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Twenty proposals for reindustrializing France through digital technology - Part 3

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The AFDEL, the French Association of Software Publishers, has addressed the serious problem of deindustrialization in France. It issued a report in early 2012, making twenty specific proposals thanks to the contribution of the digital economy. Here is the third part of this report.

5. Renewed Digital Governance

1. Grouping of independent digital administrative authorities and strengthening of the National Digital Council

It appears that the evolution of business models at work in the digital economy, driven by the tremendous development of the Internet and convergence, is shaking up value chains and resulting in strategic repositioning of players.

The Internet is thus becoming the object of covetousness between network, service and content operators to the point of posing the subject of network neutrality in a crucial way.

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Until now, this last subject has been mainly approached in France through the prism of telecom operators and their strategy of moving up the value chain towards content. The absence of a regulatory body with a global vision and competence, bringing together the entire digital spectrum, is not entirely unrelated to this.

Today, the regulatory needs of the digital sector are therefore partially covered, in particular by independent administrative authorities (IAA) which take up issues as they arise. Strictly speaking, there is no coordination between these different bodies, which are the Arcep, the ANFR, the CSA, the CNIL or even Hadopi and the ARJEL. Certain subjects such as connected television thus find their limits in the capacity of the regulator.

The creation of the Conseil National du Numérique (CNNum) was part of the desire to unify thinking and arbitration capacities on the digital issue. It is therefore desirable that this dynamic should continue through a strengthening of the CNNum's resources.

Measure No. 15 To bring together the authorities in charge of regulating the digital sector: Arcep, ANFR, CSA, CNIL and ARJEL.

Measure No. 16 Strengthening the resources of the National Digital Council

2. A more binding governance of the National THD Plan for the Development of Cloud Computing

The National Very High Speed Broadband Plan (PNTHD) has set a target of 70 % of the population covered in HSBB by 2020 and 100 % by 2025. The data available today are alarming: 10 % of French consumers perceive the interest of a fibre optic connection compared to 59 % in South Korea and 45 % in Japan (IDATE, 2011).

The latest figures published by ARCEP indicate that at the end of 2011, France had only 600,000 Fibre optic subscribers. However, 5 million homes are already eligible for Fibre optic. The key to the deployment of HSBB is the development of digital uses and the creation of new services (IIPTV HD for the general public, e-health, e-education, access to quality Cloud computing infrastructures...). The cost of HSBB deployment in France is estimated at around 24 billion euros. An annual investment of 2 billion euros in the deployment of optical fiber would lead to an increase of the French growth potential by at least 0.2 point per year, i.e. 4 billion euros. The cost-benefit analysis of these investments is largely positive (source COE-Rexecode). But today, all analysts agree that the objectives of the Broadband Plan will not be met despite government efforts to create the right climate.

In reaction to the publication of the parliamentary report by Eure Senator Hervé Maurey, "Aménagement numérique des territoires: passer des mots aux actes", some observers had expressed concern about the risk that this delay would hinder the development of the software and web sector, and in particular Cloud computing in France, whose future depends on the implementation of a very high quality digital infrastructure.

With a 69-fold increase in the volume of computer data exchanged (IDC) in 10 years, the new digital uses, which are based on software, will not be able to develop without a suitable infrastructure. Software publishers whose business model is gradually moving towards Software as a Service (SaaS) mode, depending on the quality of the network, could ultimately suffer from this delay. The PNTHD relies on the involvement of private operators and supports local authorities for areas not covered by operators. The implementation of the PNTHD has necessitated the zoning of France into dense and less dense areas in order to define the areas in which public financial intervention will be justified, given the low or even non-existent return on investment.

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Depending on these areas, a specific financing scheme has been set up. In densely populated areas, the operators have made public declarations of intention to invest without being binding. In less densely populated areas, the State allows local authorities to set up subsidised "Public Initiative Networks" (RIPs), in addition to or in the absence of private initiative. However, local authority projects must nevertheless satisfy the following characteristics:

 - These are projects in less densely populated areas where the operators have no commitment to deployment or where they will be behind schedule (5 to 10 years);

- The RIP must comply with Digital Territorial Development Plans (SDTAN);

- The local authority must have presented its project to representative future network user-operators and must have reasonable assurances as to the intention of such operators to use the communications lines constructed.

