France braces for WAP portal access row - Company Business and Marketing

CommunicationsWeek International, May 8, 2000 by Joanne Taaffe

France Telecom has come under fire after restricting its new wireless access protocol (WAP) customers to using the operator's own portal site as their home page.

The move raises questions about the degree of control mobile operators across Europe can maintain over their customer relationships, their brand and their advertising revenues as they introduce WAP and Internet services.

The French national operator has immediately come under heavy criticism from the French wireless Internet service providers' organization, I'Association Francaise d'lnternet Mobiles (AFIM), in Paris, for placing the so-called WAP lock on its mobile phones.

Concerned that the wheels of the French regulatory authority will grind too slowly, AFIM is readying a complaint with the French competition authority.

"The competition authority could view this as an abuse of a dominant position in relation to other portal sites," said Jean-Francois David, a partner at Braxton Associates Deloitte and Touche, in Paris.

AFIM will take the case to the European Commission if necessary, according to Sebastian Crozier, AFIM's president.

"Brussels has given out some strong signals on precisely this subject," claimed Crozier. "In reference to the Vodafone/Mannesmann [merger] it said their networks should be accessible [to other service providers.]"

The European Commission said it would make no comment yet.

AFIM claims that the action is anti-competitive on the grounds that it will discourage France Telecom's customers from using portal sites developed by AFIM's members. AFIM groups 50 Internet service providers and content providers, including Excite, America Online Inc. and Crozier's company, the Paris-based Internet Telecom.

AFIM's first step has been to contribute a paper to a workgroup that the French regulator, l'Autorite de reglementation des Telecommunication, has established to examine the regulatory issues relating to WAP portals.

ART said it had no comment to make on AFIM's case.

France Telecom's move risks undermining revenues that content providers and applications service providers may have gained from advertising and e-commerce deals linked to the usage and prominence of their portal sites.

Success with WAP

Internet Telecom has already developed WAP services that run successfully over existing France Telecom WAP handsets. These services, claim Crozier, will be jeopardized by France Telecom's decision.

"The huge paradox is that our systems work with France Telecom," said Crozier. "We have 2,000 WAP subscribers. We're the second largest WAP provider after Itineris."

France Telecom is attempting to preserve the link between the mobile phone and the operator's services and brand as it moves from closed voice and short message services towards data and the Internet.

Its customers will have to pass via the France Telecom portal to reach sites managed by companies such as Excite or AOL.

"You can understand that a network operator is going to want to keep [traffic] in-house for as long as possible," said a U.K.-based analyst who advises France Telecom and declined to be named.

But this strategy will not necessarily guarantee France Telecom long-term success.

"It's not a very smart strategy," said the analyst. "It's not viable in the long term; someone else will compete on the grounds that they offer completely open access."

In its defense France Telecom has said it will only place a lock on those phones it sells at subsidized rates as part of a package of services.

Unlike the personal computer market "operators are subsidizing [the cost of some of the handsets," said a spokeswoman for France Telecom. Handsets that are not bought at a subsidized rate will not be locked.

And the lock will not prevent users from accessing any WAP site they choose to.

"Le voila portal will provide open access to other sites," said the spokeswoman.

However, the U.K. analyst questioned how large a share of the market for mobile Internet services the operator will actually gain before it is forced to abandon WAY locks.

"It's going to be a while until [the market for mobile Internet service] takes off," said the analyst. "They risk [merely] cheesing off consumers."

In Japan NTT DoCoMo has taken the opposite approach with its hugely successful I-Mode service.

"NTT has opened up the walled garden with the view that if they can grow the entire market then that's good for everyone and they can get a large share," said the analyst, adding that "a walled-garden approach wouldn't work in the fixed Internet."

Abusing its position

AFIM's Crozier accuses France Telecom of abusing its dominant position in the French mobile phone market.

Whereas in the United Kingdom, for example, market share is split fairly evenly between the four mobile network operators, in France, Itineris has a 48% share of the mobile market in terms of subscribers.

This compares with 35.6% of French subscribers for SFR and 16.4% for Bouygues Telecom. In terms of revenues France Telecom has a 45% share of the market, compared to 40% for SFR and 15% for Bouygues, according to the French telecommunications consultancy. IDATE, which is based in Montpellier.