free in the short and mid-term and if I were them I’d use LTE for Internet access, except perhaps for devices such as routers without mobility, where no fallback to a 2G or 3G network is required.
Femtocells
This could be an interesting one for Free. There are indications Free might include femto capabilities in their DSL home equipment. Depending on the take up, that could also reduce the load on their macro network as phone calls made at home would use the femto rather than their macro network by those customers who also use Free for their home Internet access. With attractive pricing of calls made via the femto at home they could perhaps make other people in the family switch to them as well.
Summary
Free has an impressive record in France when it comes to the disruption of the fixed DSL and cable marketing France. The wireless domain in France offers interesting opportunities already used in other countries in Europe that are waiting to being picked up. Also, their brand new access network should make it quite simple for Free to launch LTE services quickly to reduce the load on their limited UMTS spectrum. I suspect it won’t be long now and we’ll see first offers.
Martin,
Please allow some remarks to your post:
Regarding the allocation of 900MHz Free has already received a 5 MHz chunk on July 12th, 2011 which however may only be used in rural areas until 2013 when it will be released for nationwide use (Sorry, my chart on Wikipedia was misleading until today since the changes already taken place in July were listed in the “futur” section). But of course capacity will primarily be needed in urban areas.
Anyway with 80m tourists visiting France every year and the whole French population moving to the south during summer I think Free could get significant load on their 900MHz cells along the southern coasts and generate attractive cashflows.
As you mentioned France still offers a lot of unfilled market niches leaving interesting opportunities for Free, e.g. also a tourist-aimed prepaid product not requiring knowledge of French.
By the way is there something like a multi-band dual carrier specification for HSPA+?
As of the technological problems it could become even more complicated than you indicated since Free already have a national roaming agreement with Orange in place (currently limited to 2G but subject to extenstion to 3G). Since SFR’s regulatory obligation to let Free roam is limited to their LTE800 network, Free would still need Orange for nationwide coverage (unless a voluntary agreement for <4G-roaming would be entered with SFR). I suppose it is nearly impossible to get a smooth setup with two national roaming partners involving different technologies and seamless handovers among each other (which not only involves handovers from Free to Orange or SFR and vice-versa but also between Orange and SFR). Against this background and given the existing roaming agreement with Orange (surley lasting for a couple of years) Free will perhaps never make use of their right to roam on SFR's LTE800 network but rather stick with Orange and extend the existing agreement to 3G and 4G.