Another French Revolution?

France Telecom SA (NYSE: FTE) today announced a reorganization of its business structure, with the formation of five main units (see France Telecom Reorganizes).

On the surface this may look like a mere shifting of chairs, but behind the scenes the French incumbent is undergoing a radical shift in its outlook, putting services and partnerships -- instead of the network and internal R&D -- at the center of its decision-making processes.

This, says Thierry Zylberberg, senior vice-president in charge of partnerships at France Telecom, is a revolution that all the major European operators are undergoing in one way or another, as each is facing the same vision of the future -- one where individuals and businesses are customers of a service, not customers of a network.

The new strategy implies a dramatic shift in the nature of the carrier's relationships with its systems suppliers -- henceforth to be based much more on collaboration than on the traditional supplier/customer setup.

And the French operator is not alone in this. U.K. carrier BT Group plc (NYSE: BTY; London: BTA) has adopted a similar approach as it plans and builds its 21st Century Network. BT states on a Website built especially for its suppliers that it "will seek to work collaboratively with our suppliers, sharing experience and learning together to deliver mutual benefit."

So what's driving the revolution? Zylberberg notes a number of factors: the emergence of the digital mass market (photographs, music files) and a rapid advance in network technologies, leading to a marked increase in the use of telecom networks; the global acceptance of wireless services and networks; and the ubiquity of IP. In a few years' time, he reckons, people will subscribe to a service but not think twice about how it is being delivered. They simply won't care about the network.

So France Telecom will transform itself into a service provider and an integrator of services -- as opposed to its historical role as a connectivity provider -- and its customers will fall into separate service "spheres": the home sphere, the personal/mobility sphere, or the enterprise sphere. All the services provided by France Telecom will fall into one of these trois sphères.

Zylberberg is keen to stress that the operator will not become involved in content creation. Its role will be delivering the service in the optimum format and in the most convenient way.

This new vision of the future is "a real revolution for a carrier," says Zylberberg, and it's a transformation that France Telecom cannot make by itself. So the carrier has been in talks with a number of companies to facilitate the metamorphosis. Partnerships have already been announced with four of the world's biggest equipment vendors: Alcatel SA (NYSE: ALA; Paris: CGEP:PA), LM Ericsson (Nasdaq: ERICY), Nortel Networks Corp. (NYSE/Toronto: NT), and Siemens AG (NYSE: SI; Frankfurt: SIE) (see Alcatel Does NGN With FT, Nortel Partners on VOIP, France Telecom, Ericsson Partner on IP Apps, and FT and Siemens Form Partnership).

At the heart of these deals is service creation, and more partnerships are set to be announced, says Zylberberg. He adds that, although these ententes incorporate R&D activity, the timescales are now much shorter than they once were. For him, R&D has traditionally implied at least a five-year cycle, but he now expects to see results within the next 18 to 24 months.

Each relationship has a distinct focus. With Alcatel, the focus is on the development of a converged next-generation network in the countries where France Telecom currently has fixed and mobile assets, such as France and Poland. The goal is to integrate the networks to remove boundaries between fixed and mobile services.

With Siemens, France Telecom is working on transforming its own mobile networks, which operate under the Orange brand, into systems that can deliver services to any customer, not just those with a mobile phone and an Orange account.

Nortel and Ericsson have been signed up to focus specifically on new service creation -- Ericsson for home and personal services, and Nortel for business services. The end result of these collaborations will be middleware platforms that will enable the provision of a multitude of converged services, says Zylberberg.

As it happens, Light Reading is staging a Webinar on this very topic -- the creation of Next-Generation Network Residential and Business Services -- today, March 31, at 12:00 p.m. New York / 6:00 p.m. London time (7:00 in Paris). To register, click on this link.

— Ray Le Maistre, International Editor, Boardwatch

materialgirl 12/5/2012 | 2:08:32 AM
re: Another French Revolution? This looks like the first step in the "Stupid Network" evolution predicted by David I. so long ago. TCP/IP separates services, which are really customer owned, from transport. This move by FT appears to be the first step in telecom moving to the "airline model", where airlines run airplanes, but do not use them. The economic implications are clear.

Questions include: when will they write off their old infrastructure as uneconomic? How many bail-outs do they get along the way? Will they just rent another network and become a "virtual carrier"? If they do that, what do they really offer, as "services" are owned at the ends by the user.

Perhaps they follow the BT lead and become Systems Integrators with a network angle, or follow ELNK and do a good job of network-based security. I can predict that the margins on IP transport alone will not thrill them.
dljvjbsl 12/5/2012 | 2:08:30 AM
re: Another French Revolution? I think a better descriptive phrase would be 'As Expected'. There is nothing new in this announcment that has not been predicted for years.

However the concentration on customer benefit over a fixation on abstract network performance is welcome and will be profitable.
SIVROCX 12/5/2012 | 2:08:09 AM
re: Another French Revolution? Maybe Dave Huber was right and they will all follow him into being a total services provider. However, maybe I'm thinking of lemmings and something to do with the sea.........+£
jayja 12/5/2012 | 2:07:18 AM
re: Another French Revolution? This is smoke screen to launder French government money to Alcatel to keep their French employees employed.
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