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Telecom Giants Battle for Online Content: Focus on France

by Jerome Thorel in Paris

CPSR News Volume 15, Number 2: Spring 1997

Media Giant are Telecom Moguls
The deregulation of the European telecom business is not sudden, partial privatization for businesses is now in place. While voice-based communications have been protected from competition, leased lines for data transmission have been an open market. Economists fear a price gap between voice and data lines will continue to exist due to recent accords among the big PTOs. Indeed, mergers and joint venture may leave us with no more competition than before deregulation.

Global One, an alliance of French and German PTOs with Sprint, was created to adapt the telephone infrastructure to the exploding demand of corporate computer networks, intranets and extranets. Each partner retains a good deal of autonomy in basic telecom services. Other international conglomerates are using Europe as a test site for newly opened markets, for example the U.S. -based UNISOURCE-Swiss, Swedish, Dutch and Spanish TCOs joined with AT & T; and CONCERT-a venture of MCI and British Telecom. European telcos are being asked to build smart info-highways with rich multimedia content, however, nobody knows who will pay for them-service providers, access providers, governments, or even the basic user.

Media concentration is a component of the telecommunications companies' strategy. French cable television, the weakest communications business sector among the G7 countries, is controlled by two major utility conglomerates, the Generale des Eaux and Lyonnaise des Eaux. These companies also control water and public service utilities. The infrastructure is owned by France Telecom, however Generale and Lyonnaise control all cable in France. Internet access via cable-TV is scheduled to begin this year, but, business disputes between cable operators and the PTO may delay the launch in some localities, including Paris. General des Eaux recently acquired an important stake in the media and publishing giant, HAVAS-the main shareholder of the pay-TV Canal+ group and one of the most profitable media firms in Europe. Canal+ launched satellite digital TV service last year and offered a smart package of contents for computer users. Generale des Eaux won the French government's concession to exploit the huge telecom network of the state-owned railway company, SNCF-France's second largest communications network.

User Needs
These newly opened telecom markets will directly affect online access tariffs. A recent survey made by the Organization for Economic Cooperation and Development (OECD) showed that dial-up charges for online access are nearly three time higher in a market where the PTO has a monopoly. This is due, mainly, to the local fee structure (called tarification in France). Throughout Europe, local calls are not free. The price of local calls is thus a significant part of dialing an ISP. The OECD survey indicated that leased-line markets (T1 to ISDN) are 44 percent higher in countries with a monopoly than in more open markets.

France is a good example of the impact telecom deregulation will have on basic consumer access. In 1993, France Telecom decided to change the local call tariff, in which the basic unit was reduced from 6 minutes to 3 minutes. The change has not dealt a major blow to telephone usage, but the OECD noted that it has doubled the bill for a 'basic' Internet user-an annual increase from $339 to $678. The Internet, as a source of ideas and information exchange, has not attracted a broad public in France, compared to the UK or Germany. French Internet users are estimated at less than 1/2 million subscribers, compared to nearly 1 million in both the UK and Germany. This trend will be accentuated by another scheduled tariff change in October, 1997.

Some observers claim that PTO monopolies will not have a totally negative effect on Internet use. The recent crash of the America Online network in the United States, after the launch of a flat rate, helped the PTOs make the case that local call charges could improve network usage, as the user's Internet bill will be tied to the basic telephone charges. In other words, the user has an incentive to not leave an open connection.

Deregulation of Infrastructure, Regulation of Content
The European Commission, which is the European Union's (EU) executive branch based in Brussels, has prepared a draft statement to help EU's member states regulate Internet content according to their own national laws, including children's protection, racial discrimination, and matters of copyright.

Germany is the first European country to envisage comprehensive digital laws-from copyright protection and digital authentication, to regulation of racist and pedophile propaganda. The fear of being held responsible for illicit material transmission is great for German ISPs. Recently, REUTERS reported "The German division of the world's second-largest online service, CompuServe GmbHJ, has said it would consider moving its operation to a neighboring country if German laws forced Internet companies to control porn on their networks". Britain has created a private organization of local ISPs, the Internet Watch Foundation (IWF), to monitor illicit content. "We acknowledge the problems-we're not abdicating responsibility", said Janet Henderson, lawyer and rights strategy manager for Internet services at British Telecom. In an opinion piece, REUTERS stated "access providers cannot be the moral guardians of the nation". The Netherlands have also taken steps to regulate content, using the same kind of ISP professional panel. Last year, France's neo-Gaullist government passed a broad telecommunications law which included the creation of a Conseil de Telematic (the French term for electronic material) which might have had the official power to judge what could be deemed legal in cyberspace. The Conseil Constitutionnel, which reviews French law, overturned the regulation, explaining that matters related to freedom of expression can only be settled in courts of law or by the French Parliament.

Last autumn, stymied at home, the French Telecom Minister submitted the concept of for an 'international charter of good conduct' to the OECD's Council of Ministers. In early March of this year, Ms Falque-Perottin, a civil servant in the Conseil d'Etat, OECD's highest judicial authority, was appointed to chair a panel on Internet content regulation. Public debate is being sought to discuss to develop a "Conseil de l'Internet", modeled on the British IWF. French cyber-rights watchdog groups, AUI and Citadel-EFFrance, have expressed concern that the Conseil might become a 'censorship bureau' unless it is restricted to observation of Internet content. They also noted that the 'charter of good conduct' was prepared by the staff of Minitel and expressed strong concern that this is an opportunistic expansion of Minitel's influence.

Jerome Thorel, editor of the monthly magazine Planete Internet, writes frequently about technology and society, especially in the Lambda Bulletin.

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