Accordingly:

- The PNTHD is based on private initiative and does not easily encourage complementarity with public initiatives.

- It is very difficult for local authorities to offer networks only in areas that are inherently unprofitable because the deployment of a coherent network requires serving mixed (dense and sparsely populated) areas.

- There is no obligation to invest for operators who have an option to invest within 5 years.

We need to restimulate the market:

- The European dogma of infrastructure competition needs to be reviewed, to replace it with the dogma of competition by active infrastructures on a basis of shared and mutualised passive infrastructures. There is no point in duplicating the passive layer of networks, which constitutes, over 80 % of our territory, an essential infrastructure for regional planning, and it is an illusion to think that this layer can be financed by private initiative alone.

- Not to lose the benefit of building coherent territorial projects, including dense and less dense areas and thus allowing for a reduction in public subsidies thanks to the effects of equalization while avoiding white zones.

- Gradual regulation has obvious limitations, particularly in the context of ambitious short- and medium-term growth objectives. Functional (not necessarily structural) unbundling would clearly act as an incentive for the market: it would impose transparency in the relations between the various players operating active networks, fostering healthy competition and would help to create the climate of confidence necessary to attract the long-term funds needed to finance passive infrastructure.

Measure No. 17 New ways of financing very high-speed broadband

- Review the financial tools in order to mobilise all resources (long-term investment funds, loans, European funds, local public funds, etc.) around the "first layer", that of essential passive infrastructures.

- No longer oppose, in existing procedures, so-called public and private initiative investments on this common layer.

Measure No. 18 A single manager of the passive base at the regional level Entrust, at the regional level, the deployment of this base of common and pooled passive infrastructures to a single passive network manager who would bring together and amplify the existing skills of the various stakeholders.

Measure No. 19 Beyond the necessary rendez-vous clauses, more binding measures will have to be elaborated in case of failure by operators to comply with their commitments in terms of the Very High Speed Plan. These measures could involve, if necessary, the functional separation of the activities of the operator concerned, which has globally demonstrated its efficiency in Great Britain, while taking care not to harm it in relation to other vertically integrated operators.

3. A competition law adapted to the international consolidation of the software and web sector

To encourage the creation of national champions, it is necessary to make it possible to group together French companies in the same sector where size is a key factor, particularly internationally. In the current state of the law, the takeover of a company may have taken place several months before and be contested more than six months afterwards, even though the integration plan of the acquired company has been largely implemented! Moreover, in a sector that is in the grip of global consolidation, European law must assess the size of the markets under consideration precisely according to this European or international dynamic.

Measure No. 20 It would seem necessary to review first of all the definitions of the "relevant market", in particular the minimum turnover levels and the geographical areas which characterise a "relevant market". Similarly, it is widely desirable to shorten the deadlines and to give priority to ex-post control.

__________________________________________________________________________________________________

Software publishing market in France :

Main x digits : 

- 2,500 software publishers in France

- 70,000 employees in France; 7,000 internationally

- Investment in R&D: 20 to 30% of sales on average

- Turnover of the sector :

- 2010: €9.3 billion

- 2011: €9.7bn*.

- Sector growth :

– 2009/2010 : 2,7%

– 2010/2011 : 4,0% (forecast) 

- France accounts for 4.5% of the world software spending market :

- Europe's 3rd largest industry

- 5th largest industry in the world (Source: Pierre Audoin Consultants)

About AFDEL

Founded in October 2005, the French Association of Software Publishers, AFDEL, aims to bring software publishers together in a spirit of community and to be the voice of the software industry in France. AFDEL currently has more than 300 members (global turnover: €3.5 billion) throughout France: large international groups including the leading French companies (50 % of the Top 100 French companies in turnover), SMEs and start-ups. AFDEL is a member of the FIEEC and the CICF and participates in the management of the Syntec-CICF collective agreement and the branch training offer.

Contact: 

- General Delegate: Loïc Rivière 

- Head of Institutional Relations: Pierre-Frédéric Degon

- Development Manager: Stéphanie Jullien

- Communication Manager: Fabrice Larrue

AFDEL : 11-17 rue de l'Amiral Hamelin, 75016 Paris / T : 01 49 53 05 89 / F : 01 45 62 01 12 www.afdel.fr / info@afdel.fr

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