France Telecom (Orange) held its annual investor day on May 31. At the event, CEO Stephane Richard highlighted the issues facing the company and sought to clarify Orange’s role in the industry, particularly in relation to its approach to over-the-top (OTT) players. Richard spoke of his positive discussions with Google CEO Eric Schmidt and promised to announce partnerships “soon”.

 

Richard began the day by highlighting the fact that without telecoms networks, online services would not exist. However, he also acknowledged that OTT players drive demand for the networks. While Richard’s statements are true, networks are simply the delivery mechanism for the content and services that are important to end users.

 

As well as setting the usual financial and operational targets, Conquests 2015 has focused on attempting to establish Orange’s role and identity within the telecoms industry. It appears that Orange has made some progress on this front, with its building of best-in-class networks an example of its future strategy. Orange sees the quality and coverage of its networks as a key differentiator for its customers and for content and service providers at a wholesale level and it is an area of competitive advantage that Orange plans to maintain across its entire footprint. However, at the end of the event there was still a lack of clarity over how Orange would deal with OTT players.

 

A recurring theme of the event was that Internet players should contribute towards content and service delivery costs. To this end, Richard reported on recent meetings with Google, Apple, and Facebook. While he was bullish that partnerships will be announced “soon”, no details were revealed as to the nature of the partnerships or whether Richard was able to negotiate the volume-based charging models touted previously. It seems unlikely that such models will be introduced as they could derail Internet player’s profitability targets and raise issues around net neutrality.

 

Like many in the industry, Orange has moved on from competing with OTT players to “co-opetition”. That is a good move as we believe telcos will struggle to compete head-on with the Internet behemoths. However, Orange’s boundaries between competition and cooperation were not entirely clear. On the one hand, presentations highlighted its open innovation model. For example, French music-streaming service “Deezer” was reported to have made strong progress. On the other hand, the fact that some web players have struggled to launch services such as Netflix outside of North America was highlighted as an opportunity for Orange rather than as a chance to partner.

 

As well as working with Internet players, Orange is being more pragmatic about data profitability - a welcome change from the company’s previous comments that bemoaned the fact that OTT players are getting a free ride. Richard indicated a desire to introduce more tiered pricing schemes, differentiated classes of service, and yield management-based data pricing for consumers. Orange also plans to offer services to OTT players that are designed to improve the distribution of content, in particular content delivery network (CDN) services. CDN provides telcos with an opportunity to make a difference, but it also highlights that the future is not black and white, with web players playing the role of customers, competitors, or partners to telcos.